In the past few years, there have been multiple food-related articles about supply chain management, including the ongoing sugar shortage that entails soybeans, petroleum-based product packaging, fruits and vegetables and flowers. Food supply chains are one of the utmost important, yet multiple convergent factors have triggered a global food crisis affecting over 783 million people in the world. The impact of this predicament has caused shortages and higher prices. Food prices in the United States rose 24% over the last three years, 30% in Europe, 20% in the UK, and around 13% in India. The scale of the current global hunger and malnutrition crisis is enormous. Some of the affecting factors include:
· Extreme weather and natural hazards triggered by climate change alter crop production and harvests.
· Pests and diseases that damage crops and livestock.
· Armed conflicts, socio-economic conditions, and political instability disrupt food distribution and access.
· Protectionist measures that add complexities to the global food production supply chain make it necessary to expand beyond local production.
· The COVID-19 pandemic impacts on supply chains, labor, economic conditions and demand flux.
· High energy prices and equipment shortages increase food production and transportation operating costs.
Efficient supply chain management is key for effective food operations because it helps ensure that food products are delivered promptly, safely, and economically to consumers. Supply chain management involves the planning, coordination, and execution of all activities involved in the production, transportation and distribution of goods and services. Average consumers fail to appreciate the depth of supplier tiers required to source and produce goods – imagine a cream-filled cookie without the cream filling. While there’s no single answer to the dilemma, supply chain leaders can focus specific areas to help move the needle.
In a recent Forbes article, it states that, “our food systems remain based on post-World War II technology focused on volume production and efficiency from economies of scale.”
However, the pandemic’s extreme supply chain failures have pushed stakeholders to transform their operations. In the food industry, supply chain management is crucial because of the perishable nature of food products and the need to maintain quality and safety standards throughout the supply chain.
To determine the ideal trade path for their operations, companies can turn to technology and advanced innovation to optimize all stages of procurement, production and movement to reduce costs at the register and ensure ample supply.
Shifts in regional concentration due to climate change and investment considerations have led to new and bolder trade compliance controls that only disrupt food supply chains. No amount of funding can change where food commodities can be naturally sourced or where crops grow. Supply procurement teams need visibility into potential options for supplier diversification - a strategy that involves sourcing food products from multiple suppliers instead of relying on a single supplier. This approach can help mitigate the risks associated with supply chain disruption-prone regions. Companies can introduce supply chain diversification by leveraging technology to look into the sub-tiers of their current sourcing base to discover faults or unrealized potential. Such strategies may include identifying product materials or ingredients presenting the most significant risk to production and performing a cost and benefit analysis for various techniques (such as increasing safety stock levels, regional sourcing and joint venture relationships with suppliers) that can mitigate those risks.
Collaboration with supply partners can help optimize shipment visibility and production status of food ingredients to factories. Supply chain collaboration occurs when mutually dependent enterprises work in tandem using digital technology to ensure uninhibited communication flow. Food manufacturers can gain a significant competitive advantage by collaborating with ingredient supply chain partners.
Optimizing shipments of food ingredients to factories can be a complex process. Consolidating like shipments into a full truckload with a dedicated trailer can help reduce the risk of damage by reducing the amount of “touches” to the product and lowering cost and emissions. By implementing artificial intelligence (AI)-driven logistics solutions, brands can optimize every element in the food supply chain, from strategic sourcing to optimal storage to precise packaging and packing in suitable containers.
The food supply chain is a complex system that requires careful management to ensure ample supply in an ever-pressing environment where hunger is rising. Businesses can mitigate the risks associated with supply chain disruptions by implementing sourcing strategies, such as supplier diversification and regional sourcing. Additionally, logistics strategies such as consolidation, AI-driven logistics solutions, and supply partner collaboration can help optimize shipments of food ingredients to factories. Finally, utilizing technology to improve demand forecasts, ensure purchase compliance to save money and create a quality and safety program with all partners and suppliers as a preventative measure are some of the top practices to improve supply chain management.