In January 2020, the food supply chains were humming along with business as usual. Refrigerated and frozen proteins, fruits, vegetables and consumer package goods made their predictable journeys from manufacturing to distribution centers along to retail and restaurant locations worldwide. Similarly, the way we engaged our supply partners was predictable, albeit cumbersome, often involving numerous departments like quality assurance, purchasing, category managers and accounting. Each department would likely have different procedures, including manual processes and back-and-forth phone calls and emails. It would likely take weeks to bring a new product into the supply chain, let alone an entirely new supplier.
Then one day in March 2020, it all came to a screeching halt, quite literally overnight. It seems like a lifetime ago, but over the past 12 months, companies have re-thought every aspect of how to engage with a supplier and source and bring products to market. The abrupt and chaotic disruption to the supplier network in the days and weeks that followed the shutdowns made it very apparent that the industry underestimated digitalization and automation in their supplier management and sourcing processes.
In the decades leading up to 2020, we were slow to adopt new methods. After all, the supply chain is a 24-hour, seven-days-a-week business; products keep moving day in and day out. Embracing innovation and affecting change across a supplier network felt complex and cumbersome at best. It was easier to stick with the systems we had. It might have been uncomfortable and inefficient, but it worked. This was very much the “boiling frog” syndrome in action. As the industry began to triage its way through the supply chain crisis, many industry folks felt digital transformation was no longer too complex or unapproachable. For most folks, it couldn't come fast enough.
Post-pandemic, we will most certainly never return to the status quo. Sourcing suppliers and products will have to have a digital transformation. It's critical that procurement and category managers source products and ingredients from well-vetted, reputable suppliers. In many cases, it will be necessary to have multiple suppliers available to supply the same product to mitigate supply disruptions.
Where and how to start
A solid and modern digital process starts with a solid strategy. For example, when you're sourcing a new supplier and a new product, what documentation will you need to gather? Who will need to review and approve the documentation, and how accessible will it be after it's approved? Likewise, how are you going to evaluate the product that you were sourcing properly? What tools do you have at your disposal to allow you to document and approve the product specifications?
Another critical element to a solid digital process is the communication flow between the supplier and the various departments that will need information. Multiple departments such as quality assurance, accounting and procurement will need to collect different information and documentation about a supplier's product and business. A single contact or a single process in which a supplier can pass the required information and distribute it to the appropriate people will allow for a higher compliance rate and a quicker turnaround time to getting them active in your supply chain.
Besides digitizing supplier and product evaluation and documentation, another critical element to consider is total cost of ownership (TCO). This pertains to the cost of labor, transport, storage, tariffs, waste/damage and other costs associated with bringing a product into the supply chain. The TCO needs to be considered when building out a digital supplier sourcing strategy. It’s recommended to calculate these costs when evaluating a supplier and provide a forecast for accurate budgeting. But, given the volatile and unprecedented disruptions experienced since the start of the Coronavirus disease (COVID-19) pandemic, it is clear that more needs to be done beyond just forecasting these costs. We need to evaluate them as close to real-time as possible. Collecting feedback directly from the loading docks, warehouse floor or restaurant and retail locations will allow you to evaluate both the supplier and your processes to determine whether or not suppliers are meeting your expectations.
Finally, you should consider "what comes next," and this doesn’t just pertain to the next supply chain disruption or another pandemic. Will your digital strategy carry you into the future? Or, is it simply a Band-Aid for the here and now?
In the foreseeable future, there will be additional regulatory changes such as FSMA 204 that will require the collection of critical tracking events along with documentation such as Bill of Ladings, Certificate of Analysis and other information relevant to the batch-lot level for a product provided by a supplier.
Digitizing how you onboard suppliers to evaluate the TCO and future-proofing your strategy might feel a little daunting, but it's important to know that we're all in the same boat. Every business, big and small, has felt the impact of the past 12 months. Making a move to a more automated and digitized process will not happen overnight. Start with the greatest need and build out your plan. From there, take the time to network with industry peers and brainstorm on best practices. We're all in this together!