Dependable supply of inputs can differentiate your business
It is incredible how the pandemic has impacted the supply of inputs that are required to get food and beverages produced and into the market. It seems almost everything has been “hard to get” and/or much more expensive. We can produce food, but we do not have the bottles to package it. The food industry is dependent on inputs from across the globe and right now it is a challenge to find what you need and have it when you do need it. You have heard us talk about how important service level is in your relationships with customers. You need the inputs to deliver service level.
Between now and the end of 2021, we will share 10 SKUFood insights to help you make the most of 2022. We try to help you see the entire value chain and prepare your business to respond to changing customers and consumers. Each week we will share a different theme and some ideas and opportunities for you to consider.
It starts with a sales forecast
To understand what you require for inputs, you need a forecast for production. How much of your product will be required? This is a challenge as big as finding the inputs. We have experienced significant shifts in the market from food service to retail and even within categories.
Do your best to understand your own sales numbers. Review different metrics such as per week, per month, per store. It is difficult to compare to 2020 because there were so many things happening in the market. You might have to go back to your 2019 and even 2018 numbers and compare 2021 to them. Every category is different.
Once you have had a chance to review the history you have you will need to make a prediction about the future. I am always an advocate of taking a number to your customer. If you just ask them “what do you think” they will not have the respect for you. They want you to work through it and share your estimate with them. Explain the process you used to determine the sales estimate. Ask for their input and agree on a number. This is a very important number. In many cases, it will be how you are judged.
Review every component required
There are probably inputs you use that have never been a problem. You place an order and usually they have wanted to sell you more. That seems to have changed for almost everything. We hear stories about bottles being available but no lids to fit. We also hear about lead times changing to many months from a few weeks. This is not limited to food. We purchased a chair last January at a local furniture store. We still do not have the chair. Apparently, there was a shortage of foam and then when you layer the pandemic on top of it, the result is no chair. It seems hard to understand when there is demand but the supply cannot meet it.
We suggest you look at every single input required to produce, package and deliver your products. In this environment it is much more comforting to know you have it, as opposed to just on order. This can impact cash flow and you might be pushed for space to store the packaging or other inputs.
Explore options and secondary markets for inputs. You could be forced to use suppliers you have not worked with in the past. This will take more time and resources. In the past you had a relationship and could issue a purchase order and they knew they would get paid. A new supplier might want a credit reference which all takes time.
The challenges with logistics have been well documented. Your suppliers might have the inventory, but unable to ship it to you when you need it. We see some producers and processors picking up supplies and even collaborating to get items shipped.
Do not assume anything
Your suppliers are facing the same challenges you are. If you need bags printed, they might need ink or resin. Make sure you are not just ordering without confirmations. You should have relationships with these people and make sure they are giving you an honest answer, that is current. If I go back to my chair story, it did not start out at a 12 month delay. It was 10 weeks for delivery. Seemed like a long time back then. They have communicated a few times, but we had to ask which is frustrating. Ask for weekly or monthly updates and if they are not communicating, you should be concerned.
Within your own business make sure people understand the importance of service level. Sometimes we assume our own production or packaging people will get it done. If they are struggling to get inputs, they might not see how serious it is to short the order.
Communicate the positives and negatives with your customers
Everyone understands the challenges of operating right now. They might not like it, but they do know it is difficult. Communicate regularly with your customers. The good and the bad.
Sometimes it is a just a quick note to let them know everything is on track or if you are concerned about something. Be careful what you tell them because you do not want them going somewhere else, but you also do not want to leave them with an empty shelf. Only you can assess the right time for communication, but if you must err, be a bit early than a bit late. They will respect you for it in the long term.
Do not wait for them to ask. Be proactive and make sure they understand some of the challenges. Keep it short, they are busy, but make sure they are informed. They have people to answer to as well.
If you have any questions or require help working through the challenges of sales forecasts, inputs or communicating with customers, you can always send me an email peter@skufood.com or call me at (902) 489-2900.
Peter
As we approach a new calendar year, we will continue to share insights to help you position your business for increased success in 2022.
“We thought it might show up is not an excuse to miss a service level target”
Peter Chapman
If you see things happening let us know so we can share them with our community. We also want to hear if you find this helpful and benefits your food and beverage business!
Lush halting relationship with social media
Recently Lush cosmetics decided to halt their presence on social media platforms like Facebook and Instagram. There is no doubt this will impact their online sales, however the company believes it is time for change. They are concerned about the impact of social media on mental health for consumers.
It is a risk because if they do go back people will accuse them of a publicity stunt.
Have you considered your online relationships with consumers? We know there is often a desire to create the largest online community possible. This can pay dividends but what responsibility do consumer packaged goods companies have? It is a complicated issue.
A different take on 2022 trends
We have been sharing our vision for 2022 with you. We believe the more informed you are the better you can serve your customers and consumers. Different perspectives are always important.
Nourish Food Marketing from Toronto have shared their 2022 trend report. They are a food focused marketing agency, so they have a good perspective on where consumers are going. Some of these might be important in your business.
We are done for 2021 with speaking events. It is time to recharge the batteries and get ready for a busy 2022. Hard to believe this year has gone so quickly. We have been privileged to share insights at events across the country. Most of these have been virtually but we have also been in person as well.
We are creating the calendar for next year and will share it soon!