For many food manufacturers, the word “forecast” can send purchasing managers running from the room. While packaging suppliers appreciate the advanced notice a forecast can provide, food manufacturers can find the idea of predicting the future in an industry known for its ups and downs an intimidating one.
However, there are many benefits to conducting a forecasting process for packaging usage. Forecasts can help manufacturers reduce costs, control inventory more effectively, and manage sudden production spikes without fear.
So how does a food manufacturer start this process? Below are six things to consider when planning your upcoming packaging business plan and usage.
- What is the appropriate time period to review?
This can vary quite a lot, depending on a number of factors. If there is a seasonality to the production cycle, then it would be most useful to review the same period in the previous year. If production rates are consistent on a monthly basis, then the previous quarter would be adequate. The more information available, the better the chance of accuracy in the forecast.
- What was your packaging use in the last period?
This is actually a very straightforward statistic, based not only on what packaging was used, but what remains on the floor. Since most food packaging involves multiple components, this information must include the individual packaging that makes up the product packaging. For example, many ham products utilize a shrink bag, bone cover, and a finished net. Each of these components, including their waste rate, need to be considered as part of the calculation. If this is the first time the forecast has been put together, this number can represent the baseline usage number upon which to base future packaging and forecasting needs.
- What factors influenced packaging use during the last period?
There are a multitude of possible forces, both internal and external, that could have impacted a food manufacturing schedule. Was the product new and just ramping up, or is it a consistent performer? Was there a shortage of raw material or were you stockpiling for future sales? It’s important to understand these forces to understand if their influence was temporary or part of a longer-term production trend.
- Are there any significant influences in the upcoming period that may impact production rates?
Is the busy season beginning or ending? Is the industry anticipating any shortages? Are there any upcoming business changes that may affect the amount of product run in the upcoming period? While it can be difficult to determine the impact these forces may have, identifying them is the first step to managing their influence. Internal sources and external sources (from industry contacts to suppliers) can be helpful in gather this information.
- Assigning a numerical figure (growth percentage) to the production rates for the next period
This is always the tricky part to any forecasting food packaging process. It may take several iterations through this process, comparing predicted outcomes to actual results, before the manufacturer can feel comfortable in the accuracy of the growth percentage. Over time, however, the accuracy of these predictions will improve and become a useful tool, not only in packaging purchases, but in planning food costs for your other production purchases as well.
- Communicating this information to your packaging supplier
The final step in this process is sharing the information with the packaging supplier. With a stocking agreement in place, this forecast information is essential to ensuring that proper stock levels are produced and ready to be shipped. Without a formal stocking agreement or blanket PO’s in place, most suppliers will not produce products without a purchase order in hand. However, forecasts can still offer visibility to upcoming orders, providing an opportunity for suppliers to provide advance notification if there are unexpected delays in materials or other supply chain issues.
The more relevant information a company can share with its suppliers, the better chance to jointly reduce costs, control inventories, and ensure they never run out of the supplies they need. An accurate forecast of packaging needs, shared with the packaging supplier in advance of the time period, can be an effective communication tool that will improve both cost control and inventory management.
