As a family in New York stocks up on groceries and eats yet another meal at home, the local Starbucks cancels their milk order with a dairy distributor in Cleveland. With up to one-third of their orders canceled, the dairy distributor has reached maximum storage capacity and stops picking up milk from a dairy farmer in rural Ohio. The farmer is forced to dump 31,000 gallons of milk into a lagoon on his farm. Meanwhile, a grocery store back in New York is facing a milk stockout as household demand skyrockets.
This is just one example of how the COVID-19 public health crisis has upended supply chains in the food and beverage industry. Demand has fallen in some areas, such as bulk purchase items for restaurants and schools, while there has been an increased need for shelf-stable household packaged goods.
With volatile demand and upstream supply chain disruption, wholesalers and distributors are adjusting sales targets, revising procurement planning, reconsidering production schedules, and repackaging items for different markets.
With business challenges revealed by COVID-19, now is the time to evaluate current business processes and identify where improvements can be made.
By working to be more accurate and agile, companies can strengthen their ability to weather current uncertainty and position themselves for a strong recovery when pandemic circumstances pass.
Here, we go over three key business challenges and how to approach them.
1. Disruption to upstream supply
As illustrated with the example of a farmer dumping thousands of gallons of milk, numerous factors are disrupting the cost and availability of raw materials. To name a few, these include:
- Export restrictions
- Regional transportation restrictions
- Fluctuating fuel prices
- Reduced production capacity, due to shutdowns and social distancing
- Shifts in consumer demand
All of this can result in the delay of expected deliveries, or the need to pay a premium for the expedited delivery of scarce goods.
To meet operational targets under these new conditions, wholesalers and distributors will need to make some adjustments, including:
- Relaxing delivery schedules to accommodate suppliers struggling with transport restrictions and material or labor shortages.
- Revising payment terms for either upstream or downstream partners to ensure the survival of the supply chain.
- Finding alternative vendors to facilitate the flow of goods, amidst up-chain business disruption or raw material shortages.
Accommodating new vendors and supply chain realities, while maintaining product quality, can be challenging – but QuickBooks® Enterprise, designed specifically for wholesale and distribution, can help.
With QuickBooks’ Vendor Management Center, wholesalers and distributors can see outstanding purchase orders by vendor, and even compare vendor contracts and pricing by item. In addition, with vendor-specific reports for item availability and fill rates, finding an alternative vendor to meet operational and business needs is made much easier.
But, in order to adapt to market changes, wholesalers and distributors also need to understand and adjust to the shift in market demand.
2. Volatile demand
McKinsey & Company reported that sales at restaurants, fast-food locations, coffee venues, and casual-dining locations declined 27% in March this year, as compared to the same period last year.
As large events remain off the table (restaurants, stadiums, and schools remain closed or operating at diminished capacity), the demand for bulk packaged goods has declined. But, as people have taken to eating meals at home as a preventative health measure, demand for grocery store items has surged, especially in the area of e-commerce grocery shopping, which has increased fivefold since the beginning of the COVID-19 crisis.
With the economic downturn and an increased awareness of healthy food items, consumers are now also more carefully considering their purchases.
Like the Cleveland milk processor, this shift in demand has left many wholesalers and distributors in the precarious position of having products in stock, but without the means to package and distribute them to the consumer market.
To continue bringing in revenue, food and beverage wholesalers and distributors need to diversify their sales and distribution channels to make their products available directly to retailers and consumers.
Baldacci Family Vineyards uses QuickBooks Enterprise’s advanced inventory management functionality to do just that. To make their wine available to both wholesale customers and individual consumers, the vineyard must have the means to package, track, and deliver their wine for different fulfillment channels.
With QuickBooks Enterprise, Baldacci Vineyards is able to manage multiple sales channels, including their warehouses for wholesale accounts in Ohio and distribution from California for direct-to-consumer sales. No matter where items are filled, each inventory depletion is reflected in their inventory system in real-time.
QuickBooks Enterprise users can tap into the advanced inventory management functionality to:
- Shift existing inventory in low-demand channels to high-demand channels.
- Get real-time cycle counts, without shutting down.
- Connect procurement to inventory management, so that staff always know what’s available.
- Print FedEx and UPS shipping labels, with tracking capabilities for direct-to-consumer orders.
- See all open orders and back-ordered items on one dashboard.
With end-to-end visibility of items on order, in stock, and in motion, food and beverage wholesalers and distributors will be in a better position to meet shifting demand and fill orders for more diverse customer segments.
To effectively optimize supply chains and improve inventory management to meet new market demand, companies will also need to overcome the challenges brought about by the public health crisis.
3. Human resource challenges
Most food and beverage companies are classified as essential business and, thus, workers have continued to work through stay-at-home orders.
As food wholesalers and distributors continue to work, a number of new operational and human resource challenges have surfaced:
- Frequent shutdowns to sanitize equipment and facilities
- Installation of physical barriers and protective equipment
- Reduced deliveries
- Increased time between employee shifts
- Purchase of PPE
- Purchase of new technology for remote workers
Some companies have had to hire a new shift of contingent or sanitation workers, while others find themselves paying more overtime, sick leave, or incentives to maximize attendance.
During these uncertain times, food and beverage companies need to make extra efforts to keep workers safe and ensure they are compensated accurately and promptly.
QuickBooks Enterprise users can upgrade to a digitally integrated payroll add-on that manages both full-time W-2 workers and 1099 contract workers from the same platform. Employees are able to clock in and out from their mobile devices, creating accurate, electronic timesheets that enable you to process payroll quickly and accurately.
Finally, QuickBooks’ Landed Cost reports reveal true product costs by factoring in freight, duties, insurance, and labor. By keeping track of how labor costs impact profitability, managers can make more informed staffing and pricing decisions to keep business moving forward.
Adapt now – thrive later
There is no doubt that COVID-19 has brought about new challenges for food and beverage companies. Food and beverage wholesalers and distributors need to adjust to shifting market conditions and protect their margins, while continuing to deliver quality products to customers.
To adapt, food and beverage companies need to bring agility to procurement, diversify sales, and order fulfillment channels, as well as take measures to keep workers safe and compensated in a timely fashion.
By using QuickBooks Enterprise, leaders can bring greater efficiency to processes and arm themselves with the business insights needed to weather these turbulent times – and thrive when normalcy returns.