August 01, 2023 | Procurement Software
Limited product shelf life, stringent regulations around food safety and rapidly changing consumer preferences make food and beverage procurement a challenging task. Add to that soaring input material costs and supply uncertainties. Food and beverage procurement has many challenges at hand.
Yet, if it’s done right, it also presents an opportunity for businesses to source fresh produce, streamline supply chain operations and effectively meet consumer demand.
Let’s first look at the key challenges for food and beverage procurement.
For many businesses, food and beverage procurement means dealing with a large number of suppliers. This stems from the need to source a wide range of food ingredients quickly and cost effectively. Finding the right suppliers and favorable deals and keeping up with changes in pricing often pose a challenge.
Food shortages and unforeseen price surges in recent times have necessitated the diversification of supplier base to ensure supply continuity. It is also important for a business to understand industry regulations, especially if it operates across different regions with different regulations.
The freshness of food is a key parameter for food and beverage procurement. For a customer, the first bite of a dish can reveal the freshness of its ingredients. It can make or break a business. It’s vital therefore for restaurant owners, catering companies, vendors and other stakeholders in the food and beverage supply chain to source the freshest fruits and vegetables.
And as many of these food items may be perishable, it is equally important to find ways to store and preserve them. Transportation, which is struggling with rising fuel prices and truck driver shortages, plays a key role in this process.
Predicting consumer demand is another key challenge in food and beverage procurement. A food item may suddenly be seen as a super food and become popular, leaving little time for vendors to procure and stock sufficient supply. As empty shelves can disappoint customers, businesses tend to stock excess inventory, leading to unnecessary wastage and costs in the process.
On the other hand, a fast-selling food item may be in the news for some wrong reason and suddenly become less popular with consumers.
Like other categories, sustainability has garnered a lot of consumer interest in the food and beverage industry. Consumers are increasingly looking to buy products that are green and do not harm the environment as well as packaged sustainably. And they are not afraid to leave brands that aren’t making efforts in this direction. Growing demand for organic foods and local products has put further pressure on procurement teams in the industry.
So, how can food and beverage procurement get things right and source fresh products to delight customers?
Advanced AI-powered procurement software can streamline food and beverage procurement. Not only can it simplify routine procurement processes such as supplier selection and performance management, but it can also perform data analysis and add more value to the business.
Real-time visibility of stock and fast-moving items ensures buyers and chefs do not have to worry about running out of key items. AI-enabled technology can automatically replenish inventory and place orders for items that are running low on stock. Buyers can also access a wide range of food and beverage suppliers who could agree to negotiate prices or provide more value to their product offering.
Procurement software can gather data related to spend, contracts, suppliers, finance and market intelligence. It can analyze all this data and create predictive models to assist a business in short-term and long-term planning.
Data integration can also help a business create accurate should-cost models and identify significant cost drivers that may be exposed to market movements. This information can be handy while selecting and negotiating with suppliers.
Food and beverage procurement can also leverage technology to trace the supply journey of individual ingredients and components. Such traceability can help establish consistency and product quality and reassure customers.
Procurement software can also simplify spend analysis in addition to real-time spend visibility. Such analysis can help a business understand where and how spend is utilized as well as where it can be minimized.
Additionally, with demand planning and forecasting tools , procurement technology can accurately predict customer demand and help optimize inventory management . By aligning inventory management with demand forecasts, businesses can avoid stockouts as well as overstocking.
Innovative solutions can digitalize fulfilment and backend processes and facilitate storage and transportation. Better delivery management, in turn, reduces carbon footprint and promotes sustainability.
Finally, procurement technology helps food and beverage procurement cultivate strong working relationships with suppliers, distributors and even farmers. Clear communication and transparency are vital in this process and help all parties work seamlessly. All stakeholders can look at the same data in real time and take prompt action.