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7 Food and Beverage Supply Chain Challenges in 2020

In the old days, food manufacturers didn’t sweat the issue of finding food suppliers. They looked local and went with the lowest prices. Often, they would build a processing factory right near the fields where they sourced their raw ingredients. Canning and bottling plants were built nearby, so the entire process was often run within a small geographical area.

The picture today could not be any more different. We can source ingredients for food products from all over the world, distributors can ship end products across the country or globally, and the regulatory environment is far stricter.

Let’s dive into the many challenges that Food and Beverage sourcing teams face:

1. Sourcing Raw Materials Globally

Most food manufacturers today don’t source every ingredient locally. They may come from countries all over the globe. That leads to a flood of specific challenges that are listed separately. But just think about the overall complexity this creates for the food producer’s sourcing team. 

·      There are timezone and language differences to deal with

·      Different growing seasons 

·      Different local rules and regulations 

·      Competition for raw materials on a global scale, with other food manufacturers across the world bidding against you 

The big takeaway here is that the management of food suppliers is critical.

2. Transportation and Warehousing Requirements

Food raw materials are notoriously perishable. A load of iron ore can sit on a barge for an extra three weeks, and it has no impact on the cargo whatsoever. Just a few additional days in transit can mean a shipment of oranges or tomatoes is spoiled. Meat needs to be refrigerated at a specific temperature not only during transport but also when in a warehouse. 

The logistics of transportation and warehousing of raw materials often fall under the umbrella of the procurement department.

3. Different Production Formulations for Different Markets

It’s not just food suppliers who can be spread across the globe. Food manufacturers can also distribute their products globally, not only to a local market. That can mean different formulations of a product for various markets due to diverse consumer tastes and preferences. That is a challenge not just for manufacturing but also for procurement teams that have to track multiple suppliers for multiple variations on the product.

4. Weather, Pests, and Climate Change

With ingredients coming from across the globe, weather and climate change are variables that manufacturers must account for. A flood or storm can wipe out a crop, leaving the sourcing team scrambling to find an alternate supplier. Climate change can cause long-term challenges as suppliers find their local climate is less suited to growing a crop. A good example of climate change is the stress on coffee crops as South America temperatures rise, and more droughts hit the region.

If you need a visual on how badly an unexpected regional event can impact food supply, imagine the freak swarm of locusts that desecrated crops in 1930s America, and how not having an alternative supplier impacted the Great Depression. 

5. Currency Fluctuation

When you deal with food suppliers from different countries, currency fluctuations can change the value proposition overnight. The procurement team needs to be on top of exchange rates and currency valuation trends to ensure they don’t end up accidentally overpaying for raw materials.

6. The Need to Meet FDA and Other Regulations

In addition to all the logistical and sourcing issues faced by food manufacturers, the regulatory environment has become far stricter. In the U.S., that means satisfying Food and Drug Administration (FDA) rules, along with a wide range of state and local laws. The FDA spells this out in its food industry guide:

“If you are thinking about opening a food business, there are many regulatory requirements that you will need to meet. Some of these requirements apply to all food businesses, and some are specific to the particular food product, such as low-acid canned food, seafood, or juice. In addition to the Food and Drug Administration’s (FDA’s) requirements, your food business will be subject to other federal, state, and local requirements.”

Food manufacturers need to be able to prove they meet these regulations, from the point of raw ingredients right up to the final product. The paper trail can be long, complicated—and required on short notice.

7. Environmental and Ethical Requirements

Increasingly, consumers are also choosing products based on environmental and ethical factors, which can be very relevant to food manufacturers. Were crops grown on large-scale factory farms or cultivated by local farmers? Were ingredients grown from genetically modified seeds? Was meat slaughtered in a way that meets religious requirements? Did “free-run” chickens produce those eggs? Food manufacturers must be able to verify this information from their suppliers as a competitive advantage. 

Adding to the complexity of modern food manufacturing, consumer tastes have become notoriously more educated and opinionated. All it takes is a viral video, and what is popular today gets supplanted by the next big thing—time to pivot and start production on a new flavor or food trend.

Sourcing teams working for food manufacturers face many challenges. Far more now than ever before. That raises a very fundamental question. Given the number of variables in play and the need to make decisions quickly, how do food manufacturers look for food suppliers? The real question should be how do food manufacturers manage food suppliers because that’s what it really comes down to.

The successful companies leverage technology and employ strategic sourcing software — but which? Arkestro is an AI-powered Predictive Procurement Orchestration platform that is ideal for food manufacturers and those in the food industry. It incorporates all the advanced features needed to optimize the food sourcing process, including the all-important supplier management, the transparency required to meet FDA regulations, and the speed to bid against global competitors. Since we can’t rely on fields conveniently being adjacent to processing facilities, or consumer demand being solely for what we can grow in our regions, we need the correct tool in our toolbelt to tick these boxes. 

Request a demo today to see what an impact Arkestro will make for your organization.

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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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