COVID-19: Impact Support | Learn More

How Is Technology Driving Food Distribution?

Technology and food distribution are increasingly becoming natural allies as businesses continue to use tech to improve their processes.

We’ve already seen over the last few years large enterprises like Amazon express a fervent interest in getting into the food distribution market.

Part of the reason a company like Amazon would be interested in the industry is because a technologically forward-thinking company is uniquely positioned to disrupt the food distribution industry and take advantage.

As ever with digital transformation, organizations who are the boldest—and who have the clearest objectives for how they want technology to serve them—tend to be the big winners.

We’re no longer new to the 21st century, and the rapid evolution of technology over even just the latter half of the 2010s has necessitated the adoption of some kind of digital strategy for virtually every SMB in the country, from marketing to app development.

Food distribution is no different, so today we’ll be taking a look at the state of the industry and how organizations are using technology to stay competitive.

Is Food Distribution Lagging Behind in Technology?

There is no short answer to this particular question.

As with several other industries, it is the frontrunners and large enterprises that are pushing the limits of business technology and profiting the most from it.

Industry leaders in food distribution, such as Sysco, have been investing heavily in digitizing their supply chains—among other areas—in order to future-proof their warehouse and logistics operations, where they noted “expense challenges will persist.”

With other technologically advanced organizations like Amazon joining the B2B food distribution fold, it’s inevitable that their use of digital tools will position them well for the future.

This is particularly the case when you consider how other industries are using digital tools to improve their business agility.

Food distribution is a fragmented industry

Though just a select few companies have the lion’s share of the market, food distribution is fundamentally a very fragmented market.

There are over 16,500 businesses operating in the space, all of various sizes and age.

This vast number of organizations is partly due to a common desire among food service operators to purchase supplies from several distributors for specialty items, spreading their risk and reducing reliance on any one distributor.

But with so many small and midsize distributors, many of them are easy pickings for larger businesses through acquisition or merger.

In order to counteract this, SMBs in the industry must use the tools available to them to tighten their operations, reduce waste and improve their competitiveness as much as possible.

Here are some of the key disruptors in the industry today.

Large enterprises dominate food distribution market

Virtual Inventories

Distributors have to deliver faster now than ever before. The surge in SMBs revamping their supply chains by introducing new technology is unlikely to let up any time soon, and competitors have had to implement their own tech to keep pace.

Growth and competition are often cited as two of the biggest factors driving supply chain transformation. But top of the list is new technology, according to 45% of businesses.

Virtual inventories are one innovation that aims to streamline supply chains as quickly as possible.

They work by establishing an inventory across multiple locations, helping you pick out the most appropriate location to dispatch the delivery from for the fastest result.

If you’ve ever wondered how Amazon is able to meet such tight deadlines for orders, it’s because they have centered their entire distribution strategy around the philosophy of virtual inventories.

More SKUs Than Ever

Americans eat out more now than ever before. In 1955, for every dollar spent on food by consumers, 25 cents went to restaurants. Today, that figure is more than half a dollar.

Combine this with a vast increase in the variety of stocked items you find in grocery stores today, and the end result is that distributors have to ship far more SKUs than at any point in the past in order to meet demand.

Grocery stores carry on average 40,000 more items today than they did in the 1990s.

When you further consider that innovative newer markets, like the meal kit delivery market—which is expected to reach $14 billion in 2024; almost double what it was worth last year—the increase in demand on suppliers is even higher.

For organizations that are still running legacy systems and contemplating whether or not they should introduce updated technology for their operations, the simple answer is that it will be essential to do so.

Distributors must have the technology in place that will allow them to use digital tools the way their competitors are, like predictive analytics to help cut waste and effectively streamline your supply chain and deal with disruptions.

Biggest supply chain challenges for food distribution in 2019

Technology on the Warehouse Floor

We often talk about the effects that Internet of Things technology has had on other industries—look no further than healthcare, for example, to see how devices and wearables are driving innovative new ways to meet consumer demands.

With the use of monitoring sensors, companies have the means to much more effectively track their stock at every stage of fulfillment, and in doing so garner more data on customer and consumer preferences for the products they ship.

Additionally, this IoT tech allows businesses to automatically re-order supplies that are running low, through the combination of sensors and automotive software that can assess your inventory and act accordingly.

Driver tracking offers the opportunity to speed up delivery by removing route deficiencies where you see them, managing schedules more effectively, and giving customers forewarning about deliveries.

And that’s before we consider the improvements to food safety that can be made through IoT devices. For example, sensors that measure temperature and humidity can report information and then conditions can be remotely controlled so as to keep produce from going bad.

40% of food waste comes post-harvest, with food distribution playing a key role in the supply chain. Using technology to reduce the chances of distribution issues is key.

The Bottom Line

  • Food distribution is highly competitive, with giants of the industry implementing modern technology solutions to meet growing consumer demands when it comes to what they eat.
  • The industry is fragmented, meaning SMBs must follow suit if they are to survive and remain competitive with industry leaders.
  • Several new and developing technologies have already been adopted by frontrunners, namely logistics automation and IoT tech to streamline operations.
  • Technology will continue to drive food distribution as the benefits of using digital tools remain apparent for distributors.

Using analytics, you can reduce overstocking, assess historical trends in your inventory, see the productivity of employees, and get predictions to help you prepare for market fluctuations that you might not have otherwise been aware of.

For more information about how tech solutions can help your SMB, download our free eBook, “Fast-Tracking Your Digital Transformation”, featuring an entire chapter on Enterprise Resource Management, which helps improve the efficiency your supply chain and other warehouse processes.