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C2FO Powers Early Payment Programs for the World’s Largest Companies.
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In a highly competitive industry, food and beverage supply chains must invest in new technologies and more resilient logistics to stay ahead.
Food and beverage manufacturers continue to experience supply chain challenges as evolving customer demands, disruptions lingering from the pandemic and geopolitical conflict, as well as inflation and fears of a recession jeopardize resilience. Additionally, rising energy, transportation, material and labor costs are putting increased pressure on company bottom lines.
It’s no surprise that this environment has stretched food and beverage manufacturers, as well as their suppliers, financially. Buyers need longer credit, while suppliers need faster payments. As a result, the industry is seeing increased demand for financial solutions that optimize working capital cycles. Food and beverage manufacturers also need technologies that improve supply chain visibility, streamline processes and optimize margins. Together, these strategies can help build more adaptive, flexible and resilient supply chains.
This article covers emerging trends in food and beverage supply chains and what leading companies in the industry are doing to succeed. But first, what supply chain challenges are top of mind for these companies?
The major challenges facing food and beverage manufacturers include:
One of the top concerns for food and beverage manufacturers is labor and raw material shortages. For example, Russia’s invasion of Ukraine — one of the world’s largest agricultural producers — sparked export shortages and volatile prices for resources such as corn, wheat and sunflower oil. For food manufacturers, these shortages mean higher costs and delays, which can drastically affect customer satisfaction and margins.
Food and beverage supply chains also struggle to fill crucial roles, such as warehouse workers and drivers, contributing to delayed delivery. According to a 2021 Deloitte survey, nearly half of food and beverage product suppliers cite retaining talent as a top challenge.
In addition to raw material and labour shortages, rising fuel prices, inflation, high interest rates and the price of in-demand supply chain technologies are affecting the bottom lines of food and beverage manufacturers. These companies must find ways to lower costs without sacrificing business continuity and efficiency.
As demand rises for more affordable working capital solutions, such as supply chain financing (SCF), manufacturers are also under increased pressure to adhere to International Financial Reporting Standards (IFRS). For example, in the United States, the Financial Accounting Standards Board now requires companies to report on the terms and size of their supply chain financing programs.
Pandemic lockdowns fundamentally changed consumer preferences for food and beverage products. Increasingly, customers want:
Food and beverage manufacturers must quickly adapt offerings and navigate more complex stock-keeping unit (SKU) and order management processes. Additionally, companies that want to stay globally competitive must develop growth strategies for the Asia-Pacific (APAC) market, which has more than doubled its agri-food imports from European countries in the last decade. To realize this opportunity, manufacturers must integrate APAC legislation and consumer trends into their supply chains.
Collectively, these challenges point to an ongoing struggle to build and maintain more resilient supply chains. Manufacturers are under pressure to stay agile and meet new customer requirements while minimizing supply chain disruptions. The problem is exacerbated by inefficient buyer and supplier communications, and a rise in food fraud. Food fraud not only affects customer satisfaction but also can cause expensive recalls, costing the industry upwards of $40 billion annually.
In response to these challenges, key trends are appearing, including:
One of the leading trends helping address food and beverage supply chain challenges is digital transformation. Investing in digital technologies is one of the most effective ways supply chains can become more efficient, support business growth and improve margins.
Artificial intelligence techniques such as machine learning are helping food and beverage supply chains leverage data to make more informed decisions. For example, software powered by machine learning can analyze data collected along the supply chain. This helps quickly identify bottlenecks, alternative supplier opportunities and demand trends for improved inventory management. Supply chains can also use sensors to ensure that products adhere to food safety standards, while robotics facilitate more efficient manufacturing processes.
Nearshoring is a supply chain strategy that relocates manufacturing to areas closer to a company’s markets. More companies are producing food and beverage products near the point of sale, making it easier to adapt or scale production based on changes in demand.
This strategy also supports faster delivery times and can even lower transportation emissions — an added benefit for companies that have social, environmental and governance (ESG) targets. To maximize the benefits of nearshoring, many companies are combining the strategy with more efficient order fulfillment (often through digitalization), diversified transportation services, and direct-to-consumer, direct-to-store and last-mile delivery solutions.
Food and beverage supply chains are rethinking how they handle waste. Through circular supply chains, companies find ways to reuse food and beverage products that would otherwise end in the landfill. For example, some businesses have invested in the circular supply chain model to:
This approach isn’t just better for the planet. It also generates alternative revenue streams, optimizes resources, supports ESG goals and appeals to sustainability-minded customers.
Food and beverage manufacturers are spending more on financing as inflation increases interest rates. These factors are prompting the growth of supply chain financing, a relatively easy, cost-effective way to optimise working capital without weakening the supply chain.
Put simply, supply chain finance entails partnering with a lender — either a bank or fintech company — to finance early payments to suppliers. Traditionally, SCF programs have been inefficient and often inaccessible, particularly to smaller suppliers. However, the SCF industry is rapidly changing as fintech companies develop more efficient, flexible and accessible approaches.
Within these trends, food and beverage manufacturers are taking advantage of innovations to address their particular challenges, including:
Innovative food and beverage companies may develop or outsource digital technologies, such as machine learning and intelligent automation, to streamline supply chain tasks, saving time and money. Global businesses can further maximize return on investment by empowering citizen developers — who are often closer to the processes they are automating than professional developers — to create custom solutions. This approach leverages low-code and no-code tools, which allow citizen developers to build applications with little to no coding experience. Supply chains can not only alleviate the burden on IT resources but also gain better visibility into automation opportunities and outcomes.
Real-world example: Carlsberg and citizen automation and development
Carlsberg Intelligent Automation uses UiPath to find optimal automation opportunities and help citizen developers create, share and evaluate the performance of automation tools. As a leading multinational brewer and global business, Carlsberg achieved a more unified and scalable approach to automation, gaining more control over automation implementation and assessments.
Real-world example: Carlsberg and citizen automation and development
Real-time transportation visibility (RTTV) software tracks transportation data across the supply chain, often integrating this information with enterprise resource planning (ERP) systems. RTTV tools enable supply chains to estimate delivery timelines more accurately, optimize fleet resources, anticipate potential food and beverage spoilage, and reduce manual transportation management processes.
Real-world example: Coca-Cola HBC and RRTV
Early payment programs, which are initiated by buyers, give suppliers the option to request early payments in exchange for a discount. Rather than funding early payments via lenders, as practiced in supply chain financing, buyers fund early payments themselves.
These programs offer an alternative to traditional SCF programs, which have grown in popularity but are often inefficient and inaccessible to smaller suppliers. Early payment programs have several benefits, helping food and beverage manufacturers:
Early payment programs such as C2FO’s Dynamic Supplier Finance allow buyers to choose how they fund early payments — either themselves or through a third-party lending network — for added flexibility.
Real-world example: Associated British Foods and early payment programs
Food and beverage supply chains have been heavily impacted by the COVID-19 pandemic and geopolitical disruptions. Inflation, rising interest rates and new customer demands are continuing to stretch manufacturers’ bottom lines even further.
Despite these challenges, innovative food and beverage companies are staying competitive by investing in supply chain digitalization, agile models such as nearshoring and circular supply chains, as well as modern financing solutions. Through these approaches, industry leaders can build more resilient supply chains that optimize working capital for buyers and suppliers alike.
Click here to learn more about early payment programs to support your supply chain initiatives.
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