26 Aug Provisioning in the food industry
The purpose of provisioning in the food industry is the acquisition of the raw and auxiliary materials needed to make products with the best quality at the lowest possible cost. Implementing a good provisioning policy is essential to having materials when they’re needed and, thus, having the lowest possible non-moving stock to avoid excessive and unnecessary costs.
Good provisioning in the agri-food sector is quite important. It includes three basic aspects: procurement, storage and stock management.
⇒ Procurement: the acquisition of the products and materials themselves. In order to do this, you need to study the market, request quotes, choose suppliers, order, track your orders and file claims and return or cancel orders as needed.
⇒ Storage: this phase involves receiving the goods and placing them in the warehouse under the best conditions to prevent deterioration due to the passing of time and handling. It also includes warehouse input and output processing to know the provisioning status at all times.
⇒ Stock management: knowing what you have and what you need. Determining the precise quantity required to create and renew your stock in addition to determining the frequency at which you must order is fundamental.
Benefits of Proper Provisioning in the Food Industry
Good provisioning control in the food industry brings companies great benefits: everything from reducing the storage costs to minimising losses due to damage and obsolescence. But there are many more such as having enough stock so the production process is never short of raw materials and being able to make inventory forecasts.
Provisioning Aspects to Keep in Mind
With provisioning management, several things must be taken into account in order to meet the company’s goals. Two of the most important issues are the provisioning period and the margin of safety.
⇒ Provisioning period: the time it takes to have a product available after detecting a need. The customer’s activity and the supplier’s activity come into play here. The customer’s activity refers to the time involved with internally detecting a need, choosing a supplier, determining quantities, processing the order, receiving the product and all the procedures required before being able to use it. As far as the supplier, the provisioning period includes the time it takes for the order to be shipped after the order is received, which also involves production, preparation and dispatch processes.
⇒ Margin of safety: the time added to the provisioning period for the risk of unexpected delays. The aim, therefore, is to increase the reliability or confidence in the delivery time.
How to Determine Quantities and Your Provisioning Timing
One of the keys to good provisioning in the food industry is deciding what the correct safety stock is. Yet it is rather complicated to know what and how many products each customer will order at any given time. It is possible, however, to forecast the demand by taking the variability into account. Thus, the safety stock will guarantee an adequate service level for the company’s business.
Once the quantity has been determined, you must pay attention to your provisioning timing. There are two useful methods for making this decision: the reorder point and needs planning.
⇒ Reorder point: starting the provisioning process when the stock level reaches a certain level after dropping as a result of the demand. There are several ways to do this. One of them (and the most highly recommended way in the food industry) is to consider the safety stock so replenishment happens before it is reached.
⇒ Needs planning: estimating the demand in each of the production process phases. These estimates are done for the quantity and timing. This means going back in time to detect the needs in the previous processing phases which must be fulfilled before continuing through the chain to the end market.