The massive food price increases seen over the course of 2022 and 2023 haven’t been making headlines as frequently in the past couple months—but that doesn’t mean their impact isn’t still being felt. Reports showed that in most parts of the US, food prices rose by more than 10% year-over-year (compared to a recent historical average of closer to 2% per year), and consumer buying habits shifted significantly as a result.
Some of the most common adjustments that consumers made involved looking out more closely for bargains, moving towards cheaper brands, and shifting their spending away from things like home decor and luxury items. But, of course, it’s not just consumers who are being significantly impacted—food distributors and wholesalers have had to deal with rising prices at the source and adapt to changes in consumer behavior in recent years, all of which can have a big impact on distribution and delivery operations.
The results go beyond simple cost pressures. There’s also added pressure to be flexible and adaptable in the face of buying habits that are simply changing much more rapidly than they used to. That’s why businesses in this area are increasingly taking a more holistic approach to optimizing their deliveries and future-proofing their delivery operations. But what does that actually look like in practice?
How Inflation Impacts Food Wholesalers and Distributors
To be sure, it’s not just inflation that’s causing price increases. Major supply chain disruptions—the egg shortages resulting from a spate of avian flu is just one example—have also created real scarcities that led to price increases on foods. But regardless of the cause, situations like these put distributors in a tight spot: you want to minimize the extent to which you’re passing cost increases on to price-conscious accounts, but your prices still have to reflect your sourcing and delivery cost realities.
At the same time, customer demands go beyond a preference for competitive pricing. When their own customers are changing their buying patterns, big box stores, grocery chains, and even mom-and-pop convenience stores need to find ways to adapt—and they rely on their wholesalers to enable them to do that. This might mean changing their order mixes significantly from week to week, placing more off day orders, or even skipping more of their usual delivery days.
We’ve talked on this blog before about the challenges that come with rapidly changing order mixes. Without a large amount of visibility into your current distribution plans and the ability to update those plans on the fly, it can be tough to cope . But when customer ordering habits are less predictable, the only option is to get more flexible. That means finding a way to ensure that your delivery planning and execution workflows can keep up with changes in your business. Groceries, restaurants, convenience stores—they’re all becoming more dynamic as a result of changes in the market, and they need their suppliers to get more dynamic as well.
Best Practices for Optimizing Food Distribution
We’re not going to pretend that the challenges presented by rising commodity prices and more volatile demand from customers aren’t serious—but with the right approach to delivery optimization they can absolutely be overcome.
Here are a few best practices for making that happen:
First things first, you need to have absolute clarity into your existing delivery costs at a per-route, per-stop, per-customer, and per-case-equivalent level. For many businesses—especially those running legacy software solutions or with information silos around delivery management—getting this clarity into delivery costs can be a challenge. But arming yourself with an easy way to get this knowledge is an essential part of fighting inflation. In practice, this might look like prioritizing technology that integrates easily with other supply chain solutions you may be using. It might also mean seeking out a means of staying connected with delivery personnel in the field that goes beyond just GPS tracking. Lastly, you’ll likely need predictive capabilities driven by AI or machine learning in order to turn all of your data into accurate cost estimates at the delivery planning stage.
Speed Up Your Planning
When you’re dealing with more and more changes week in and week out, you need to make adjustments more quickly and more frequently. Unfortunately, most food distributors aren’t really built to do this at the route planning or territory planning level. After all, managing a network that’s mostly based on recurring stops and orders is fundamentally more complex than handling completely dynamic orders each week, and so the processes that support these plans have historically been complex (and thus slow and cumbersome) as well. But modern, AI-powered SaaS technology makes it possible to plan new routes in a matter of minutes and make updates to existing routes in just seconds—putting you in a position to actually adjust your routes week-to-week to deal with the latest batch of orders.
Optimize Your Routes
Again, food distribution is complex—it’s not an industry where techniques like purely dynamic route optimization are going to work in the real world. But it is possible to boost efficiency and reduce delivery costs by optimizing your routes around recurring orders and stops. This sort of hybrid approach might look different depend on the tools and techniques you’re using and how your current routes are put together, but the basic idea is the same: start by setting fixed routes and sequences in stone for the accounts that absolutely have to get their orders on a particular route, at a particular stop number, at a particular time; then use dynamic routing around those stops to fill in the order where you have more flexibility about when you’re delivery personnel need to arrive. In this way, you can get the efficiency gains and cost reductions that come with dynamic routing without sacrificing dependable service.
Streamline Your IT
We said above that you need to prioritize visibility in order to figure out your cost-to-serve—but it’s also crucial for all sorts of other delivery optimizations, from ensuring that your transportation network is designed to meet your actual customer needs to creating closer connections between route planning and route execution. One of the ways that you can do that most effectively is by streamlining your IT so you aren’t constantly switching back and forth between screens to find the right data and make the right decision about any given delivery or route. When you’re able to make decisions that account for planning and execution across multiple functions and areas, you can tackle costs and fight inflation from a more holistic perspective. As a bonus, streamlining your IT means that you can do more with fewer technology solutions, which potentially helps you reduce costs even further.
Though both food price inflation and the supply chain challenges that exacerbate it may be tapering off, the cost pressures on food distributors aren’t going away any time soon. And they’re not helped by the ongoing driver shortage. Luckily, the right delivery optimization tools and techniques are out there for distributors that want a way to rein in costs. It’s just a matter of finding technology that will help you boost visibility, speed up planning, optimize your routes, and streamline your IT.