Feeding the Growing Global Middle Class without Starving the Supply Chain

Feeding the middle class is the same everywhere. What has changed is the amount of middle class mouths to feed. For example, in China and India, this growing segment is pulling more and more seats up to the dining room table—and their standards for quality and demands for timely and consistent delivery from field to fork is the same as the rest of the middle class world. This means the food supply chain is changing too, and food companies across the globe need to be ready.

The challenge for food logistics and supply chain professionals is managing this increasing demand for food, which is not exclusive to Asia. The growth may occur in Asia—with projections to nearly double its middle class population from 1.8 to 3.2 billion people by the end of the decade, according to Brookings Institution—but also in areas such as Brazil, Africa and the Middle East. Regardless of where change occurs, with today’s global food supply chain, significant fluctuations in one region are felt globally.

To remain competitive on a global scale, food supply chains must be capable of absorbing the many shocks inherent in a volatile, growing economy, including consumer demand trends, rising commodity prices, and imposed regulatory changes. Strengths can be directly tied to a company’s ability to adapt to changes and make decisions quickly based on many of these expected and unexpected challenges.

While an ideal solution may in fact live within today’s big data and business intelligence (BI) platforms and analytics tools, it is not as easy as flipping a switch. BI and enterprise resource planning (ERP) solutions can and often provide supply chain mangers with greater access to a consolidated view of inventory levels and product movement, but that is only half the battle.

Managing data is more than just a clerical function; it is the foundation for smart supply chain decisions. For many enterprises, however, transparency or the resources needed to translate the information gathered into intelligence that is actionable is lacking. Other times, the wrong information is being examined or inoperable metrics have been put in place. Business departments lose sight of how their day-to-day activity and responsibilities align with goals and strategies of the company. They instead turn to limited data that can impact collaboration and delay important decision making.

This risk goes beyond simply using projections that are based on last year’s demand and forecasted costs—should a problem occur, decision makers may not be able to access the latest data on transactions, orders, supply chain activity, and markets, and make adjustments in real-time.

To reduce inventory exposure and become more nimble, business decision makers must take a strategic approach and think creatively about the potential impacts the growing volatility and risks present.

 

Be Adaptable — Attempting to manage a supply chain without an integrated approach to addressing fluctuations in commodity prices, or using traditional management tactics that accommodate simple factors or aging data, can leave companies significantly exposed to rising product costs and shrinking margins. Supply chain managers must be able to modify products or ingredients as external implications call for changes.  

By engaging real-time, dynamic models, supply chain managers and users easily input current data and generate outputs (costs, demand projections, crisis scenarios, etc.) that reflect present information with consistent, easily replicable results. With a single, consistent view of data, users spend less time preparing and validating numbers, and more time assessing the impact of unexpected change; evaluating scenarios, and addressing the subsequent decisions that must be made quickly.

Understand the Entire Supply Chain—Once information is integrated into a working system, it must be acted upon. When operating on a global scale, sending and receiving food or ingredients can be challenging—especially when companies have a complex network of suppliers, distribution centers and redistribution centers.

It is important to know the suppliers well and understand the dynamics of the relationship. Can prices be negotiated upfront to avoid volatile market shifts, for example locking-in fuel costs? Another consideration is fluctuating prices with specific ingredients. From shipping that requires refrigeration to seasonally adjusted food prices, passing costs on to consumers or formulating seasonal promotions can offset expenses.

Other examples include such factors as crossing international borders, inspections at customs, trade compliance and foreign laws. These elements should never impact shipping timetables, but often do. While established cross-border relationships are beneficial, it is important to understand when alternative sourcing must be considered. Qualified suppliers with lower associated costs may be worthwhile.

Companies can improve supply network efficiency and overall profitability by better integrating data and analytics to support planning and strategic decision-making, while creating additional value for marketing and operations.

Make Contingency Plans—The issue with risk management has always been the quantification of something that did not happen, or was successfully averted. From a natural disaster delaying shipments to another supplier’s product recall, some challenges cannot be anticipated. With sophisticated big data analytics it is possible to compare amounts spent on resolving a problem with the savings generated by mitigating a risk. Simply put, it is best to have a backup plan for most any scenario so that decisions can be made as quickly as possible.

By bringing together all the factors that impact margins, businesses can take an integrated approach to incorporate various demand scenarios in planning, enabling a comprehensive view and understand the impact a decision may have on costs and margins.

Development trends and global growth among the middle class has placed more demand on the supply chain and challenges for food logistics professionals on all levels, locally and globally. To succeed, companies need to take an integrated approach to managing their supply chain and addressing risk, moving beyond the traditional metrics and management tactics that can only accommodate simple factors or aging data.  By doing this, companies can shift their supply chain management from a cost center, to a competitive differentiator.

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