COVID-19 upended the global meat value chain, forcing them to adapt rapidly. Luckily, DecisionNext was there to help. With large quantities of frozen food destined for now-dormant foodservice channels, the customer utilized DecisionNext analytics to rapidly and optimally liquidate inventory as lockdowns spread across the US.
As lockdowns began and consumers were ordered to shelter in place, there was a shift in demand for commodities such as beef from the foodservice sector to retail. Beef prices were heading towards record lows in April 2020 with no end in sight and products traditionally used by foodservice were hit especially hard.
Selling a majority of their product to the foodservice or cruise line sectors in the United States and across the Americas, the company had to decide what to do with their inventory, and fast. Freeze it and wait for a foodservice recovery, or sell fast and retool? Selling would enable the company to buy more product from Australia at a much lower price. On top of that, there’s the uncertainty of where the markets will go, when prices will correct and where they will end up.
DecisionNext has provided the industry with forecasting tools since well before the pandemic, providing “what-if” analysis, real-time decision support, and financial reporting, enriching their internal data with publicly available data.
Using DecisionNext’s “Transaction DecisionDesk”, the customer and DecisionNext team members built out and compared four complex sales and procurement alternatives to see the expected market outcomes and compare risks. Each alternative considered a combination of the factors listed below:
- Inventory – Cost of carrying excess inventory
- Timing – Expected profits from selling at different times, using floating or fixed prices
- Freezer Costs – Freezer storage and interest rate costs from holding onto inventory
- Seasonality – Historical margins by product, by season, to establish likely outcomes from selling in different periods
- Forecasted Costs and Prices – Replacement inventory costs and expected sales prices
- Supply Chain – Enterprise level benefits of cleaning house early and moving on
With DecisionNext’s support, they were able to successfully liquidate excess inventory across multiple cuts. These transactions provided a