On Tuesday, Walmart confirmed it will order USDA Choice-graded beef for all 3,800 of its U.S. stores, adding the higher grade product to the Select-grade beef that has dominated their cases until now.
When the world’s largest retailer boosts demand like that, it makes an impact. Beef packers are now struggling to meet the sudden uptick in demand, and margins are being squeezed as they turn to higher cost cattle to satisfy the buyer’s requirements. Ironically, they are struggling to make a profit when demand is higher than ever.
You can see a variation of the material-cost theme happening in the tree nut market with pecans, where processors are facing a double-whammy of short supply and increased demand from China. When demand is higher and material supplies are lower, the result is the same: manufacturers struggle to fill orders and see their margins squeezed tight by higher costs. It’s a major issue in the food and beverage industries today.
With raw material and commodity costs volatile and climbing across many industries, the same thing can happen to any manufacturer, in any industry. And since there is a limit to how much additional cost can be passed on to the consumer, companies are wondering how to get ahead. The answer: you must focus on eliminating waste and maximizing material yield.
Check out Tuesday’s webinar: The Top Five Ways to Improve Margins and Control Yield Loss.
