If you’re in the food and beverage industry, the future is looking pretty bright right about now. Sales are higher than ever before thanks to the recent rise in e-commerce, a heightened preference for convenience and rapidly advancing automation technology.
The industry isn’t showing signs of slowing anytime soon. In fact, grocery sales are expected to grow by 21% to $3.4 trillion within the next three years. But, this growth comes with a slew of challenges for companies to keep up with demand. Though there's a potential for profits to soar, companies will have to reassess their fulfillment processes and appropriately scale for growth.
Scaling a food and beverage business presents a unique set of challenges. The products you’re handling have a shorter shelf life than those of most industries and certain products require cold storage or other specific restrictions, conditions and protocols. Plus, when you have large e-commerce c creating an industry standard of lightning-fast delivery speeds, it can seem impossible to keep up.
So, what can food and beverage companies do to scale their businesses and keep up with the rapid advancement in our industry? Let’s take a look.
Location Is Key
One of the most important factors to consider when scaling a food and beverage business is location. Products can’t spend weeks in the supply chain and extra precautions need to be taken to keep the products fresh. Proximity helps protect the health of the customer, especially when dealing with food and drink products. Prioritizing location is one way to ensure that your products spend less time in storage and more time in front of the customer.
When you’re looking to scale a food and beverage business, consider carefully where exactly you want to expand. What markets would match your growth? Where should your storage and distribution facilities be located? And how far are these locations from your producers? Are you dealing with perishable goods, non-perishable goods or both?
Although today’s technology can help expand the range of how long your food products can spend on the supply chain, the average distance that most U.S. meals travel is about 1,500 miles from farm to plate. This gives you a general idea of how much space you have to expand from your already-existing supply chain infrastructures.
One key player to have in the conversation around scaling and location is your third-party logistics partner or 3PL. Approximately 90% of Fortune 500 companies rely on 3PLs to meet their fulfillment needs, especially if the company is involved in e-commerce. If you identify a market you want to expand in, odds are a 3PL already has the infrastructure in place to meet your storage and fulfillment needs.
3PLs can partner with companies that help growing brands with their fulfillment services. For instance, Smart Warehousing provides storage, warehouses and transportation alongside partners like Mable, an online wholesaler of emerging food and beverage products that provides technology to help with ordering and invoicing capabilities. Partnerships like this can allow brands to use an alternative to the traditional distribution when they’re ready to scale.
Another crucial aspect of scaling a food and beverage business is automation technology. Automation is certainly not new to the industry. While many industries are just now beginning to implement RFID and barcode scanners, the grocery industry has been utilizing this technology to automate inventory processes since 1970. But the pace at which automation tools are advancing is unprecedented and can be difficult to keep up with.
New automation technology helps give more visibility into the supply chain than ever before, allowing for more efficient processes, quality control, and sometimes even predicting what challenges lie ahead. For example, a digital twin is a new type of tech that can help food and beverage businesses effectively scale their operations. A digital twin uses a combination of IoT systems and warehouse data to create a digital representation of the physical environment.
Many of the technologies that digital twins rely on – such as RFID and warehouse management systems (WMS)—are already core parts of the food and beverage infrastructure. Once the digital twin is up and running, companies can test out changes to see how those changes will play out in the environment, without having to deal with the real-life repercussions. Depending on your existing technology, a digital twin can replicate everything from a single warehouse to the entire supply chain. These systems can increase warehouse efficiency by as much as 25 percent by streamlining complex operations and identifying trouble areas.
Another great piece of automation technology that arose recently is pick-by-vision, an augmented reality headset to guide warehouse workers throughout the facility. Not only does pick-by-vision collect valuable inventory data throughout the warehouse, but it can help streamline the training processes of warehouse employees. The headset gives workers step-by-step instructions through visual guides to teach them how to navigate the warehouse. As with digital twins, pick-by-vision also utilizes already existing technology in our industry like RFID and WMS.
In order to scale your business and have that growth be sustainable, you have to scale within your means. You can’t just go out and buy the best automation tools on the market when your demand doesn’t yet require that level of automation, or if you don’t have the financial backing to support the long-term use of these tools.
Scaling a food and beverage business has a direct impact on the environment. Whether you care about the environment or not, your customers do. In fact, recent studies have shown that more than 60% of consumers say they would pay more for a product with sustainable packaging. There is also a heightened awareness among consumers of a company's overall supply chain impact. So, taking measures to ensure a minimal environmental footprint is also going to have a positive impact on future revenue.
There are also a number of new regulations that help to ease the environmental impact of supply chains that regulate everything from ingredients used in products to emission levels during transportation. Environmental sustainability is an unavoidable factor in discussions around scaling. Make sure that you’re placing emission sensors in warehouses and transportation systems to ensure that you are tracking your emissions and following regulations. Also, look into and invest in energy-efficient technologies as you expand and upgrade systems.
It is also important to bring your supply chain partners into the discussion as well. Increasingly, governments and consumers alike are holding companies accountable for their indirect emissions.
Scaling is not just an opportunity for growth, it's an opportunity to revisit and improve your processes throughout your supply chain. Identifying ways to implement automation and streamline as many of your processes as possible will give your company more room to grow.
A final piece of advice for food and beverage companies looking to make the most out of this period of growth is to build partnerships with companies that already have these factors in mind. These partnerships are what allow you to continue to grow and adapt to the rapidly changing landscape that and can help you achieve the sustainable growth we’re all looking for.