Some of the common frustrations in the food ingredient supply chain are long lead times, a poor customer service experience, and pricing inconsistency. Managing risks in these categories ensures business continuity and a baseline for company growth, but this peace of mind does not just happen, and it is one of the reasons distributions is needed in the supply chain: ensuring reliability.
This blog will highlight why these challenges are present in the supply chain and how distribution helps with the process.
Long Lead Times
Producing functional ingredients takes time. Unique processes, specifications, and formulation precision are a must and the wait for finished product can be a challenge to supplying varying demand, seasonal needs, and new business requests. Distribution presents value in the supply chain by shortening lead times and ensuring availability through bulk purchases and storage of finished material. This allows end users to order what they want, when they want it, in the quantity that they need.
Why This is Important
Long lead times often require end users to carry “safety stock” to allow for unforeseen production increases or new product offerings. While raw material to produce is essential, carrying inventory ties up cash and limits storage space.
Because distributors shoulder the burden of keeping inventory on their balance sheet and utilize their facility for storage, they should be viewed as an “extension of the warehouse”. Of course, it is imperative that the end manufacturer Trust their distributor.
Poor Customer Experience
We have established that functional ingredient production can take time, and without the right communication, “the unknown” can become frustrating and limiting to normal operating procedures. Often it is not the long lead time that causes the most unease but rather inaccurate or unavailable information on tracking, shipment, delivery, and production details.
Typically, buyers can adjust purchase cycles to allow for longer manufacturer times, but when they don’t receive confirmation of a production date, shipping information, or are unable to quickly and directly get an answer on their order, it becomes harder to accept the long lead times and depend on the manufacturer.
Why This is important
A poor customer experience makes it difficult to operate without frequent production interruptions. When communication about an order is not accurate, businesses must operate in a reactionary fashion based on when their raw material arrives rather than proactively planning and forecasting production schedules based on when they want the product to arrive. Distribution plays a significant role in this process when they embrace World Class Service.
Price Inconsistency
Because of the limited number of producers and complicated process of manufacturing functional food ingredients, price increases often emerge without significant advance notice. Most end users understand when macroeconomic conditions support increases, but it becomes frustrating and seemingly unsubstantiated when the changes happen regularly and without a strong narrative to support the higher price.
Why This IS IMPORTant
End users often contract business for a year or create budgets based on production costs. If prices continue to increase it creates inconsistency and forces end processors to spend more time focusing on current products and less time seeking out new growth sectors. When a partner embraces a More than Distribution mindset and negotiates better pricing or seeks out alternative options, it ensures that customers can focus more on their business and less on sourcing and fighting rising costs.
If your company is experiencing long lead times, a poor customer service experience, or frequent price increases with any product category, let us know. We have an alternative option.
