In order for the restaurant industry to thrive and be successful, it requires a finely-tuned food supply chain. That supply chain should have solid distribution channels that are working seamlessly to get food products from point A to point B.
These days, companies are transporting food products through bulk shipping methods over long distances and in some cases, across continents. This causes the supply chain to become longer and fragmented with many goods in transit. As a result, consumers become disconnected from their food sources. It almost creates a greater risk of food waste or food getting lost.
You might ask yourself, “What is the food supply chain?” and “How does supply chain management help?” We’ll go over numerous aspects of the food supply chain and distribution in this guide, so keep reading.
What Is the Food Supply Chain?
The food supply chain is the path food products pass through, starting with production stages and making their way to the consumer. When the supply chain gets bigger, it gets broken up and this creates a disconnect from the original food source.
Supply chains start with raw materials inventory and other original food product components. This inventory is turned into tangible products or finished goods inventory.
Stages of the Food Supply Chain
The details of food supply chain stages depend on whether food products require processing or if they’re ready for consumption. Factors include whether farmers supply local wholesale produce or if it requires external packaging–such as eCommerce packaging and subscription box packaging–and transportation.
The food supply chain consists of the following five stages:
- Handling and storage
- Processing and packaging
- Distribution, retail, and wholesale–familiarize yourself with wholesale vs retail price to understand the difference
Importance of the Food Supply Chain and Distribution
Recent years have demonstrated increased consumer demand for high-quality food products. With a solid food supply chain and distribution process, this demand can be met. Within the food production process, there should be reassurance for sustainable food production and food safety.
The food supply chain makes quality food products available to consumers at competitive costs. This is how restaurants, grocery stores, and suppliers maintain profits and customer satisfaction.
Problems arise within the food supply chain when raw materials inventory contributes to food waste. Incidents are still reported even though most food processing companies meet consumer expectations.
This is what leads to recalls which negatively affect the supply chain’s performance. Utilizing proper food management and restaurant inventory management practices helps regulate food waste and loss.
What Is Food Supply Chain Management?
Food supply chain management involves the production and handling of consumable goods starting with raw materials and turning them into finished goods inventory.
The five aspects of the supply chain management process include:
- Demand Planning. This involves planning resources and managing the processes to meet consumer demands. During this process, it’s also essential to use the reorder point formula to determine when the ideal time is to place product and ingredient orders.
- Sourcing. Suppliers provide raw goods to their buyers in order to create products or merchandise inventory. Then, they establish processes such as inventory management, ordering, authorizing payments, and receiving. Potential payment methods include eCheck, B2B payments, and ACH payment.
- Manufacturing. During this process, activities are organized to accept raw materials, perform product quality tests once manufacturing is completed, utilize eCommerce packaging, prepare goods for shipping and handling, and schedule deliveries. This is where the kitting process comes in handy.
- Delivery and Logistics. Order coordination begins using order management practices. The service delivery employees will schedule deliveries using 3PL companies, dispatch loads, and create customer invoices after receiving payment.
- Returning. This stage involves taking back unwanted, excess, or defective products and is part of the warehouse management process flow. Familarize yourself with the RMA meaning to better understand this process.
Supply Chain Technology
High-quality improvements to the food supply chain and distribution process are possible through the use of technology. This also ensures operational efficiency within the supply chain.
ERP solutions and farm management software are technological automation tools that optimize the workflow process while improving business productivity. Understand the ERP meaning and explore some ERP system examples to see how they help.
The decision-making process is huge in the supply chain and technological tools help with some analytic functions of food-based businesses. Analytic functions in the restaurant industry can include adjusting inventories and fine-tuning different types of menus. Restaurant technology tools are used to make timely and well-informed decisions.
Technology that continuously transforms the food supply chain includes:
- Cloud compliance
- Warehousing process automation
The Food Safety Modernization Act (FSMA) and FDA Food and Drug Administration (FDA) have strict regulations that companies must comply with when it comes to food products. This is often time-consuming and there are still information gaps and confusion within the process. Cloud-based SaaS solutions and technology-based cloud compliance software ensure company compliance and seamless operations.
Tracking product flow is crucial in the supply chain and real-time technology helps. Automated warehouse operations are able to identify the origin of the product order, the supplier, and all tracking information.
Logistics sensors are located on most pallets and boxes which allow for orders to be tracked in terms of tampering, temperature, and humidity of the goods. This is why understanding how to ship food, especially shipping frozen food, is important. The sensors will send automatic alerts when necessary.
Warehouse Process Automation
The warehouse inventory management process involves the use of technology such as scanners, bar code readers, and robotics. Bar code readers refer to devices that read and translate data from a SKU number or UPC code to information that humans can use.
Warehouse software, such as vendor-supplier configurations and warehouse management software, stays connected during each supply chain process. It allows for product tracking at each stage.
3 Supply Chain Management Trends
Taking advantage of supply chain management trends will improve productivity, efficiency, and safety. It’s also possible to boost profitability as well as provide safe and high-quality products. Supply chain management trends will change regularly, just like beverage trends, food trends, and DTC trends.
Three supply chain management trends for 2022 include:
- Innovative Technology and Applications
Collecting data to manage your products moving through the supply chain is important. Technology helps with such data collection making it less time-consuming and offering less room for error.
Technology such as inventory tracking systems, delivery route planner apps, inventory control systems, inventory forecasting, and predictive analytics help with supply chain management. They’re effective in increasing sustainability and accuracy while reducing costs and increasing profit.
