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Logistics Network of the Food and Beverage Production Industry
The supply chain serves as the core of todays enterprises, becoming the foundation upon which effective business operations are based. The correct organization of a supply chain is key to navigating along the optimal path in todays globalized, changeable business landscape. As such, logistics networks hold special significance within vital industries, which are expected to function without interruptions at all times. Food and beverage production is one of such areas in which stability and sustainability acquire an unparalleled degree of importance. Indeed, this industry provides the worlds population with basic sustenance, meaning that its supply chain must possess a certain level of resistance to both external and internal stress factors. In order to meet this topical objective, logistics management of the industrys leading companies incorporate advanced performance measures and lean principles. At the same time, it is equally crucial for the leadership to have a comprehensive of the supply chains functioning through the implementation of relevant metrics and criteria. The purpose of this paper is to analyze waste management, lean principle application, value, costs, and performance within the food and beverage industry.
Budget optimization has become the cornerstone of effective business organization in the contemporary environment. As such, this idea does not solely suggest the reduction of expenses at all costs. On the contrary, this process should benefit from the managements considerate approach to utilizing assets and resources in the most effective way possible. In todays corporate environment, logistic expenses and supply chain value are becoming important points of interest. According to Goldsby and Martichenko (2005), logistic costs can attain 15% of a companys revenue. In the food and beverage industry, excessive logistic expenses translate into elevated prices and general dissatisfaction of the end consumer.
Total logistics costs in this sphere comprise two primary aspects, which are inbound and outbound logistics. The first notion refers to the process of raw product transportation to the manufacturing site, for example, local farm products (Zaman, 2017). Next, the cost of transporting the organizations product to warehouses and selling points account for another major expenditure (Ahmed, 2017). Thus Ultimately, the logistic network cost comprises transportation, warehousing, material handling, ordering costs, and inventory carrying costs (Goldsby & Martichenko, 2005). While some of these points may seem less significant within the scope of the entire organization, their balance, or lack thereof, constitutes the degree of the supply chains efficiency in terms of expense management.
While establishing and maintaining the functioning of a supply chain is a matter of paramount importance for organizations, an equally critical task consists of tracking its effectiveness. In order to attain this objective, managers utilize various metrics, the exact set of which may vary depending on the industrys context. As explained by Trent (2008), the primary role of performance management is to identify the most important points of improvement. In the case of the food and beverage industry, the efficiency of a supply chain acquires additional importance. Both raw and final products are often perishable, meaning that they are to be delivered within a reasonable time in order to remain fresh for consumption. Therefore, the speed of transportation is a critical metrics for the industrys managers. If the performance in this sphere is below par, the products will be more likely to expire before the company can sell them, thus causing a decrease in profits. As per the lean principles, leading players in this sphere aim at placing their production and processing centers in close proximity, thus maximizing the value.
In addition, waste management becomes another area of increased importance within the framework of the industrys lean principles. The zero-waste philosophy is eminent in todays corporate landscape, as it serves two major purposes. It optimizes the supply and production chain processes and minimizes the expenses while underpinning a companys commitment to environmentally aware practices (Long et al., 2018). Sustainable food and beverage sector production corresponds to modern trends and improves the brands positioning, as well (Tseng et al., 2020). In fact, sustainability is said to be the cornerstone of the notion known as Logistics 4.0 (Edirisuriya et al., 2019). Zero-waste policies demonstrate immense potential in financial terms, as well, which makes its percentage a relevant metric for the industrys management.
Evidently, the mere existence of critical metrics does not yield guaranteed improvements for organizations because figures are to be interpreted correctly, as well. According to Trent (2008), it is vital to present the metrics in a clear, comprehensible format. First of all, each point of measurement is supposed to be quantifiable and objective, meaning that it is to be attributed to a numerical value. Subjective solutions cannot guarantee the required level of insight, which would correspond to the industrys challenges. While finding this quantifiable form may be difficult, it is an objective of pivotal importance (Hannon, 2004). Modern technological advancements enable effective solutions in the area of metric chart composition. The management in the food and beverage industry will benefit from a visually advanced integrated dashboard, which would track the significant metrics. Such a dashboard, for example, can reflect the companys advancement in waste reduction. Simultaneously, it would reflect the correlation between transportation efficiency and profits while highlighting the performance of various product suppliers and distributors.
References
Ahmed, M. N. (2017). Impact of outbound logistics in purchase decision of small electronic home appliance traders in Chittagong. International Journal of Applied Logistics, 7(2), 52-62.
Edirisuriya, A., Weerabahu, S., & Wickramarachchi, R. (2019). Applicability of lean and green concepts in logistics 4.0: A systematic review of literature.
Goldsby, T. Dr., & Martichenko, R. (2005). Lean six stigma logistics: Strategic development to operational success. J. Ross Publishing.
Hannon, D. (2004). Tracking total logistics value from the inside out. Purchasing, 133(16), 1-3.
Long, T. B., Looijen, A., & Blok, V. (2018). Critical success factors for the transition to business models for sustainability in the food and beverage industry in the Netherlands. Resources, Journal of Cleaner Production, 175, 82-95.
Trent, R. (2008). End-to-end lean management: A guide to complete supply chain improvement. J. Ross Publishing.
Tseng, M. L., Sujanto, R. Y., Iramanesh, M., Tan, K., & Chiu, A. S. F. (2020). Sustainable packaged food and beverage consumption transition in Indonesia: Persuasive communication to affect consumer behavior. Resources, Conservation and Recycling, 161.
Zaman, T. M. (2017). Overview of the supply chain function of Nestle Bangladesh. BRAC Business School.
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