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3 Challenges of Procurement in the Food and Beverage Industry in 2022

Food and beverage producers have gone through sweeping changes over the past several decades. Automation has been a big one, but there have also been widespread and dramatic changes in how companies work with suppliers. Consolidation has resulted in fewer, larger plants—for both producers and suppliers.

Globalization is in full effect, and that means raw materials are not necessarily sourced locally any longer; they may come from across the globe. The end product may also find itself on a container ship and bound for another continent. In addition, there has been a significant tightening of regulations around food production. However, nothing has challenged procurement in the food industry so quickly and so fundamentally as the pandemic. 

A paper published by the Oxford University Press at the end of 2020 summed up what was at stake:

“Every industry in the world expects to see how the COVID-19 outbreak will affect the manufacturing industry, and the food industry is no different from other industries. However, the difference in the food industry from other industries is to produce products that are essential for daily life.”

While 2020 was a transformative year for procurement in the food industry, 2021 brought its own challenges. These include a seriously backlogged global shipping industry, rapidly spiking fuel costs, inflation, and a series of extreme weather events—some of which shut down vital rail lines and ports and others that hit crop yields. All of these issues are expected to continue into next year, as are the effects of COVID-19 thanks to the globally surging Omicron variant. 

Looking at 2022, what are the biggest challenges procurement will face in the food industry?

 

1. A Combination of Factors Continues to Result in Shortages

 

The food and beverage industry faced shortages in 2021, and the trend will continue in 2022. A combination of factors has bedeviled sourcing professionals. These include climate change, extreme weather, and global competition for limited resources.

Drought conditions resulted in U.S. farmers reporting the lowest grain harvest since 2002, with spring wheat yields down 41% from 2020. That issue alone will have ripples through the food and beverage industry in 2022, affecting the production of everything from bread to dog food. Other challenges reflect problems throughout the supply chain. For example, there have been ongoing shortages of canned fruits and vegetables at grocery stores. The cause? It’s not the contents, but the cans themselves. There’s been a global shortage of aluminum needed to make the cans. 

Shortages will continue to be a major theme in 2022, and they could come from anywhere in the supply chain.

 

2. Transportation of Raw Materials and Finished Goods

 

Supply chain transportation logistics have been a nightmare in 2021 and will continue to be a significant concern in 2022. The year started with a huge container vessel getting stuck and blocking the Suez Canal for a week. That backed up global shipping, and it has yet to recover. Leading up to Christmas, ports in the U.S. had dozens of container ships anchored offshore and waiting to unload.

Adding to the transportation challenges have been dramatically rising fuel costs, shortages of truck drivers, and changing regulations for crossing borders during COVID outbreaks.

Transportation has been especially problematic for the food and beverage industry because many raw materials and finished products are perishable. They need to be shipped and delivered quickly.

 

3. Retaining Staff

 

The third issue on this list is one that many sectors are feeling: labor shortages. It may sound minor compared to climate change, but this is a big one. Procurement was already feeling the heat of not having sufficient staff to meet demand, but the pandemic and subsequent events have made that problem far worse. As companies have recognized the importance of supply chain management to their success, the competition for procurement professionals has ramped up.

One of the most important challenges procurement in the food industry will face in 2022 will be a talent shortage. Losing a high-performance team member means a hit to productivity, a lengthy recruitment process, and onboarding costs.

 

How Do Procurement Teams Prepare for the Challenges of 2022?

 

There is a wide range of challenges facing procurement in the food industry in 2022. However, there is a common thread running through them all: Predictive Procurement Orchestration

Organizations that adopt Predictive Procurement Orchestration will be far better equipped to meet each of these challenges. Many of the issues procurement professionals will face next year boil down to speed. The company that is able to move more quickly will secure the contract for the raw materials that are in short supply. It will nail down the shipping contract before rates go up. It will source the packaging before inflation drives up the cost. Manual processes lack that speed. Most software lacks the speed. Advanced, AI-powered solutions like Arkestro are the answer.

Here’s a real-life example of how Arkestro predictive sourcing software gives procurement teams the needed speed and resulting competitive edge.

Justin Heard is the CapEx and Industrial Procurement Manager for Bel Brands, a multinational cheese producer. His company implemented Arkestro to manage interactions with its 3,500 suppliers.

