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Simon Marley
Supply Chain Expert

Solving unpredictability just got predictable!

Many food wholesalers and distributors are wondering what problem to solve first and the unpredictability of supply and demand is usually high on their list.

They ask themselves many questions: How do we solve our supply problem? How do we maintain fill rates without overspending on stock? Should we invest in our digital strategy, the choices are endless.

Here’s the interesting thing though, the top performers in the sector solve the following challenges first:

  1. Managing unpredictable customer demand
  2. Dealing with unpredictable product supply
  3. Stopping margin erosion in its tracks.
  4. Reducing wastage
  5. Lowering labour, transportation, and warehouse costs

Managing unpredictable customer demand.

Food wholesalers and distributors have always had peaks and troughs in their customer demand.

Seasonal demand fluctuations and promotions are a perennial challenge, and the recent unpredictable nature of supply and demand has only made things worse.

Supply chain commentators now say historic sales data has little to do with what is going to happen in the future, as the macroeconomic conditions are changing so rapidly.

Many wholesalers are still using traditional forecasting methods that heavily rely on historic sales data and a one size fits all prescriptive algorithm, which rarely consider real world internal and external supply chain constraints.

Modern machine learning (ML) techniques have greater flexibility and increased accuracy when forecasting what will happen in the future. ML technology is not a silver bullet to the problem, but ML forecasting has many advantages over traditional forecasting methods.

Unpredictable demand only becomes a major problem when you are not looking at all the variables in the equation.

Dealing with unpredictable product supply.

If your suppliers have no stock or limited stock, that is unfortunately a reality, but does not mean you cannot act in some capacity.

Monitoring your supplier’s performance over time is a fantastic way to predict their future performance.

When you monitor your suppliers’ lead times and variability, short shipments, and incorrect product delivery, you have the necessary insight to make changes to your relationship.

Real time insights allow you to quickly make alternative plans. There is a cost to your business when your suppliers do not perform to your pre-agreed expectations.

Having this insight can be of immense value.

Stopping margin erosion in its tracks.

Being a competitive sector, the food wholesale environment is always tight on margins.

Margin erosion can be heavily impacted by discounting and normally happens when stock levels outweigh the demand. In order to reduce stock, wholesalers typically discount the price.

Some wholesalers have decided to mitigate this problem by analysing the best discounting policies. But this does not solve the underlying problem. It just addresses the effect of the poor buying decisions they previously made.

Buying the optimum amount of stock is the best way to maintain your margin.

Solving the margin erosion problem is one of the best ways to put extra cash back in your bank account.

Reducing wastage.

Waste can happen in many places in your business, but it is especially prominent in products with short shelf-life or limited life. Therefore, ordering short shelf-life products without considering your customers’ daily demand, supplier lead time, and their lead time variability, will only result in unnecessary waste.

When you consider all the above factors, you can then place orders with your suppliers at the optimum time and in the correct quantities. The net effect of getting this process correct is that you extend the life of each of your short-shelf-life products, while reducing your overall wastage across all short-shelf-life products.

We typically see our clients add 2-3 days of extra shelf life. Our clients regard this outcome as a serious competitive advantage.

Lowering labour, transportation, and warehouse costs.

After working with over 25 food wholesalers and distributors globally, we recognised common problems. The first of these was 70% of them held too much stock. The other 30% spent the correct amount of money but invested this money in the wrong mix of products.

When you reduce your stock holding with insight and understanding, you not only put cash in your bank, but the knock-on effect ripples through your supply chain and associated costs.

Here is a quick example of one of the many benefits. Many wholesalers suffer with uneven workloads in their warehouses. This challenge adds significant employee costs, just imagine if you could flatten out this workload across the week and still meet all your service level targets. What would this mean to your business?

Solving the above challenges is not easy, you could do it now or in the future. When you decide, we are here to help you.

If you would like to receive a one-page summary of the projected benefits of solving these challenges for your business, please email me and I will forward the summary.