The DNA and foundation of every brand is its supply chain, but what do you do when economic factors out of your control impact how you make and sell your products? We talked to five experts with perspectives representing manufacturing, freight, and last-mile delivery to find solutions to today’s most pressing logistics challenges impacting food and beverage brands.
Track Your Crucial Commodities
Monitor the rising costs of fuel, your packaging (plastic, glass, aluminum), and key ingredients in your products like corn, wheat, soy, potato, tapioca, or sunflower oil. Look for opportunities to reduce your commodity costs, such as buying larger quantities, longer-term contracts, or partnering on a group order with brands that need the same ingredient. Make sure to always have second and third suppliers as backups in case your primary supplier has a shortage, ingredient recall, reduces their team size, goes out of business, or starts to prioritize the needs of their larger brand customers. We recommend using ShelfLife to source ingredients and Lumi for packaging.
“We recently announced that we would increase our prices on certain products due to supply chain challenges. One of the main challenges with sourcing ingredients is rising prices and freight costs across the board. We’ve definitely slowed down our hoarding of raw materials now that lead times are normalizing and shortages are no longer a frequent issue. While I’m definitely a little scarred from the global cardamom shortage we experienced last year, the pandemic really pushed us to strengthen our supply chain with secondary and even tertiary suppliers. We are now really focusing on the geography of our supply chain. We’re looking at consolidating suppliers, prioritizing suppliers with warehouses in neighboring states to our manufacturers and even considering moving to a co-packer closer to our 3PL to reduce freight time and costs.”
- Anonymous operator
Double Down on Your Freight Partners
The rising price of gasoline around the world is still impacting the cost of importing goods and raw materials via shipping containers and domestic freight between ports, factories, distribution centers, retailers, and deliveries to a consumer’s house. Similar to the importance of backup ingredient suppliers, Mike Grillo, VP of Marketing at Ampla and co-founder of Gravity Products, recommends having contingency plans in the event that your transit times and/or costs start fluctuating dramatically. He notes,
“A great freight partner can help you troubleshoot your problems versus just bringing them to your attention. Say getting goods to land and clear at Long Beach is going to take 1.5-2x as long as it usually does; does it make sense for you to ship into the East Coast as a one-off (New Jersey or Georgia)? It may, depending on the final destination of your goods. These are the type of backup plans that a strong freight partner can help you come up with.”
- Mike Grillo, VP of Marketing and co-founder of Gravity Products
If your brand has strong distribution and runway, Ben Rudman at Charis Consumer Partners (a hybrid private equity firm and co-manufacturing) recommends locking in 1 to 2-year contracts with your freight providers to avoid paying a premium next year.
Skyler Kragt Wuolle at ISO, a platform for brands to manage and measure freight transportation, recommends reserving some of your route schedules for 'mini-bids' a few times a year, rather than bidding out all your freight at once (on-demand/as needed trucks vs. an annual contract) to give your brand flexibility if you need more or fewer routes, or if the cost of freight drastically reduces next year. The idea being that rather than evaluating your freight costs on an annual basis, sending out mini-RFP for underperforming or overpriced lanes more frequently to keep your rates more in line with the market.
“Since the pandemic, transportation markets have been very volatile. We've seen driver and equipment shortages, freight rates went sky high, and there was an influx of new MCs. More recently, the driver shortage eased and overall demand is down, but the cost of fuel is now a really big problem. These ups and downs exacerbated the challenges brands deal with getting goods to retail. This is affecting brands in almost every industry and margins are very tight within the CPG world, especially food products. It's also very expensive and difficult for these brands just to get the shelf space. It’s costing transportation providers A LOT more to run their businesses as well, so it’s going to cost a lot more and require more time and resources for product to hit those shelves.”
- Greg Ackner at Capital Logisitcs
Plan Ahead for Holiday Shipping
The holiday season is the perfect time to acquire new customers through promotions, limited edition flavors, and encouraging customers to gift your brand to friends and family. These are all reasons why your customer experience - from order to delivery - needs to be five stars in Q4.
Whether you make beauty products or seasonal pumpkin-spiced RTD lattes, you’re likely thinking about your holiday supply chain strategy this summer. Melanie Nikravesh at Ohi, an instant delivery partner for DTC brands, recommends researching holiday shipping rates now to know your costs and to plan ahead for any shipping delays your 3PL and various suppliers anticipate. Ohi can complement your core delivery partners by offering customers 24-hour delivery from your site. With Ohi, you can bypass traditional surcharges and holiday cut-off times for gift orders.
See also - Ampla’s advice for the holidays
Strong runway and access to flexible working capital can arm your brand against supply chain disruptions. Learn more about how Ampla customers have used their credit lines for purchasing ingredients and inventory.