The way the foodservice distribution industry works is complex — and rapidly changing.
For food to continue to make it to store shelves and restaurants, distributors need to stay agile, adaptable, and innovative, deploying new strategies to meet shifts in supply chains, changing consumer needs, increasing costs, stiff competition, and other challenges.
Especially in the modern, digital age, food distribution companies are facing challenges many couldn’t have even imagined a generation (or even a decade) ago. Being a leader in foodservice distribution requires getting creative to stay ahead of the curve — and ahead of your competition — as new, unforeseen challenges come your way.
Read on to learn more — including some of the top challenges facing distributors today, and how you can solve them to meet the demands of a changing food distribution landscape.
5 ways to meet major food distribution industry challenges
Below are five ways that food distributors can overhaul their operations, ordering, accounts receivable, and more — all to meet some of the most difficult challenges facing the industry today. These challenges aren’t easy to overcome, but they give food distributors an opportunity to shift their distribution strategies to meet the evolving needs of today’s operators and customers.
1. Be conscious of food miles
It’s not uncommon for food to travel great distances before it’s sold. One study estimated that fresh fruits and vegetables grown in the U.S. travel, on average, 1,500 miles before they’re consumed.
There are many legitimate reasons for food to travel long distances, and some that are unavoidable due to consumer demands for variety and specialty products.
International imports can also be in high demand; for example, specialty products from Italy are commonplace to use in many Italian restaurants in Toronto. In fact, the most food imports to Canada come from the United States, Italy, and France, mostly because those countries produce a large number of specialty products that are in high demand around the world.
Foods are also shipped across the country in order to reach densely populated areas — it’s estimated that if all the agricultural land in New York were devoted to feeding only the population of New York City, there would only be enough food for half the residents, with none left for the rest of the state.
Additionally, food travels because of seasonal growing cycles; in Canada, the growing season is limited by cold weather. Shipping food from Southern regions provides people with year-round variety of fresh fruits and vegetables, something Canadians with access to supermarkets have grown to expect.
However, the food distribution system has come under scrutiny in recent years for the way it contributes to climate change. In addition to the financial challenges imposed by taxes and fluctuating shipping and fuel prices, transporting food across long distances creates greenhouse gas emissions, depletes oil reserves, and negatively impacts air quality. Consumers are growing more conscious of these challenges, and demanding that businesses do their part to lessen their environmental impact.
For food distributors, this is maybe the greatest challenge of the modern age. The only way to directly solve it is to work with more local manufacturers and suppliers, which, depending on where you’re based and the types of products you offer, isn’t always even geographically possible.
Distributors can meet this challenge by finding creative ways to localize their supply chains and work with smaller, local businesses.
This requires changes to how distributors manage their operations, including order fulfillment, invoices, and payments. Technology solutions can help cut down on labor and overhead, while making operations scalable, even while working with a wider variety of smaller and more localized producers.
And for products that can’t be sourced locally, distributors can look for more cost-effective and planet-conscious ways to import and transport goods. One way is by joining other distributors to create purchasing groups to source and order wholesale imports in bulk. Not only does this come with lower costs, but transporting a larger quantity of goods on a cargo ship or train is better for the environment than transporting a smaller quantity on a truck.
2. Modernize your importing process
On that note, another challenge for distributors is importing food products responsibly and in ways that meet their buyers’ evolving needs. For some time, international supply chain data has existed in siloes that block visibility into where products and ingredients come from and all the steps they take between the processor and the consumer.
Today, there’s a higher need for tracking and traceability for imports.
Consider this nightmare scenario: an imported good that you supply for your buyers contains ingredients that came from a region where forced labor is making international headlines (you might remember this real story from last year). Now, the bad press is forcing a recall. If your imports are paper-based, you’ll have to manually retrace all your orders, which can take weeks.
Today’s distributors have all the technology they need to modernize their importing process and avoid situations like the example above.
