Rob will be delivering a three-part webinar on Food Supply Chain Challenges in 2022, part of the free-to-attend Fi Webinar Series on the following dates:
30 August 2022: Meeting supply chain challenges
4 October 2022: Building resilience in supply chains
8 November 2022: Health and safety: Allergen management
What can companies do to mitigate the effects of food supply chain crises, fueled by recent events such as the Covid-19 pandemic and the Ukraine crisis?
“In the very short term when it comes to access to ingredients, the only things that companies can do to mitigate effects of food supply chain crisis are to look for alternative sources of supply – often from other areas on the globe – and to reformulate the products they produce using alternative ingredients.”
“While cost implications due to low crop yields or higher transport costs can sometimes be mitigated by choosing an alternative source of supply in another region of the globe, big disruptions like on sunflower oil and wheat from the Ukraine can usually only be addressed by using alternative ingredients and reformulating products. This of course brings a lot of additional work in terms of product development, packaging changes, and requires careful planning.”
How can companies build resilience into their business for the future?
“Building resilience into businesses starts with having a good insight into the potential risks and identifying mitigating strategies accordingly. While some risks can be mitigated by having a back-up in place, e.g., dual supply of ingredients from different parts of the globe or having a generator to cope with power failure – other risks are sometimes more difficult to mitigate for a single company. Here you can think of the risks involving natural disasters like flooding or earthquakes or the risk of strikes. If you are located in a geographical area exposed to natural disasters, the only thing you can really do is have sufficient safety stock in safer areas. And some risks you will simply have to accept – like strikes. If your entire workforce is on strike, there is little you can do.”
“Next to the risks which pertain to the business itself, there are of course the supply chain risks as well. This is where extensive horizon-scanning is a crucial approach to get some level of certainty that potential issues are identified well in time for the business to take mitigating actions.”
“[…] companies should also have scenarios in place in terms of reformulation in case supply of a certain ingredient is very low or becoming too expensive.”
Today, fuel and commodity prices are rising, crop yields are decreasing, and international trade is increasingly being disrupted by social and political conflict. How can companies ensure access to the raw materials they need, while still making a profit?
“Horizon-scanning at a deeper level and having detailed insights in the entire supply chain, and not just focusing on the direct supplier, are the first steps companies should take to deeply understand the risks that are there and future risks that might emerge.”
“The rise in prices cannot always be off-set directly, but by creating a more holistic approach to the cost of ingredients, factoring in all aspects like transportation costs, import duties, and the differential costs of potential alternatives, companies can take a more informed approach off-setting the additional costs they are facing.”
“Taking the last approach one step further is getting companies in a supply chain to seek closer collaboration and find innovative solutions to off-set costs in a supply chain. While this is natural in most multi-national companies, it might be an interesting strategy for smaller companies to “team-up” in their network, either with suppliers and customers in a vertical sense or even with competitors or non-competing colleagues in a horizontal sense.”
What steps must be taken to manage the current supply chain disruptions? Whose responsibility is this, and what must be done to safeguard for the future?
“Unfortunately, the biggest supply chain disruptions are due to a combination of climate, geopolitics and a pandemic. None of these are easy to influence as we all know."
“As long as every company tries to solve these issues in isolation, we can rest assured that there will be short-term winners (who make a lot of profit at the expense of others and ultimately the consumer) and only long-term losers as short-term greed by a few will only drive entire supply chains to long-term price inflation with all the negative side effects.”
“In our view, company owners, boards and management teams are responsible for addressing these disruptions in a more holistic and supply chain-oriented manner. In doing so, it is essential to place common interests first and perhaps be more open to cost-drivers so that in the end everybody in a supply chain is able to remain profitable.”
In terms of food safety, allergen management is a key challenge for food manufacturers due to the inconsistency of the global regulatory landscape. How can companies keep up to date with changing regulations, especially those who work internationally?
“The international landscape in terms of allergen related legislation is indeed a very inconsistent picture. Keeping track of all legislation changes in individual countries is almost impossible to do. The Food Allergens Research and Resource Program at the University of Nebraska has a great tool which shows the current regulatory status of allergens around the globe."
“The only set-back of this free resource is that it shows the current situation and is only updated if users indicate that the legislation has changed. The chart does not display upcoming changes; hence it might be too late to act. Therefore, it is wise to look at a service provider which can keep you up to date on upcoming legislation changes in the countries you are active in as a company. Companies like Leatherhead Food Research and Campden BRI provide services like these.”