Many food and beverage companies are not optimising their customer service levels and profitability opportunities due to gaps in their ability to manage their supply chain, according to a survey report released by Lawson Software. The research, which examines and compares the working practices and processes of 200 leading food and beverage (F&B) suppliers within Europe, Asia and Australia/New Zealand, was conducted by Enterprise Economics on behalf of Lawson.

The survey findings suggest that many F&B companies routinely cope with excess inventory in the supply chain and empty store shelves, largely due to the continued use of spreadsheets or paper-based methods for sales, production and purchasing planning. This can, in turn, lead to lower sales and impact bottom-line performance for both the retailer and the food and beverage manufacturer.

According to the study, 1 out of every 4 companies in Asia still uses paper for sales forecasting and planning, compared to 1 in 100 in Europe. European companies take the lead in using planning software for sales forecasting and planning, at 58 percent, compared to just 36 percent in Australia/New Zealand and 13 percent in Asia. However, while the study suggests that Europe is leading the way in the use of advanced planning tools, 21 percent of those surveyed in Europe are still using spreadsheets for production planning, and 30 percent use them for sales forecasting.

Lawson maintains that continued use of manual methods leads to widely publicised data errors, particularly in relation to seasonal peaks of supply and demand. Manual processes increase the risk of producing flawed forecasts based on faulty data and can adversely affect customer satisfaction, as over- and/or under-production leads to stockouts on certain items and excess inventory of others.

According to Lawson, the food and beverage industry has small margins and is dynamic and as such, accurate supply chain information is absolutely key, not just for planning, but also for operational efficiency. Many food and beverage businesses still have a great opportunity to take advantage of the modern technologies available that can help them increase their level of customer service, create new operational efficiencies, reduce risk, and increase profitability. It’s still a vastly untapped area of supply chain management.Lawson maintains that by relying on paper and spreadsheets for needs such as planning and forecasting, organisations are leaving themselves open to being cut out of an increasingly competitive global market, and ultimately, serious failure. Retailers are putting increasing pressure on suppliers to either improve their supply chain processes or lose contracts. Investment in Lawson technology to automate the supply chain can help provide a way for companies to reduce inventory costs, increase retailer and customer satisfaction, and provide a significant return to the company.

Regional spotlight

Australia/NZ:

Only 42 percent of Australia/New Zealand F&B companies report achieving customer satisfaction levels of 98 percent or higher. This could perhaps demonstrate difficulties in planning, forecasting and stocking the appropriate goods at the appropriate time. When a company has goods in inventory but not on the shelf, this is a clear sign that they are not taking advantage of modern technology and are missing opportunities to increase their sales and improve customer satisfaction. While most companies recognise this as their greatest challenge, they responded that their focus is on reducing operational costs, and attacking inventory issues in a second step. Lawson’s research suggests that better forecasting will help minimise excess operational costs by providing consumers what they want, when they want it.

Europe:

Companies in Europe account for the largest number of survey respondents that highlighted use of planning packages for sales forecasting, at 58 percent, production planning, at 34 percent, and purchase planning, at 32 percent. However, there is still significant room for improvement. Those organisations still with inadequate planning capabilities may potentially be impacting their bottom line and putting their business at serious risk of failure as a result of over- and/or under-production, stockouts on some lines, and excesses on others that lead to product expiry.

Lawson launches the findings of its commissioned research in its annual global food and beverage supply chain management survey.
20 November 2006