Supply chain issues are creating headaches for manufacturers and causing alarm for many consumers. Rob Kooijmans, CEO of the Food Strategy Institute, discusses some of the root causes of the current situation and explains why strategic interaction along the entire food supply chain is vital.
October 13, 2021
The global economy is experiencing a sharp rise in transport costs, especially for container shipments. Events like COVID restrictions and the blockage of the Suez Canal earlier this year have caused a shortage in container availability, leading to prices more than doubling over the last six months.
“Of course, not all foods are transported via containers,” says Kooijmans. “But at the same time, we are seeing a strong increase in fuel costs. On top of this, especially in the UK, we are seeing a shortage of drivers which makes logistics even more difficult. Logistics managers will be kept awake at night, getting their mind around cost control and making sure transport is available.”
Other factors have come into play. Drier summers caused by climate change have resulted in lower yield levels of certain crops in Canada, the USA and Europe, which will impact the price of agricultural commodities.
“Another interesting aspect is the shortage of corrugated packaging materials, which has been caused by consumers ordering more and more stuff online since the start of the pandemic,” adds Kooijmans. “This is now starting to hit the food industry as well, especially in North America.”
So far, the food industry at large has coped very well. One big exception, says Kooijmans, is the UK, where the level of choice between food products has been reduced due to the shortage in drivers. For everyone though, food price increases are on the way.
“The strange thing at the moment is that we do not see a lot of strategic movement – yet” says Kooijmans. “Some countries say that local production for local markets is the solution, this is not realistic. To a large extent our current food supply chain is truly international – just look at where wheat is grown and where you find most of the dairy and meat producers. This is not an even spread across countries.”
For Kooijmans, the biggest strategic decision that needs to be addressed is how to make our food supply chain more resilient, more cost-effective and profitable for all parties.
“Consumers need to accept that (luxury) food will be a bigger part of their monthly budget,” he says. “Next to this, we see that the COVID-19 pandemic has resulted in a step change in consumer behaviour, with healthier options and plant-based alternatives gaining traction. Consumers are eating out less frequently. Together, these trends represent the biggest shift we have seen in years. New initiatives will certainly gain traction – think of vertical farming and consumers starting to grow their own vegetables.”
At the corporate level, board members need to embrace this new situation, and think strategically.
“One thing is sure: the changes we have seen over the last few months show us that organisations must be far more adaptive than ever before. We will need to feed 10 billion people pretty soon. Companies not only need to think and act strategically at the organisational level, but also need to interact more closely along the entire food supply chain.”
Finally, at the policy making level, Kooijmans argues that authorities should recognise the reality of global food supply chains.
“For most countries it is an illusion to try and be totally self-sufficient,” he says. “The only route towards the future – certainly when our population keeps on growing towards 10 billion people – is international collaboration to ensure food security.”
A key lesson from recent events, concludes Kooijmans, is that seemingly small events can have huge impacts on our global food supply chain and the cost of our food.
“It is up to the whole food supply chain to strive for stronger collaboration and more equitable sharing of profits,” he says. “In this case, the motto should be ‘together we stand strong’.”
