Strategies for Scaling Business Growth in the Food Industry
Scaling a food manufacturing business is tricky, involving plenty of variables and risks that can quickly eat up profitability and turn successes into major setbacks. Imagine you could instantly access data that would give you clarity and insight at those crucial moments – which metrics would you track to amplify and sustain your business growth?
We asked the food industry participants of the webinar, Maximizing Margins for Food Production: Mastering Strategies that Build Profitability, to rank their highest priority metrics. Their top three choices were: (1) Overall Equipment Effectiveness (OEE); (2) Fulfillment Rate; and (3) Inventory Levels. Icicle creator Steven Burton wrote about the importance of the first two metrics in his article, “3 Metrics for Scaling Up Your Food Manufacturing Business,” which was published in the most recent issue of Canadian Food Business Magazine.
In this article, we expand on that list to cover inventory levels and two other important sets of metrics that can support your business development decisions through any situation, from market positioning to product development to international expansion into new markets – all while closely managing costs and profitability.
#1. Track Inventory Levels (Including Shelf Life) to Reduce Waste and Maximize Revenue
It is sometimes shocking that in the food industry, plenty of businesses operate without knowing what they have in stock or especially where inventory is located. Larger and more profitable companies will almost always have complex and expensive inventory management systems to maintain their competitive advantage. In the age of automation and heightened traceability regulations, that also means real-time, granular data on inventory as it moves through the supply chain, and not just accounting records for purchasing and sales.
Optimizing Inventory Levels Gives Food Manufacturers an Edge
How do inventory levels fit into the picture? Tracking inventory levels isn’t just about what you have in stock; it’s also about when – and not just for traceability purposes, either. As a food manufacturer, your inventory is time-sensitive. You need to operate not just on your business’ timeline, but also the shelf life of your ingredients. Incorporating best-before dates into your inventory management system doesn’t just help you prevent waste, but also makes sure you deliver on shelf life commitments and avoid shipping out expiring products to unhappy customers. Inventory control with shelf life in mind can even open up new revenue opportunities by enabling you to optimize product pricing (for example, selling products with longer shelf life at a higher price).
Maintaining optimal inventory levels, then, involves a delicate balance. High inventory levels are damaging to your profitability and scalability because raw materials are wasted. On the other hand, if your inventory rate is chronically low, you may need to improve your ordering processes, better define your minimum stock thresholds, or seek out alternative suppliers in order to avoid unscheduled downtime and/or missed production targets while waiting for materials to arrive.
Tracking Inventory Levels Enables Strategic Automation Tools for Business Growth
Icicle ERP’s comprehensive suite of inventory management and logistics features allows users to leverage their inventory data to:
- Monitor and track inventory levels in real time to avoid costly downtime or delay scheduled production if ingredients or materials are short
- Use raw materials in first-in-first-out (FIFO) order to avoid being stuck with stale inventory
- Ship out finished product in FIFO order as well to maximize shelf life for happy customers
- Identify ingredient surpluses and items with short remaining shelf life to further minimize food waste, perhaps by running a sale or promotion
- Schedule staff according to warehouse activities and production schedules to avoid disruptions
- Track waste and identify the causes so mistakes can be avoided in the future
All these actions require detailed data visibility and real-time feedback systems, which are simply impossible to accomplish using a system that is not constantly reporting data. Making these moves towards greater efficiency requires targeted metrics, real-time inventory control on the lot code-level (plus shelf life tracking), and a solid reporting framework so you can take proactive steps to avoid stale inventory and understocked raw materials for production runs.
Combining inventory thresholds with fulfillment rate, Icicle’s Production Forecast interface incorporates data from existing inventory, pre-set inventory thresholds, booked sales, and planned production to provide suggestions for efficient production planning, including raw materials, production quantities, and timelines for meeting production targets. These complex tools support food business growth by adapting JIT (Just-in-Time) methodologies, which help you product and store only what you need in order to cut down on production costs and eliminate unnecessary waste – now taking into account all of the factors involved in food manufacturing.
#2. Secure the Right Suppliers for Business Growth with Supplier Performance Metrics
Supplier (or vendor) performance is a key metric for establishing a competitive advantage in today’s supply chain as your suppliers have a major impact on both risk management and profitability. While the most essential element of supplier management is compliance with food safety programs and third-party certifications, overall vendor performance can’t be measured with compliance alone.
Gaining Visibility into Supplier Performance Requires Integrated Data Management
Just like managing vendor certifications, measuring supplier performance involves closely monitoring clearly defined specifications and procedures, as well as reliable mechanisms for verification and approvals. These data points, or KPIs (Key Performance Metrics), should refer to quality, delivery, innovation, risk, cost, and service to deliver a full picture of your suppliers’ impact on your business growth.