“The numbers speak for themselves. After rolling out Arkestro, Bel Brands reports a 20% to 25% increase in sourcing velocity. Bidding events happened much more quickly, more strategically, and with a corresponding increase in team productivity. In addition, the company reported Arkestro delivered a 10% savings on the final bid.” 

You can read more about the Bel Brands experience here if you’re interested.

The bottom line is that food and beverage companies need to adopt predictive procurement to meet the challenges of 2022. The easiest and most effective way is to join food industry success stories like Bel Brands in switching to Arkestro. Book your free demo to see how this AI-powered predictive procurement software will keep your business ahead of the market and thriving through all the challenges of 2022. 

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Rob DeSantis

Founder

As a former co-founder of Ariba running sales, Rob has deep expertise in the procurement space, having helped propel Ariba from zero to $250 million in revenue in four years and IPO of the year in 1999 before its acquisition by SAP a decade later. In addition to co-founding Ariba, Rob was also an early angel investor and board member of LinkedIn, the world’s largest professional online network.

More recently, Rob served as an investor and advisor to a small portfolio of companies including Bloom Energy, AEye, Inc., HiQ Labs, Agiloft, USEND and more. He is also a co-founder of Dibbs Technology and TrueParity. Rob holds a BSME from the University of Rhode Island.

Marty Meyer

Chief Financial Officer

A trusted partner and advisor on the executive team, Marty has a unique background having been the CFO of nine venture backed technology companies. Marty has raised over $300M in venture funding and has closed six strategic M&A transactions with a combined value of over $1B. Marty has deep domain expertise in ecommerce, consumer internet, networking, data security, data privacy, media technology and enterprise software industries. Marty is especially experienced in the finance and operations activities of SaaS companies and is driven by data and metrics to help create outstanding customer experiences and drive efficient growth.

Neil Lustig

President and Chief Operating Officer

Neil is a seasoned executive with over 30 years of experience leading and building teams in Tech. Neil brings insights from a variety of market spaces and company sizes. Most recently Neil was the CEO of GAN Integrity, an innovative SaaS Compliance technology company serving enterprise customers in North America and Europe. Before that Neil was the CEO of Sailthru, a leader in ML driven personalized multi-channel marketing communications for media and e-commerce markets. Prior to that Neil was the CEO of Vendavo, the leader in B2B price optimization and management for large enterprises. Before Vendavo, Neil led the commercial team at Ariba, the market pioneer that defined and created the eProcurement space. Neil served as the GM of Ariba Europe and subsequently the GM of Ariba North America. Neil started his career at IBM where he spent sixteen years, initially as a software developer, and then twelve years in a variety of Sales and Marketing roles

 

Neil has a BS in Computer Science and Applied Mathematics from SUNY Albany. He is a native New Yorker, Brooklyn born, and still resides with his wife and three children in New York City.

Bonnie Adams

Director of People Operations

Bonnie is a People Operations and HR veteran, with over a decade of experience establishing successful people and culture functions for early to mid-stage tech startups going through high growth phases. She has a passion for supporting and creating inclusive and collaborative work environments and is well-versed in driving positive changes in her organizations as a trusted leader. Prior to joining Arkestro Bonnie worked as the People & Culture Coordinator for Ionic Security, helping them scale from 5 to over 200 employees in addition to a $120M funding round. Most recently she was the Head of People & Culture for blockchain innovator Storj Labs and was the Director of Human Resources at PrizePicks, the largest independently owned Daily Fantasy Sports platform in North America.

Arym Diamond

Chief Revenue Officer

Arym Diamond joined Arkestro in January 2022 bringing over 20 years of experience in the enterprise software and consultancy industry.  He is responsible for the worldwide go-to-market revenue strategy. Prior to Arkestro, Arym was Chief Revenue Officer at CalAmp focused on Telematics and Logistics. He also served as the area vice president of North American Sales within the Salesforce.com Enterprise Business unit for Einstein Analytics & AI, where analytics and machine learning were re-imagined for the front office.  Prior to that, he spent over 10 years at Oracle in various sales positions. Arym holds an MBA from the University of Southern California Marshall School of Business, and an undergraduate degree from California State University.

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