One of the most important lessons manufacturers have to learn is how to deal with scarcity. Especially for businesses in the food industry, sourcing can be tumultuous because of fluctuations in production based on weather patterns and crop yields. There are likely also competitors in the market that may be vying for the same items, making a low-yield season even more difficult for manufacturers to meet demand.
Accordingly, it's important for manufacturers and distributors to maintain robust supply chains, while also establishing strong inventory management processes.
Hazelnuts a Hot Commodity
NPR recently reported the world's supply of hazelnuts has been called into question, namely because of the demand one specific company has for the nuts: Nutella. The 50-year-old brand depends on hazelnuts to create its spread that's a combination of chocolate and the highly sought after ingredient. In reality, the spread is made up of four simple ingredients: sugar, cocoa, palm oil and hazelnuts. The product was born out of necessity during World War II when the Italian inventor wasn't able to find enough cocoa, so he used hazelnuts as a supplement, NPR wrote.
However, the nut is actually a rare commodity. They're mostly grown along the Black Sea in Turkey where they're harvested by hand. Nutella sources 100,000 tons of hazelnuts from the region on a yearly basis, which is roughly one-quarter of the total global supply. Because of a cold spell that hit Turkey this year, the price for hazelnuts has risen 60 percent on top of already elevated levels, according to NPR.
Pressure to Perform
According to an RFgen Software white paper titled "8 Signs You Need an Automated Data Collection Solution," increasing margin pressure is one telltale indicator that a manufacturer should invest in automated data collection software. Declining profits can occur for multiple reasons, including falling revenue, as well as higher costs or scarcity for production materials. As in the case with the hazelnut shortage, environmental problems can arise that significantly impact production and a manufacturer's ability to extract higher profits.
One of most attractive features of an automated data collection solution is that it establishes a lean manufacturing environment. Fewer resources are necessary to accomplish a variety of tasks, including managing inventory levels in real time and improving traceability. Manufacturers can reallocate or reduce their workforce to adjust for higher commodity prices and lessen the pressure on profit margins.