Reducing waste, increasing profits

By Nathalie Brunet

While a small number of retailers continue to dominate the food retail market in Canada, other market entrants are putting pressure on traditional business models – from Costco and Walmart to online farm-to-fork delivery services. As competition increases, retailers are being pressured to balance an ever-increasing availability of products with shifting customer demands. Retailers know if products are not on the shelves when customers want them, the customers will look elsewhere.

Retailers pass their supply pressures down the supply chain, creating waste as distributors, wholesalers, processors and producers acquire more product than required to ensure quantities are available. Unfortunately, much of this inventory goes to waste. Some estimates suggest that just 60 per cent of food produced for retail distribution makes it to consumption. Given increasing pressure on product margins at every stage of the supply chain, this amount of waste is unsustainable.

The case for collaboration

If organizations across the supply chain collaborated on demand forecasting and planning, everyone could benefit. The right product for the right quantity would be required – leading to less waste and higher profits. And that isn’t all. Through collaboration, supply chain partners could better understand what products customers want and when, creating a competitive advantage by reducing new product cycle time.

What does collaboration require? As a starting point, consider the following activities:

Gain buy-in from stakeholders

It can be difficult to gain buy-in across a supply chain because you need to go beyond the inherent distrust that keeps organizations from sharing business critical information. As a starting point, consider asking your supply chain partners to validate your sales plan. By helping them see the value of demand planning, you can start enhancing efficiency. Over time, you can extend your collaborative activities.

Leverage the power of technology

To manage the complex demand planning required of leaders in the food industry today, you need to leverage technology so that all supply chain partners are using the same information. This typically begins with obtaining information from point-of-sale (POS) systems – whether in store or online. For some companies, especially producers and processors who may not have the same technological maturity level as retailers, this may require them to innovate with cloud solution, multi-enterprise processes and shared tools.

Ask the right questions

Access to data is only useful if you can understand and act upon it. As you’re working toward multi-enterprise collaboration, consider the following questions:

• Do we get customer orders based on a demand plan that has been validated by all stakeholders?
• How does the validated demand plan affect our manufacturing/distribution processes?
• How can we foster stakeholder collaboration regarding demand forecasting?
• Have we achieved value from the changes? If not, what needs to be changed?

Food distribution and retail will only become more complex over time. The Internet of Things and other technologies have the power to reshape how the industry gathers and responds to customer demands. By collaborating now, supply chain partners will be better able to respond to challenges in the future.

Nathalie Brunet is director, Conseils/Consulting for PwC. Contact her at nathalie.brunet@ca.pwc.