Consumers are increasingly looking for convenience. They want their groceries delivered at the right time and at the right temperature. They expect the freshest products at every point of sale. They also want innovative ready-made solutions combined from multiple product streams. Such customer demands are setting a challenge to the sector to find novel answers for the last mile, mixed temperature streams and intricate distribution networks. Decision-makers in the food industry seem to be aware these challenges exist but have so far taken very little action. Investment and innovation are lagging far behind what is needed, according to recent research. Why is this? And how can the industry become more effective?
Food Sector Not Effective Enough on Solutions for the Convenience Economy
Challenges in the food sector
When food producers and manufacturers were asked about their greatest challenges, it turned out there were plenty to choose from. The food sector is faced with some very obvious gaps, according to the research ‘Opportunities, challenges and trends in the cold chain’, that was initiated recently by cold chain specialist VebaBox.
The most important issue for food producers and manufacturers is the balance between maintaining cost levels and delivering excellent customer service. Compliance with growing levels of regulatory requirements is also putting more and more pressure on cost effectiveness. Other difficulties are related to their ability to adapt: How to manage the supply chain effectively while you are also dealing with a shifting portfolio? How do you keep customers satisfied? And how do you make all of this work when employees are hard to find?
Despite (or possibly because of) the myriad issues, food producers and manufacturers appear to be in a state of paralysis. The majority of companies surveyed say they lack a focus on solutions.
Disappointing effectiveness in the sector
This recent study uses a model to show how effectively food companies have organized their cold chain. The model compares company ratings on effectiveness aspects such as leadership, processes, governance, collaboration, capabilities, monitoring and sourcing. The overall effectiveness rating (importance x implementation score) in the study was very low. With scores ranging between 5.1 and 6.4 out of 10, companies in the food sector clearly have a long way to go in realizing optimum effectiveness. The average scores for how successful companies have been in implementing these elements were significantly lower than the level of importance placed on them for every single effectiveness aspect. The model also reveals some important priorities for making improvements: focusing on technology and collaboration, for example, are recognized as proven ways to increase effectiveness.
Lack of strategy and investment
Even though the challenges are considerable, there is still a lack of strategy in the food sector. Three-quarters of the companies that participated in the VebaBox research admitted they have no strategic plan. The shortfall is apparent predominately in the use of foresight, forging strategic partnerships and innovating in response to trends in the market. This lapse in preparedness for the future means that solutions that are sorely needed to help meet the changes and challenges will continue to evade many in the sector.
A majority of food producers do not have a clear strategy or willingness to invest
The food sector also invests too little in revitalization. Just one-fifth of companies in the sector have allocated the funds necessary to pay for optimizing systems, people and/or resources. That is not nearly enough for the sector to be able to meet the challenges it faces, including customer satisfaction, cost reduction, quality improvement, safety and sustainability. Could it be that the challenges not yet big enough? Or are they simply missing the right focus?
There are, however, notable exceptions. There is a much greater propensity for action at those companies that do already have a solid strategy. In fact, 31% of companies that say they have a strategy in place are also investing in solutions. Clearly, a strategic focus makes a difference.
Of course, there are also companies in the food sector that are not lagging on innovation. One-third of companies are ahead of their competitors, and there is a reason for that. This group of leaders is driven by a strong desire for efficiency and cost reduction. To reach those goals, they prefer to race ahead of the rest rather than sit back and wait. They are making strategic investments in new technologies, and that pays off. These leaders report much higher levels of customer satisfaction, effectiveness and sustainability. They are demonstrably better at conquering the challenges facing the sector.
Research report available
The answers to how companies in the cold chain rate according to the effectiveness model and how the leaders are able to stay ahead can all be found in the free research report ‘Hot Shots & Hot Spots: Opportunities, challenges and trends in the cold chain.’ It is one of the ways VebaBox is helping the food sector innovate. The report offers a guide to improving effectiveness, quality, sustainability and many of the other challenges in the food sector. As the results of this research clearly show, collaboration is one of the most important determinants of success. The report, and the insights it reveals, should provide all the inspiration you need.
Interested in the research report? Free download.