How digital technologies help food & beverage companies combat inflation

‹ Previous page

Recent inflation spikes are causing food and beverage manufacturers worldwide to face potential threats to profitability and risks to customer relationships. To prevent negative pricing‑related fall out, food and beverage companies should take a broad view of their costs, product portfolio, and margin strategies. This will help put today’s economic volatility in perspective, avoid panicked responses, and reinforce the continued need for making the business and supply chain more resilient and agile. Managed carefully, the current inflation challenges can become need‑driven opportunities that embrace innovation and automation.

Four common inflation‑related pain points and suggested coping mechanisms:

1. Ingredient shortages and disruption

In addition to extreme weather conditions and seasonal variability, conflict, supply chain disruptions, and political pressure contribute to inflation and soaring prices for agricultural raw materials. The most recent example causing severe ingredient shortages is the Russian invasion of Ukraine that has created uncertainty for exporting grain, wheat, and vegetable oil, affecting food production globally.

Improve visibility—With real‑time visibility across the food supply chain—from the farmers and suppliers upstream in the supply chain, via processing, to the distributors and retailers downstream in the supply chain—food and beverage manufacturers can receive notice of shipment delays, allowing the procurement team to form and execute alternative plans.

Review the product mix—Diversifying their raw material and supplier options is another way food and beverage producers can mitigate the risks of ingredient shortages. Alternatively, scaling back on some products if the price increase can’t be justified (or absorbed) may be an unavoidable option.

Improve supply chain planning—Modern supply chain planning solutions can help food and beverage companies achieve greater planning and forecasting accuracy. These solutions should have embedded machine learning (ML) to make the forecast more accurate and responsive to demand contributors such as the weather and price changes.

Think long term—Accurate forecasting and planning scenarios will help food and beverage manufacturers understand their long‑term needs so they can confidently negotiate contracts with suppliers to guarantee availability. In some cases, prices can be locked in, protecting the food company from future price spikes.

2. Spiking fuel prices, energy costs, and transportation costs

The shut‑down of container ports during the pandemic is still being felt in the global food supply chain. The rise in energy cost and fuel prices are again adding significantly to the cost of food products. All regions are impacted, even those with pipelines, fuel reserves, and relaxed sustainability mandates.

Plan shipping strategies—Transportation costs are impacted by inflation, including container carriers, cargo planes and long‑haul tractor trailers. Ensuring efficiency in shipping perishable products or raw ingredients may require choosing new suppliers that are closer to the manufacturer. Software that provides end-to-end visibility and cost analysis is critical to proactive procurement strategies.

Consider local sourcing—Consumers prefer local and organic products where possible. As a trade‑off, they will face limited choices and reliance on locally sourced produce. Strategies for bringing production back from countries with low labor costs may require a fresh examination due to disruptions in shipping costs. When the savings achieved from low wages are eroded by high shipping costs, returning the production facilities to the home country is a logical step if there is an available workforce.

Outsource logistics—Turning to third‑party logistics companies (3PLs) can play a role in last‑mile fulfillment. Working with 3PLs, like any strategic collaborative partner, is best managed via highly flexible cloud solutions that support data sharing while protecting security and data governance.

“Choosing Infor as a partner for our business transformation program will help our organization work as One Paulig. We need to have increased visibility into our processes, which is something that Infor provides with their modern, cloud solution in a trustworthy, industry-specific manner,” says Juha Väre, Paulig’s CFO. “We believe Infor’s capabilities help Paulig reach a new level of efficiency in our organisation and improve services to our customers.”

Malin Petterson, Infor EMEA North general manager, says, “We are thrilled to welcome Paulig as a new customer in the Infor family. Infor respects Paulig’s strong heritage and brands in Europe.”

Juha Levo, Infor country manager for Finland, continues, “With strong roots in Northern Europe for both companies, Infor will serve Paulig with a wide local ecosystem for cooperation and support in all the Paulig operating countries.”