Explore the benefits of commodity intelligence for the foodservice industry and discover software features to consider for an optimal sourcing strategy.
Keeping track of and analyzing commodity data can be a difficult task when running a supply chain. It often requires careful examination and expert skills to determine how market volatility will affect product pricing and your business's bottom line.
Analyzing commodity markets and data is essential in understanding the market’s impacts on your products, sourcing decisions, and supply chain optimization efforts.
While most supply chain teams don’t have the time or expertise to analyze data themselves, there is still a way to gain the insight needed without creating immense opportunity costs -- leverage automated and centralized supply chain and commodity data from foodservice industry experts.
Here's everything you need to know about how real-time commodity data can benefit your supply chain and operations.
What is commodity sourcing in the foodservice market?
Food products and natural resources are categorized as soft commodities, meaning they have been grown instead of mined. Commodities include many essential agriculture products, such as corn, soybeans, coffee, sugar, and more that create a significant portion of our food supply chain.
These products can be bought, sold, and exchanged among various types of buyers and sellers. However, commodity markets are highly volatile and cause prices to fluctuate continuously, even within a single day.
Due to such fluctuations in the market, farmers, suppliers, and buyers struggle to identify the best opportunity to make a sale or purchase with the best deal.
For instance, if a farmer predominantly works in the soybean industry, the farmer can’t be sure what price soybeans will go for when it’s time to harvest them. The U.S government does offer subsidies to mitigate the financial risk of some products. However, it’s still crucial to monitor the market to get a reasonable price, whether you are the buyer or the seller.
Not only is it difficult to estimate the best time to sell or make a purchase, but you also have to consider how market disruption may impact your product’s quality or forecasted success.
Effects of market volatility on food commodity prices
The reason commodity markets are highly volatile is because they are heavily impacted by supply and demand. For instance, if there is an above yearly average supply of soybeans, the commodity price will decrease because there is more supply than demand. This situation can also be reversed––a drought or event causing crop disruption will result in a higher commodity price because demand will now exceed supply.
Some inevitable commodity fluctuations tend to be higher than others. Unfortunately, this is the case with many crops and certain food products, so employing a commodity intelligence software to gain visibility of the market is necessary for seeing this.
Why you need commodity intelligence
With increased market visibility, companies can mitigate unnecessary risks and maximize their budget with an optimized commodity sourcing strategy, while ensuring that products are on-trend with their consumer base. This can be achieved through commodity intelligence software, which offers consolidated data, expert opinion, and reporting.
Commodity intelligence features provide restaurant chain operators with visibility of data depicting hundreds of commodity markets, alongside economic insight into how products will be impacted. It offers a transparent and accurate view of your market so you can plan your supply chain management accordingly. You gain the ability to make data-driven decisions despite an unpredictable market environment.
Commodity intelligence gives your supply chain teams the capability to:
- Anticipate market movements
- Uncover the current value of commodities
- Discover financial opportunities
- Prevent risk
- Engage in business tasks, such as sourcing negotiations, with confidence and knowledge
No matter the size and operational state of a restaurant chain brand, a software that analyzes your relevant market can inform strategic goals, forecast future business needs, and accelerate growth.
4 Benefits of commodity intelligence
Data-informed commodity intelligence can make or break your supply chain growth. Now that you've captured a glimpse into some of the benefits of gaining full visibility into commodity markets, let’s talk about what solutions can make it possible.
1. Comprehensive supply chain management
Without commodity intelligence, staff are left to blindly determine their best purchasing or sourcing options based solely on company data. With limited market data, companies will find that their industry product costs remain obscure and their supply chain is highly reactive to market changes. To make matters worse, their needed market reports and analyses will prove to be manual, time-intensive, and often inaccurate despite the effort.
That’s why comprehensive supply chain management starts with the right software. Commodity intelligence software systems don’t just give your staff data updates. They also provide accompanying expert and pricing analysis.
Skilled commodity specialists and economists will monitor the market, so you don’t have to. They sort through data that is unnecessary to your organization and provide a streamlined view of essential data representing market trends, which offers guidance for future supply chain management strategies. With this modernized capability and team of experts by your side, generating reports, forecasts, and price benchmarks becomes much more efficient.
Commodity intelligence ensures that restaurant chains and food suppliers can have greater insight into sourcing decisions, supply chain strategies for product development, and competitor activity.
2. Anticipated market risks
Navigating market risks within the foodservice industry has never been more critical in the modern economy. Between reduced staff, travel restrictions potentially limiting crop seed shipments, and significant changes in consumer demand, the commodity market is no doubt undergoing many transitions as it adjusts to unprecedented changes caused by COVID-19.
System and expert guidance available with commodity intelligence software can highlight what market conditions may affect your organization’s product costs, providing you with the opportunity to proactively prepare. This increased visibility means you can be aware of market changes that are likely to occur based on real-time data, overarching trends, and global events.
3. Mastered sourcing negotiations
If sourcing negotiations are a source of stress for you and your staff, then commodity intelligence is the right strategy to consider. With accurate product pricing, you ensure that your company is getting the best deal possible while protecting your brand and reducing the negotiation process. You can even leverage market changes to your benefit, from data that your competitors have yet to have access to without the commodity intelligence features.
4. Projected core product success
Additionally, with a commodity-based software, you can access both historical and real-time data to create personalized forecasts for all of your essential products. Consulting these forecasts offers a reliable means of determining restaurant logistics, marketing strategy, critical time-frames, your target market, and even KPIs. The possibilities are endless.
Three commodity sourcing features to consider
When choosing a foodservice commodity intelligence software, consider the features most important to your business and overall sourcing strategy. There’s no point in getting data if it’s not relevant to your product. Here are 3 restaurant logistics and supply chain features to look out for.
1. Access to relevant commodity markets
Choose a software that has expansive access to hundreds of commodity markets analyzed by on-staff commodity experts and economists. A market database will ensure that your desired daily, weekly, and quarterly reports are based on large data sets to promote accuracy in results.
2. Advanced price forecasting
Software can also help your company gain the tools necessary for success with high-level price forecasting. To ensure you are consulting credible forecasts, choose a software that can adjust conditions monthly and in advance (12 - 24 months beforehand).
To fully maximize the return on investment, ensure price forecasting is monitored by an accompanying commodity advisor and easily transferable to reports with tech-enabled workflows.
3. Verified product cost benchmarks
When conducting product cost benchmarks, having software that integrates multiple capabilities within one application can significantly save time, foster organization, and prevent mistakes caused by outdated information.
Additionally, look out for an interactive and user-friendly dashboard when searching for such features. Doing so will ensure commodity market prices are easily comparable when it comes to your product costs for pricing strategy efforts.
Begin leveraging commodity intelligence within your restaurant chain
Leverage a commodity intelligence software to monitor the product market, so you don’t have to. By having the right data by your side, you can begin developing a proactive strategy that successfully determines product pricing and sourcing.
To further learn how combining research and data analytics can improve your restaurant logistics and supply chain management, check out our latest blogs on best practices for an improved supply chain management and sourcing strategy.