Your profit margin is a metric that you’re always keeping an eye on. After all, it can reveal some important things about your food manufacturing business, such as whether you’ve priced your products correctly or if your operations are as efficient as they can be (leaner operations are often more competitive and profitable).
As well as monitoring your profit margin, you should also be striving to continuously improve it. Here are some ways to increase the profit margins of your business.
- Improve inventory visibility
- Reduce waste
- Stay ahead of market and customer trends
- Boost your average order value
- Improve supplier relationships
Improve inventory visibility
Enhance the way you’re managing your inventory and you can:
- Identify and eliminate ‘dead stock’ (unsold stock)
- Monitor product levels, including what your fast and slow movers are
- Keep a closer eye on each product’s lifecycle
- Make more informed decisions relating to your inventory, such as sales, marketing and purchasing
We’ll be talking about two types of waste here - the tangible waste that’s produced and the non-tangible waste that’s produced as a result of process inefficiencies.
1. Tackle your food waste
The food waste that occurs as a result of your food manufacturing processes is unavoidable. But it does have a huge impact on the environment and your business.
It’s easy to overlook the costs associated with food loss but think about it: you’re using energy, water and other resources to produce, move and store your food products. And then a portion of the food is lost as a result of process or machine inefficiencies, poor practices being followed and more. That’s your valuable resources and chances at increasing profit being lost!
You can reduce the impact of food loss and waste by:
- Increasing visibility into your production processes - for example, by ensuring your machines are operating as productively as they could be and inventory levels are at optimum levels
- Managing the production of your co and by-products which can also help you identify opportunities for potential revenue streams (and turn your food waste into a competitive advantage)
- Automating certain, manual processes to decreasing the chances of human error occurring
2. Streamline your operations and processes to reduce operating costs
The bigger your business is, the more processes, people and systems you’ll likely have. That’s a lot of information and data being passed around. Avoid creating siloes and working from disparate systems - you need to be able to see what’s happening across your entire business and supply chain in real-time.
Technology, like an ERP system, can integrate with multiple systems so you and your teams can gain a single view of the business. There’s no need to spend hours or even days pulling together data for a report. Most times, by the time it’s sent to the team that requested it, some of the data is already out-of-date.
With an ERP system, all of the data from your core systems is centralised so finding what you need is quick and easy. Reports can be automatically generated real-time, which not only ensures the numbers are up-to-date but saves time that you can now spend on other higher-value tasks.
Read more about how an ERP system can improve visibility and drive profits for the food industry here.
Stay ahead of market and customer trends
The market and customer expectations are constantly changing. If you don’t at least keep up with them, your customers will choose other brands/companies whose values they feel align better with theirs.
However, the best approach is to stay ahead of these trends so you’re prepared for any changes and can act accordingly. Technology can help you better predict how the market and customer expectations will change by automatically analysing data trends and offering intuitive predictions. You can then use that knowledge to make well-informed decisions.
For instance, customer sales histories and demographics can be analysed to uncover buying patterns and cross-referenced with the predicted impact of upcoming events (such as weather or a political change). This can make it easier to predict how buying behaviour might change and which part of your supply chain you should be fortifying to prepare for impact.
Boost your average order value
One of the fastest ways to increase your profit margins is to boost your average order value from your current customers. They’re already engaging with your company and brand so why not entice them into making additional purchases on top of what they originally came for?
This presents the perfect opportunities for up and cross-selling. If you can easily access your customer data (e.g. their purchase history and past interactions with your company), you can use technology, like AI, to further improve those insights. So, you can use what you’ve learnt from their buying patterns and preferences to offer them additional products to complement what they’ve already bought or are looking to buy.
These tailored recommendations are much more effective than generic alternatives based on guesswork and a vague demographic.
Improve supplier relationships
If you can build closer, stronger relationships with your suppliers, you could be able to:
- Negotiate better deals (discounts and offers work even better if you’re a long-time customer and are purchasing in bulk)
- Work more closely together e.g. engaging in joint business planning where you work with your suppliers to set profit goals and initiatives to reach said goals. This collaborative effort creates a shared incentive to help each other to boost profits
- Have open discussions on supply chain efficiency and tactics to become more cost-effective
Investments in technology are just one step towards an innovated, futureproofed manufacturing business
There’s a lot of focus on technology in this blog post and for good reason. In this unpredictable day and age, embracing the right technology is key if your business is to gain the full visibility required to stay ahead of the competition.
And by visibility, we’re talking about insights into business processes, supply chain, market trends, customer expectations, weather, events - the full lot. This blog post covers the role technology plays in improving profit margins for the food industry but if you’re looking for something more comprehensive, check out our roadmap to digital transformation.
From why digital transformation is important to the steps food manufacturers like yours should be taking to futureproof your business, download the roadmap below.