The Downstream Impacts of Inflation on Food Manufacturing and Safety
Inflation continues to be one of the top concerns around the world in 2024, driving up costs of living and doing business across every industry. For consumers, rising prices for groceries, gas, and other necessities are increasing financial pressures while driving down quality of life. In the food and beverage manufacturing sector, higher costs of labor, transportation, and supplies are eating into already thin profit margins still diminished by the pandemic.
As these inflationary pressures continue to rise, issues are cascading to notably threaten global food security for populations around the world. While operations continue to buckle under the weight of excess operating costs, there could be a downstream impact on food safety systems. Here’s how to mitigate the risks.
The Impact of Inflation/Supply Chain Disruption on Food Safety
Inflation touches every aspect of an operation — from labor to sourcing to production — and has a compounding effect on increasing business costs for food and beverage manufacturers. Industry stakeholders have seen this lead to issues like:
Less Ability to Invest in Infrastructure and Technology
An increase in business costs holds food and beverage manufacturers back from investing in infrastructure and technology, particularly at a time when digital tracking systems are necessary to meet traceability standards and streamline operations amid a labor crunch. The very technology and tools manufacturers need to remain competitive and overcome the challenges of today’s market can remain out of reach if stakeholders don’t have enough cash flow to afford them, focusing instead on short-term cost savings.
It’s important to identify the solutions that are critical to achieving long-term goals — such as more streamlined traceability and regulatory compliance, greater supply chain visibility, and more automated recordkeeping — and develop a plan for making these investments. Consider reallocating budgets, selling old equipment and other assets, and even taking out loans.
Sourcing Risks
Inflation/supply chain challenges incentivize unscrupulous suppliers to engage in economically motivated food fraud, putting consumers at risk downstream if these ingredients enter the food supply. At the same time, rising ingredient costs might encourage food and beverage manufacturers to seek more affordable suppliers, increasing the risk of encountering bad actors or sacrificing quality to lower costs. These sourcing risks highlight the importance of robust supplier vetting processes and supply chain transparency to ensure the integrity and safety of food products.
Before signing with new suppliers, manufacturers should conduct thorough assessments of their food safety practices, quality control measures, and compliance with regulatory standards. They should ask for detailed descriptions of their processes, and request documents and certifications. It’s also important to consider the supplier's reputation in the industry. When possible, conduct on-site audits, review certifications, and request samples for testing to ensure that the new supplier meets their standards for product quality and safety.
Weakened Oversight and Crisis Response
As the impact of inflation/supply chain issues radiate throughout an operation, short-staffed shifts can leave workers bogged down in responsibilities and management unable to improve efficiency. These challenges, in turn, can weaken crisis response when something goes awry. It’s possible that these resource constraints are responsible for the recent rise in food and beverage product recalls, reinforcing the need for manufacturers to prioritize investment in digital transformation. As inflation continues to weaken the marketplace, improving efficiency isn’t just a way to grow but a way to maintain basic food safety standards.
Mitigating Food Safety Risks Amid Inflation/Supply Chain Concerns
Since experts are unable to predict when inflation will subside, it’s important for food and beverage manufacturers to face this as a long-term challenge. Fortunately, many of the solutions that can improve resilience in this landscape align with the industry’s goals for digital transformation, increasing transparency, and improving efficiency. The key is finding the strategies and solutions best suited to your unique operation.
Third-party food safety experts have a wide-spanning view of the marketplace and can help organizations of any size mitigate the impact of inflation on their operations. Learn more about AIB International’s Assign an Expert service and schedule a full evaluation of your business.