For example, some processors and distributors are using the blockchain to trace their goods as they move over international borders. Some are using Internet of Things (IoT) technology to trace their shipments (and the state of their shipment) in real-time, from anywhere in the world. Even artificial intelligence is being leveraged, to help distributors collect and analyze data that informs their business decisions.
3. Carry more niche products
Another challenge facing today’s food distributors is that modern consumers have constantly evolving tastes influenced by culture, health and dietary needs, and even just novelty. It’s up to distributors to stay up-to-date on food trends and offer the kinds of niche products that today’s consumers have growing demand for — for example, organic or gluten-free offerings, pumpkin-flavoured foods in the fall, or peppermint flavours around Christmas.
Offering specialty foods can make a distributor more appealing to more operators. By working with specialty food suppliers and offering niche products, you can expand your customer base and boost sales and profits.
Meeting this need requires distributors to change their strategy in a few key ways.
First, is sourcing new wholesalers to provide the products their buyers want, which can be a challenge in and of itself. Online research is a great way to find wholesalers, but it can also be frustrating and time-consuming combing through websites and online directories and trying to compare services, products, and prices. Going through industry association events and trade shows can be more efficient — events allow distributors to research, cost-compare, negotiate, and place orders on the spot.
Second is staying on top of food trends, seasonality, and other shifts that can help distributors determine what niche products to offer to their buyers. This can be tricky — staying active on social media and subscribing to industry publications like newsletters can help you stay up-to-date on what’s trending.
But never underestimate the power of going right to the source: your buyers.
Having conversations with them about seasonal menu changes, trends, and customer requests can help you to better meet their specific needs.
4. Add value for cost-conscious buyers
The COVID-19 pandemic and more recent economic disruptions have changed the foodservice industry. Many restaurants are still short staffed, and even though customers have returned in numbers closer to pre-pandemic levels, inflation is now cutting into margins, making food service operators more cost-conscious than ever before.
Distributors can meet this challenge by looking for new and creative ways to add value for their restaurant clients. One way to do this (while also adapting to the changing landscape of the digital age) is by adopting technology that allows customers to manage orders, invoices, and payments online (more on that below).
Another way is for distributors to build stronger relationships with their buyers.
You should consider the relationships you have with your buyers to be mutually beneficial partnerships, where you both work together to get the maximum benefit out of the relationship.
Building and maintaining relationships with buyers helps distributors meet their needs more directly, which in turn helps strengthen your distribution strategy — as building trust by catering to buyers’ needs can help make them more understanding of price changes and other supply chain challenges.
It also secures a sense of loyalty that makes buyers more open to working together with their distributors to maintain their relationships long-term.
#5: Modernize systems with technology
The food distribution industry has existed for a long time. Unfortunately, so have many of the systems and practices that are still common within its business models.
Many food distributors are still using legacy technology that doesn’t fully meet their needs.
Offline tracking, spreadsheet tracking, and accounts receivable collection by phone or in person are all examples of legacy systems commonly used by food distributors that have more efficient technology solutions available now.
Outdated technology prevents distribution businesses from operating to their full potential; for example, all the legacy systems mentioned above are extremely time consuming, especially compared to alternatives that use technologies like artificial intelligence and workflow automation to modernize systems and reduce time spent.
There’s also a lack of integration between many of these older technologies, which can create gaps in data and force distributors to revert to manual processes that are time-consuming and error-prone. Data is easily siloed. There’s no automation. The food distribution industry largely isn’t taking advantage of the current digital age.
Technology to help bridge these gaps exists — it’s up to distributors to take advantage of it and modernize their systems.
Advanced last mile technology can help distributors modernize their routing and planning. Wholesale software can help with inventory management and tracking, while utilizing IoT devices and telemetrics is helping distributors with their traceability and data consistency.
One of the easiest parts of your food distribution business to modernize with technology is by starting with your accounts receivable with notch. Managing orders, reconciling invoices, and processing payments can all be done with software that integrates seamlessly with other technology platforms and streamlines systems not just for you, a food supplier, but for all your restaurant partners, too.