In the food industry, the key word is quality, taste, and pricing. In this article, we will be focusing on the pricing aspect of the food manufacturing business. Food manufacturers always have to be careful about the cost as it affects the bottom line and the way they price products.
Pricing in the food industry is not only about the cost plus your margins but also about the way you position your product and how customers perceive the value of the product.
Our food manufacturing and distribution customers at To-Increase often seek a solution to their pricing conundrum. While they understand that pricing is not always about costs, managing all aspects like recipe management, supplier management, distribution costs, changing seasonal demands, storage, and distribution expenses can become a colossal ask.
Our advice to them is to seek suitable food manufacturing and distribution software solutions that can automatically sync with their ERP to manage this situation.
How a food manufacturing and distribution can help
With the right cloud-based food manufacturing and distribution solution in place, you will find it easier to manage the intricacies of pricing, margins, and costs.
Predict and optimize
In the food industry, it is crucial to leverage predictive analytics to track changes in the supply chain, conditions for manufacture, market situation, and the need to launch new products. When it comes to the supply chain, your prediction can look at the empirical data, the weather updates (in case of agricultural components), political conditions (war, election, etc.), and the pattern of new launches (healthy options in the summer to fit in with the beachwear) in the market.
When you look at these factors over the years, you will be able to predict cost variations, adjust margins, and price scientifically.
Track and manage
In the food manufacturing business, sometimes, you are as good as your suppliers and vendors. Thereby, it is vital to track the performance and reliability of vendors regularly. Your food ERP solution can help you track quantities, the locations from which the supply is from, the production conditions, and other related costs.
When you track suppliers and vendors with these criteria, you can plan for shortfalls in terms of quality and quantity and prepare to deal with these conditions with a second-line of suppliers to make up for any shortfall.
Project and plan
Allergen management is a significant factor in the food manufacturing industry, and it can add to costs in terms of labeling and storage. Allergen management also has quality, regulatory and compliance implications.
You need to project these costs alongside formula changes, production costs, packaging, storage, and distribution. When you plan for the costs of this aspect using the food warehouse and distribution ERP solutions, you can price correctly.
Forecast and adapt
The food industry is a B2C business that is subject to the seasonal changes, festivals, eating trends, and the promotional offers that your retailers have going. It is crucial to forecast these occurrences and adapt your pricing as per the demands of the market and seasons.
For instance, people prefer to eat lighter foods in the summer months whereas winters bring out the need for comfort food. Pricing appealing foods a bit higher as per the seasonal demands can help you increase your margins.
Anticipate and adjust
In the food sector, you need to anticipate and adjust your production schedule according to the supply of ingredients but also as per the spikes and falls that are part of the industry. These changes are not just in conjunction with seasons but also due to other events.
For instance, if there are sports activities scheduled, fitness will become a buzzword. And when the fitness wave hits the market, people will be reaching out for healthier options. If you can anticipate these trends and adjust your manufacturing accordingly, it can help you stay ahead of the curve.
Wastage management is not only a functional aspect of those in the food industry but also a statutory requirement. Your food solution can help you solve this issue in many ways. You can go for co-product production or find ways to tie up with another manufacture who can do this.
Take the next step today!
Now that you know that the right food manufacturing and distribution ERP solution can help you cost and price your products better, it is time to take the next step. List out all the aspects that you want to improve in your food business. And talk to our experts about how our cloud-based food manufacturing and distribution solution can help you.
Download the eBook to know how to Maximize margins in food manufacturing, which is a complex operation impacted by the weather, special events and competitor activity.