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.