Food Distribution Supply Chain Challenges & Mobile Ordering

By
Michael Elmgreen
August 15, 2016

Food distribution and production accounts for over 12% of GDP and 17% of national employment, and more than $372 billion dollars in the United States each year. This industry occupies a unique place in the food supply chain. They must receive large quantities of food from producers and suppliers and distribute it in smaller quantities to retail customers – such as grocery stores, convenience stores, and restaurants – who need enough stock delivered “just in time” to meet consumer demands for freshness. Ensuring maximum freshness and minimum waste is made more difficult when food distribution companies are unable to accurately predict how much inventory is required to meet customer needs. Demand can fluctuate dramatically from week to week, and season to season. It’s also subject to trends – such as the rising popularity of organic foods and an emphasis on healthier eating – that impact customer demand over the longer term. ERP and supply chain management systems have made significant improvements in the data available to manage inventory levels and the complex logistics needed to manage large inbound shipments of food. But while these technologies address some of the issues in the upstream supply chain, there has still been a gap in food distribution companies’ ability to accurately understand and plan for demand, especially for small or midsize customers. Large customers such as grocery store chains have been placing their orders using EDI or wireless handheld barcode devices for years, but that hasn’t been the method used by smaller grocery stores, convenience stores, and many restaurants. With smaller customers, paper processes or manual online order entry are still more common. Mobile ordering is one way companies are rising to meet these challenges in food distribution. What supply chain challenges do mobile ordering help to address in food distribution? Three that we think are most critical include:

  • Data Quality
  • Delays
  • Wasted Time and Inefficiency

Let’s look at these three in further detail.

Food Distribution Challenges & Mobile Ordering

Poor Data Quality

It wasn’t that long ago that most customers used paper catalogs and order forms to place their orders. In fact, many smaller customers – independently operated grocery and convenience stores and restaurants - still do. For food distribution companies, this can mean poor data quality due to the inefficiency of having to manually enter paper orders into an order management system for fulfillment. Assuming an error rate as low as 1% for manually entered orders, this still presents a significant problem with data quality in large orders or orders taken in aggregate. Inaccuracy results in waste when supply is greater than demand, as well as stock outages that negatively impact customer satisfaction when demand outstrips supply. B2B eCommerce ordering portals are one solution that food distribution companies are offering to increase customer satisfaction and improve data quality. However, on its own it has shown limitations. Ordering online – whether through an eCommerce portal or via more traditional EDI – is more efficient than paper, but a buyer needs to check stock levels on the shelf or in storage areas to determine the level of stock needed, then move to an internet terminal to actually enter the order. The process is inefficient and can also result in poor data quality once an order enters the system. Mobile order entry offers a more streamlined alternative. Mobile ordering allows store or restaurant employees, or food distribution sales reps, to enter orders directly into a mobile device, with no need to manually transfer information from a paper form in order to place the order. This improves the quality of data, and also makes it possible to respond much more quickly to unexpected fluctuations in demand – the information is available much more quickly.

Delays

Many food distribution customers order and reorder products on a regular schedule. Whether that schedule is daily, weekly or monthly depends on the needs of the customer and the ability of the distributor to schedule time with customer service or sales reps. This process means that when unexpected fluctuations in stock levels occur, the customer must wait to reorder, or must place a special order in order to restock the needed items. This negatively impacts customer satisfaction, and also can have a negative impact on the food distributor’s ability to predict inventory. With mobile order entry tied to a B2B mobile commerce system, some of the bottlenecks with this system can be alleviated. Customers can enter orders on their own schedules, rather than the schedules of their distributors, and distributors can provide reorders more quickly. Better access to data in near-real time also allows food distributors to more accurately predict customer demand.

Wasted Time and Inefficiency

One major challenge for food distributors, especially those that are still relying on paper processes, is the time it takes for sales reps to either manually enter orders from paper, or to spend valuable rep time on the phone for orders that require human intervention. Food distributors that are using mobile order writing technology report that they are seeing 50% to 75% increases in order writing speed. This allows them to serve more customers, much more quickly. When mobile order writing is combined with ecommerce in a B2B mobile eCommerce ordering portal, it reduces the amount of time that food distributors must spend in order to enter each order. Orders can be entered primarily by the customer themselves, which means food distribution companies can dedicate less time to entering orders, and more time on strategically partnering with customers to grow top line revenue. Food supply chains are extremely complex, but as mobile technology becomes more commonplace, distribution companies will be able to eliminate much of the waste that currently results from inaccurate demand forecasting, and serve customers more profitably. How does your food distribution company address these three challenges in your business? We’d love to hear about it in the comments.