Dairy, deli, bakery manufacturers embrace technology to cut supply chain costs

07-Apr-2023 - Last updated on 07-Apr-2023 at 13:06 GMT

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Related tags Dairy Cost inflation Bakery

To address rising production costs and supply chain issues, companies should look at their technology stack to improve operations and save money, Jared Frederici, a consultant with The Poirier Group, shared in an International Dairy Deli Bakery Association webinar.

Demand for both baking and dairy products are increasing, but this uptick comes at a time when companies are “facing enormous pressures” on costs from everything from warehousing to distribution to labor, Frederici said.

Companies have reformulated products and raised prices to bring down costs, "but there's still latent and long-term impacts that we're still finding, [and] ... the cost structure and transportation [are] still significantly higher,” he said.

As such, companies need new cost-saving solutions, which digitization offers.

For example, companies can reduce lingering increased shipping and carrier costs by setting up electronic-data-interchange (EDI) systems, Frederici said. With an EDI system, food manufacturers can more easily look at historical billing records to see if there are areas where a company might be overspending, he said.

AI and robotic process automation (RPA) tools can also speed up the process of analyzing these records for ways to reduce costs, he added.

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Companies also can use network simulations to understand where to ideally position distribution centers and integrate their warehouse management and transportation systems to find further ways to reduce costs.

Historically, food and beverage companies would rely on a team of industrial engineers or supply chain managers to assess the best location for a new distribution center, Frederici said. Now, with scenario modeling, a computer program can assist in finding the location and also factor in wages, transportation costs, and other expenses, he added.

Additionally, companies that integrate their warehouse and transportation management systems can run simulations on these correlated costs to find further savings, Frederici said. For instance, a company can simulate what will happen to costs if they change deliveries from five days to four or if they have too much of a specific SKU, he said.

“Organizations that can digitize this are starting to have the advantage versus ... [those companies with] isolated systems," Frederici said. “Inventory management is a huge lever, especially on working capital right now.”