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How an organised supply chain can reduce the cost for F&B startups
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Wednesday, 24 August, 2022, 15 : 00 PM [IST]
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Kushang
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In the last five years, India’s food and beverage sector has seen a surge of entrepreneurship with disruptive and futuristic ideas. The F&A industry is transitioning to tech-driven growth across the value chain, including supply chain management, e-commerce-based B2B and B2C models, processing technologies and equipment, storage and logistics, food safety, packaging, distribution, and retail, among many others.
Before the Covid-19 pandemic, sourcing and supply chain decisions were driven by complex manufacturing processes, intellectual property protection, and unit cost reduction, which resulted in increased reliance on a specific geography or company in certain cases. Risk management practices in the supply chain were limited to top-tier suppliers, leaving supply chains vulnerable to shock. The pandemic not only brought more shortcomings to light but also forced many restaurants and food joints to close their doors. The lack of adaptability in the existing supply chain was the catalyst for such a failure. Despite these disruptions, some businesses are pushing themselves to adapt to the new normal. They are innovating not only what they sell but also every aspect of their business model. Most importantly, they are retrofitting their supply chains to address emerging consumer spending patterns while also mitigating risks.
At the heart of F&B operations, businesses need to handle cold chains for perishables, provide end-to-end traceability, adhere to GMP and comply with a myriad of regulations. As a result, large enterprises are looking for innovative ways to de-risk demand and supply by incorporating next-generation suppliers and geographies. Many SaaS+ E-commerce platforms are enabling sophisticated technologies to help food businesses scale by digitising data and streamlining backend operations. These emerging disruptions are not only establishing the next generation of successful brands but are also tackling the emerging needs of the new consumer. As per the industry reports, India’s food and beverage industry generated near about $7.6 billion in revenue in 2021. Revenue is expected to grow at a rate of more than 10% per year, resulting in a favourable projected market volume of $11.3 billion by 2025. Here is how an organised supply chain can reduce the cost for F&B startups:
Automation of tasks
Nowadays, food business competition is fierce not only in metro cities but also in tier-1 and tier-2 towns, resulting in narrower profit margins. Also, as Covid-19 is still around the corner, it becomes a matter of survival for smaller food and beverage establishments as they still track and manage their inventory on paper. Human errors are common in startups where there is no digital record of consumption.
However, restaurants can save a lot of money if these manual tasks are automated. In recent years, digitisation and big data have driven the entire supply chain all over industry verticals. The food and beverage industry has also started embracing the winds of change. As the food and beverage industry endorsed data analytics around the world, there was a dramatic shift from traditional forecasting and inventory management, allowing them to overcome breakdown, reduce costs, and save time.
Gives a bird’s eye view of the entire cost structure
For many F&B startups, it is difficult to obtain inventory at a fixed market price due to the absence of digital data points. Due to this unorganised F&B supply chain startups will never understand where they are wasting their major chunk of money. On the other hand, a startup with an organised supply chain has clear visibility of industry data and is able to compare and evaluate statistically if it is lacking behind. For the sake of understanding let’s assume that the food cost for a QSR brand is 35%. In most cases, startups are not able to capture data when end up making them spend somewhere around 42% and it could be because, they are buying more expensive from their vendors, purchasing more than required, or not being aware of the standard purchase procedures.
Day-to-day requirements of the food businesses such as procuring material, groceries and connecting with the right suppliers can be easily handled through an organised supply chain with no fear of leakage or pilferage. The moment a brand invests in an organised supply chain, data-driven understanding will enable them to have a bird’s eye view of the entire cost structure of the major components of any kind of F&B supply chain which includes food cost, logistics, wastage, warehousing cost, manpower and so on.
Provides transparency in the supply chain
While digital data points can lead to cost optimisation in F&B startups, there are other factors which can also lead to errors and breakdowns in supply chain management. An organised supply chain facilitates complete transparency which helps detect the problem and prevent it from occurring the next time. For instance, if a startup incurs some wastage due to temperature issues, loss due to damages, order delays or order errors, the startup can precisely track the issue in their supply chain and more importantly address it which otherwise remains undetected. In addition, cloud-based inventory, procurement, and production management software can assist restaurants in monitoring and regulating inventory based on the average demand of the outlet. As a result, waste is avoided, and operational costs are reduced.
No need to invest in separate warehouse and logistics solution
An organised supply chain deals with all of the company’s logistics needs. F&B startups do not have to look for a separate warehouse and logistics solution partner, which also saves time and money. For example, if a F&B startup has 20 outlets, for which it needs a warehouse facility where it has to pay a monthly rent of Rs 50,000 and to maintain that warehouse it needs to maintain an additional workforce which comprises of a dispatch, a warehouse manager, a person who manages data entry and records. The management of all these on a whole, reduces the maximum traction of a business and is a cumbersome task to accomplish. Brands who opt for an organised supply chain automate the whole infrastructure and the other logistics requirements as per the business needs. As an organised supply chain company has a defined team handling different clients, it offers solutions at minimum costs.
Since trends keep changing, traditional measures of the supply chain will be insufficient in the new F&B landscape. The transition to an organised supply chain is more necessary than ever since the F&B industry is entrusted with meeting its customers’ rising requirements and demands. Whether it’s bringing products to market faster, changing business strategies to include e-commerce fulfilment capabilities, implementing new technology, or lowering risk, the end goal is always to keep customers satisfied.
(The author is co-founder & CEO, SupplyNote)
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