2. Improved Demand Forecasting Methods
Demand forecasting and planning allow companies to manage their supply chain process, especially in the food industry. Such technology allows for planning out the right stock levels, including average inventory which can be calculated using the average inventory formula. It’s also essential for planning safety stock levels to meet consumer demand.
3. Food Sourcing Alternatives
Health-conscious consumers are interested in various food alternatives. These include replacement products for wholesale meat and dairy products. They’re focusing on purchasing more fresh produce and following produce industry trends.
Supply chain management technology allows companies, including those that are opening a grocery store or opening a restaurant, to consider food replacements. These are vital when meeting the demand for consumers with alternative diets.
Innovative technology allows for the management of multiple food items that require production in different locations. It provides access to forecasting analysis and provides consistent communication options between suppliers, distributors, and the consumers. .
What Is Blockchain?
A blockchain refers to a decentralized database shared across different nodes within a computer network. Blockchain technology was originally created to work with Bitcoin cryptocurrency. Within the supply chain, blockchain tech allows for fast and cost-efficient product delivery, the enhancement of product traceability, improved partner coordination, and providing access to securing business finances. .
Both businesses and consumers want brands, such as private label brands, to ensure the authenticity of their products. The suppliers, that are on the other side of the supply chain, are demanding better visibility in order to minimize disputes regarding packaging control, production, food distribution, and logistics.
How Does Blockchain Improve the Supply Chain?
Blockchain technology offers solutions that improve the food supply chain and distribution process. It disrupts traditional management practices that rely on outdated systems. Blockchain allows for improved record-keeping of prices, dates, locations, product quality, and certifications.
With all this information readily available through blockchain technology, there is an increase in product traceability. This leads to fewer product losses due to counterfeit products, increased control over manufacturing, and improved supply chain visibility.
Digital data is tracked and made tamper-resistant thanks to blockchain. Blockchain tech uses traceability, security, transparency, tradeability, and sustainability to strengthen the supply chain.
What Is Food Supply Chain Distribution Transparency?
Food supply chain distribution transparency allows consumers to know where and how food products are made and grown. Food-related information such as ingredients and nutritional facts weren’t always available as they were a back of house consideration for centuries.
A transparent supply chain makes every participant and link accessible, and it provides information regarding the status and origin of food products. Within the food and beverage industry, it’s important to keep a competitive advantage with such transparency. This includes when you’re opening a business in the food industry.
3 Reasons Why Food Distribution Transparency Matters
Consumers like to be in control over what they buy, and they have this power when purchasing from transparent food distributors. This transparency builds trust between distributors and consumers while improving customer satisfaction.
When buying or selling wholesale, business owners look for wholesale products and distributors in a wholesale directory. Dropshipping vendors do the same in order to provide their customers with transparency regarding their products.
Below are three reasons why food distribution transparency matters in the supply chain:
1. Food Chain Traceability
A huge shift in demand took place at the beginning of the COVID-19 pandemic which resulted in increased restaurant online order options. This includes new online ordering platform creations. While this was going on, food producers were required to adjust their factory operations to ensure food safety.
There was an increase in product shortages due to overseas transportation and shipping issues regarding the sourcing of raw materials. Many eCommerce shipping companies faced similar problems with their bulk shipping methods.
Despite the delays, transparent supply chains were thriving because they had eyes on their products at all times. This also helped with supplier relationship management as it provided access to data such as timing, quality, and quantity for both suppliers and consumers.
2. Increased Consumer Pressure
Consumers are pressuring suppliers to be transparent because they want to know what ingredients are in the food products they purchase. This includes how the products were grown and made. Part of this consumer pressure comes from the increase in health concerns due to the pandemic.
3. Improving Recall Response
In the past, when food recalls were issued by manufacturers, the source couldn’t always be identified. Now, with strict regulations in place, it’s easier to locate the source of food safety issues. This allows for identification, isolation, and the recall of certain batches or lots.
What Are Food Distribution Channels?
Food distribution channels are the middlemen involved in the food distribution process as the products make their way from the manufacturer to the consumer. Food products travel long distances before they get displayed on grocery store shelves.
During this time, products are assessed and inspected for risk and opportunity in terms of quality, safety, price, labeling, and marketing. This includes B2C and B2B marketing and direct to consumer or DTC marketing ideas.
4 Types of Food Distribution Channels
A business owner will often work with multiple food distribution channels when starting a food-related business. This can include opening a coffee shop, opening a food truck, or a ghost kitchen.
Four common food distribution channels include:
- Specialty distributors
- Broadline distributors
- Cash and carry distributors
Wholesale sales distributors don’t often focus on direct to consumer sales processes. Instead, they’ll purchase EOQ, MOQ, or bulk quantities of food products from manufacturers in order to resell them for profit to retailers.
On the other hand, some companies focus on selling DTC food products. These include wholesale meat and seafood, wholesale dairy, and wholesale alcohol.
2. Specialty Distributors
A specialty distributor works with food service operators that work within a niche market or specific product category. This includes halal or kosher restaurants. These distributors help prevent the risk of cross-contamination.
3. Broadline Distributors
As the most general food distribution category, broadline distributors handle large product volumes and focus on working with large retail food businesses, including grocery store chains. Since they work with large product quantities, these distributors often offer price advantages or discounts for buyers purchasing in bulk. This includes bulk meat products from the meat packing industry, bulk fish, produce, and packaged goods.
4. Cash and Carry Distributors
Cash and carry distributors focus on operating warehouses through warehouse management process flow systems. Food service operators visit these warehouses to choose products they want to purchase and leave the warehouse with the products the same day. It’s common for restaurants, caterers, and nonprofit organizations to use these distributors.