Meeting tomorrow's demands in the food & beverage industry

In recent years, the phrase ‘supply chain’ has quickly became a part of everyday vocabulary, frequenting headline news across the world. From refuelling at service stations to purchasing household staples at the supermarket, supply chain issues have impacted the lives of Australians in numerous ways. As Australia has moved into a post-COVID world, one sector that is still grappling with a multitude of challenges is the food and beverage (F&B) industry.

What was an emerging issue back in 2020 remains a current trend in the F&B industry, with record low unemployment levels in Australia and New Zealand, coupled with the impact of shifting workforce dynamics and increased competition for skilled workers. According to KPMG, these problems are likely to remain a concern for the next three to five years, with rising inflation, increased transport costs and global uncertainty clouding the future of the industry. Despite challenges created by the pandemic, the crisis also presents opportunities for industry growth.

For companies to compete in Australia’s $23 billion food and beverage industry, they must understand and overcome the challenges standing in their way today.

Challenge 1: The domino effect of labour shortages

The pandemic ignited a collective reassessment of work and a considerable shift in labour availability, causing the F&B industry to navigate two significant challenges: talent shortage and current employee attrition. From farm to fork, each stage of the supply chain relies on a skilled and reliable workforce to ensure the smooth flow of operations. According to the Australian Bureau of Statistics, almost a third of employing businesses are having difficulty finding suitable staff. Shortages in essential roles, such as farm workers, processors, packers and drivers, have led to disruptions, delays and potential bottlenecks, impacting the overall efficiency and availability of products.

Resourcing, in particular in the cold chain supply network and its affiliated industries such as meat processing and agricultural processing, have also taken a big hit. Many workers have migrated away from manual labour roles, perceiving them as less attractive or opting for industries with more favourable work environments. This has presented a significant challenge for F&B suppliers, as the warehousing and logistics workforce, often required in remote and demanding environments, becomes increasingly difficult to maintain.

Challenge 2: Mismatched supply and demand

Retaining talent has also proven equally challenging, with many workers seeking better conditions. Many manufacturers are faced with regular labour turnover as businesses compete with one another to retain talent in a shrinking labour pool. To secure and retain talent, businesses are compelled to offer higher wages and improved working conditions. Consequently, rising labour costs impact margins and the bottom line, potentially leading to higher product prices for consumers — contributing to the rise in the cost of living — as well as additional costs associated with recruitment, training and retention efforts.

Further, this increased competition has resulted in additional costs for suppliers, prompting them to re-evaluate their warehousing practices. Insufficient staffing levels and skill gaps may result in slower production processes, increased errors and delays in order fulfilment. This not only jeopardises customer satisfaction but also disrupts the overall supply chain, leading to potential stock shortages and other logistical challenges.

Challenge 3: Increasing inflation

Attributed to numerous local and global factors, including labour shortages, transportation costs and fuel prices, food inflation is forecast to continue to rise, with data from Deakin University suggesting that fresh produce has already risen by 6.7% in just over 12 months. The impact of this inflation will vary across the F&B industry, with smaller players more likely to feel the pressure of rising costs.

Given that nearly 80% of Australians express concerns about the cost of food, labour shortages have emerged as a significant factor contributing to both increased food prices for consumers and challenges in processing and moving food throughout the supply chain. From a business standpoint, these shortages exert pressure on overall costs, making it difficult to maintain affordable prices while ensuring the smooth flow of food along the supply chain.

Reimaging industry operations

To combat the labour shortage, F&B suppliers must continue exploring alternative means to supplement their workforce to alleviate its reliance on manual labour. Suppliers must proactively seek ways to enhance the utilisation of existing workforces and mitigate the risks associated with labour market fluctuations.

By complementing the workforce with technology, suppliers can improve efficiency, fulfil more complex production and warehousing tasks and optimise overall business operations. For example, manual warehousing practices have increasingly been replaced by innovative solutions, where sophisticated automated pallet and case storage and retrieval systems, layer picking and case picking solutions are deployed to optimise warehouse operations.

F&B operators are increasingly turning to automated systems that help to reduce reliance on manual labour, while also enhancing the health and safety of the workers within a facility. Automation technologies, such as robotic palletising, automated guided vehicles (AGVs), automated storage and retrieval systems (AS/RS), Multishuttle case buffers and goods-to-person (GTP) workstations, automatically transport and store product and optimise the picking of orders, providing improvements in productivity, flexibility and reliability, speed, accuracy and inventory control. In addition, these solutions eliminate the requirement for a large manual workforce and allow operators to work in more efficient, safer environments, minimising the risk of accidents and product damage and contamination.

Replacing warehousing storage, transport and order fulfilment tasks with automation allows many F&B suppliers to shift their valuable labour pool to more critical areas of the business. While for others, increasing manual labour efficiency and effectiveness with automation means they can get by with a smaller workforce and reduce their risk and reliance on this.

Automation has a key role to play in developing a business’s agility and resilience to deal with current and future disruptions. There’s a large appetite in the industry to shift to automation, and while the focus has traditionally been solely ROI, business continuity and risk mitigation are now central drivers.

These efforts to upgrade with automation reflect a proactive approach to building operational resilience and agility and ensuring the continued smooth operation of the food and beverage supply chain in the face of widespread workforce challenges. It’s this level of rapid change and investment that’s required to keep F&B businesses on track to compete in the industry’s future.

For more information on how your F&B business can meet customer demand in a changing market, visit: https://www.dematic.com/en-au/industries/food-and-beverage/.

Image credit: iStock.com/JackF