Over the last year, the plummeting cost of gas garnered considerable media attention, from analyzing its causes to predicting its effects on various industries. In the food supply chain, experts say that periods where fuel is inexpensive can reveal vulnerabilities in business practices. While overhead costs are lower, now could be the time to correct inefficiencies in operations to ensure future success.
"Food manufacturers are benefiting from the decline in oil prices as it lowers the cost of production and distribution – but this could cause increased competition in the industry," explains Farming UK "The sectors gaining the most from low energy costs were named as horticulture, coffee and milk powder, potato processing and beer production as these are typically high in gas consumption."
The competitive market can drive prices down but also allows companies burdened by high gas prices to thrive. For lengthy and convoluted supply chains that require many steps and significant transport distances, lower gas prices can reduce the pressure on companies. Vertically, those savings are passed on to consumers themselves, as entities in the manufacturing, distribution, vending and purchasing spaces all enjoy breaks. Farming UK explains that periods with low fuel costs can be optimal times to change suppliers or negotiate prices down with existing business partners. Companies might be more amenable to change the terms of an agreement when more resources are available to absorb the difference.
Because companies have more money to invest in features like infrastructure, workforce and long-term planning, it's important to capitalize on additional profits when overhead is less expensive. This can help make operations more agile down the road, when gas prices normalize and companies readjust to business as usual.