Are your supplier’s deliveries arriving on time? What kind of issues or customer complaints has your team noted for that supplier? Do they have a certification renewal coming up? Have their prices increased lately? Are there Answering these questions involves lots of data from different parts of your business, from purchasing and QA to logistics and food safety. And in order to use that data, you need to be able to trend changes over time and extract actionable insights.
Agile Supplier Management Protects Profit Margins and Mitigates Supply Chain Risks
Icicle ERP was designed with food safety and quality control at its core; our supplier management software solution unifies all your supplier information to help you make data-driven decisions about your suppliers. Users can define what certifications and assessments their suppliers are required to have to verify their compliance with their company’s standards. Plus, Icicle sends reminders about upcoming renewals, third party certification due dates, and recurring supplier assessments to ensure that records are always up-to-date.
With a robust, integrated food production management system, Icicle ERP users gain visibility into supplier performance in order to achieve:
- Centralized information for strategic sourcing of raw materials (including third-party certifications and vendor assessments), reducing and diversifying risk as needed
- Streamlined receiving processes in your warehouse that integrate with purchasing records to ensure you receive what you ordered, in the right quantity, and at the right price
- Quality control data analysis to verify that you’re getting the quality you are paying for
- Just-in-Time (JIT) procurement strategies that are customized for the unique needs of food and beverage manufacturers
- Automated suggestions and notifications to ensure that minimum shelf life for raw materials is efficiently enforced
- Trending capabilities for assessments, inspections, incidents, risk potential, and more to identify poor supplier performance
Icicle’s forecasting capabilities, which on the production-side of things can suggest the most efficient inventory to use for planned production, extend to procurement too. Icicle ERP’s Smart Purchasing Suggestions feature generates an optimal list of raw materials to order based on a similar range of factors, including ingredient shelf-life and supplier lead times. With this information on hand, users can decide which suppliers to buy from based on factors from lowest price to highest quality to shortest lead time.
#3. Maximize Market Positioning with Sales Growth Rates
Market data suggests that the food processing industry will grow by a compound annual growth rate of 5.6% over the next ten years (from USD $1.9B in 2023 to $2.9B by 2032), but where does your business fit into that picture?
Sales data helps you understand your past sales patterns; knowing your growth rate gives you the ability to forecast future sales. Access to live, up-to-date costing data is an invaluable tool for responding to market pressures and other changes that are outside of your control. Similarly, knowing your sales growth rate lets you stay agile even when unforeseen circumstances cause your performance to diverge from past projections.
Innovating Sales Strategies and Product Development Goes Far Beyond Trends
In order for your sales growth rate to be accurate and effective for planning, you need lots of historical data. Icicle’s Sales Dashboard centralizes your sales data and trends it over time, yielding insights like average order size, on-time delivery statistics, customer returns, top customers, and top-performing products. By pulling data from all areas of Icicle into a range of sales management tools, you can ensure that you’re getting a comprehensive picture of your sales patterns.
A recent case study with Icicle ERP user Yoggu!, an alt-yogurt manufacturer with an emphasis on sustainability, demonstrates how much farther food processors can take sales and costing data in pursuit of scalable business growth. By leveraging Icicle’s technology to make data-informed decisions, Yoggu! grew their business by 28% in under a year.
Using historical data, the Yoggu! Team was able to adjust their product formulations (recipes) and processes to respond to supply chain disruptions that otherwise might have stymied their success. They were also able to use sales data to innovate their product lines: “Even if we were to increase an ingredient or decrease an ingredient by a couple of litres for our big production run,” Yoggu!’s Operations Director explained, “we can track that, make notes, and then see how it does in the market.”
Amplify Business Growth and Innovation with Icicle ERP’s Seamless Data Management Systems
These three sets of metrics – inventory levels, supplier performance, and sales growth rate – demonstrate both the importance and complexity of effective data management for the food industry. As Steve wrote in Canadian Food Business Magazine,
“Scaling up sustainably depends on your ability to make data-informed decisions. Quantity is not the same as quality; understanding big data’s strategic impact and management tactics for food businesses is integral to implementing analytics into operations. The ability to focus on what matters most for your success is key.”
With data at your fingertips, the possibilities for both scaling up your business – expanding to new markets, securing big customers, launching new product lines – and for maximizing the efficiency of your operations, are endless. One Icicle ERP user with high-velocity warehouse operations found that by streamlining their picking operations to be just six seconds faster, they were able to increase their profitability by $100,000 per year. What kind of insights could you use to guide your business growth?
Access our on-demand webinar on Maximizing Margins for Food Production to learn more about how to leverage 6 key metrics to drive profitability.