Food and beverage manufacturers face continuous disruption
Food and beverage manufacturers face supply chain disruptions from the COVID-19 pandemic. Supply chain bottlenecks crashed into consumer demand, forcing manufacturers to pivot formulations and change SKUs as access to raw materials grew difficult. The result: a 59% increase in forecasting errors compared to pre-pandemic levels. And, six out of 10 manufacturers changed at least six product recipes or formulations over the past two years. Thirty-seven percent modified 20 or more.
Consumers face economic uncertainty, shop for cheaper alternatives
The war in Ukraine, rising inflation and uneven raw material access pressures manufacturer margins. Additionally, many consumers began bargain hunting for everyday items to manage costs amid economic uncertainty.
Logistics hurdles still hamper manufacturers
Manufacturers prepare for late-season demand spikes and face persistent disruptions.
In 2021 alone, U.S. retailers lost $82 billion in CPG sales due to out-of-stock items. High consumer demand, logistics bottlenecks, missing ingredients, and constrained industrial capacity were the primary drivers.
If retailers and brands cannot optimize their supply chain functions to meet consumers’ changing needs, they will lose increasingly important shoppers already primed to shop lower-cost alternatives.
Manufacturers can still maximize production amid constant uncertainty
As manufacturers prepare for uncertainty ahead of peak demand, they face:
-
Ineffective manufacturing: Missing raw materials, overcrowded assembly areas or logistics bottlenecks can lead to production downtime and steep costs. Over 82% of companies experienced unplanned downtime over the past three years, costing up to $50 billion a year.
-
Inefficient, costly transportation: Manufacturers may be forced to underfill trucks and then understock retail shelves due to manufacturing or supply chain issues. Less efficient truckloads means wasted space in transit—as well as potential OTIF violations and unhappy retail partners.
-
Lost sales: Underforecasted, underproduced, and understocked SKUs lead to lost sales as customers shift to other in-stock purchases.
Leading manufacturers balance inventories, maximize production, and win hungry customers. They beat logistics hurdles with flexible supply chains. Ones that balance transportation and storage costs while leveraging strong distribution networks to place finished goods in stores.
Cut risks and boost production with structural flexibility
Leading manufacturers mitigate risks and boost production with structural flexibility. Strategies include:
-
Boost supplier diversity
-
Optimize logistics networks
-
Create flexible capacity
Boost supplier diversity
Nearly 70% of CPG business leaders plan to increase supplier diversity over the next two years. This includes sourcing back-up suppliers. Diversification strategies help manufacturers maintain their product portfolios and reduce risks in the short and long-term.
Optimize logistics networks
Successful distribution depends on how brands allocate, hold, and ship inventory within logistics networks.
Ideally, retailers optimize their networks and position inventory for effective distribution. They avoid stockouts, improve customer experiences and increase online and in-store sales.
But traditional supply chains don’t change quickly—or cheaply. Retailers can add warehouse nodes, but long-term leases are costly. Rent rates continue to spike, with the industrial vacancy rate dipping to 2.9% in Q3 2022. Costs lept to $9.54 per square foot—12.8% higher than Q3 2021.
Create flexible capacity
While traditional supply chains are static, manufacturing is dynamic—especially during seasonal peaks. One answer: leverage flexible capacity to store both raw materials and finished goods near manufacturing sites or critical retail partners. Manufacturers can use flexible space to:
-
Store additional raw materials near manufacturing plants to maximize productivity—and maintain product integrity.
-
Add capacity to hold finished goods and maximize assembly line output.
-
Position flexible nodes near critical retail partners to reduce last-mile transportation time and costs, maintain fulfillment standards and OTIF compliance.
Retailers leverage capacity in secondary and tertiary markets, access lower labor and space costs while still serving critical regions. Structural flexibility delivers stocked shelves and increased peak season sales.
Win consumers during peak
Consumers crave consistency in their food and beverage brands. Especially during the holidays. Manufacturers can meet consumer expectations and win peak sales, while still maximizing productivity and avoiding logistics snarls. The answer: structural supply chain flexibility. The results: satisfied customers and strong holiday sales.
