Rethinking food supply chains in times of COVID-19


Rethinking food supply chains in times of COVID-19

6 priorities to future proof our food supply chains

Food companies will have to seriously reshape their supply chains to stay resilient during and beyond the current crisis. From optimising portfolios and rethinking operations to accommodating a massive shift in demand and substantial growth in online channels, everything is on the table – including how to create a more responsible food supply chain.

A discussion with food & supply chain experts

Webinar: Re-shaping supply chains for future resilience

Re-watch the webinar of 15 May 2020 for additional insights from speakers from Coca-Cola European Partners, Cargill, and Deloitte. Article continues below the video.

Shift in demand

“The food industry has been heavily impacted by COVID-19,” says Randy Jagt, Global Future of Food lead. “In these uncertain times one thing is clear: reshaping the supply chain to be resilient is not going to be an easy feat. There will need to be more alignment, collaboration, transparency, visibility and control.” One of the direct consequences of the pandemic is a global shift in demand. “Consumers started stockpiling, with a focus on the non-perishables,” says Lonneke Knipscheer, Global Consumer Products Supply Chain leader. “And of course, we’ve seen a massive shift to online channels.” A shift that the major food companies all expect to be permanent. They fully recognise that if they fail to adapt quickly to accommodate that shift, other parties will happily step in to fill the gap. “In the post-COVID-19 era, relationships with consumers will be essential,” says Knipscheer. “It’s very important to stay close to them, step into their shoes and make sure you serve them in new, creative and innovative ways.”

Demand sensing is a must

These global shifts in demand have had quite a disruptive effect on the ability of the end-to-end supply chain to meet consumer needs, emphasising the need for companies to find new ways to predict consumer demand early on. “We’ve always looked back to history to predict the future, but obviously that doesn't cut it anymore,” says Knipscheer. Stijn-Pieter van Houten, EMEA Supply Chain strategy director, agrees that supply and demand conditions are radically changing. “Beyond the initial stockpiling, we see some other challenges around predicting how the global lockdowns will affect supply and demand – complicated by significant differences between markets in terms of food habits and lifestyles. As a result, the conditions for both supply and demand will be volatile and hard to predict in the near future.” To deal with this uncertainty, major food companies are investing in capabilities such as demand sensing – using analytics to predict short-term demand. One could argue that because of the new situation, such investments have gone from optional to mandatory.

More visibility and faster decision-making

“During the last few months, we have learned that visibility in the supply chain is essential,” says Knipscheer. “Not only within the four walls of your company, but across the entire supply chain all the way to the final consumer. Luckily, digital technology can greatly help in this area.” Another structural change Knipscheer has observed during the pandemic is within decision-making processes. “Lengthy decision-making cycles have collapsed and gone from what would have been monthly processes to daily ones. This has made the supply chain more agile overnight, and that is a good thing in principle.” However, Knipscheer notes that this change in decision-making is redefining the global supply chain and global dependency, possibly heralding a shift towards a more local supply chain.

Focus on risk management

“In the past, food companies were above all interested in creating a lean supply chain,” Knipscheer says. “We now expect a second criterion to be added: risk management. Companies will look for ways to de-risk the supply chain and add more flexibility, without blowing up the costs.” This is a key point for major food companies, who are busy improving their scenario planning in order to be more agile in a volatile market. “In terms of operations, the current reality has shown that we’re very reliant on human labour, and particularly migrant labour, in all parts of the value chain,” Knipscheer continues. “Now is the time to consider how vulnerable this makes us, and whether digital solutions might help to reduce this reliance.”

Optimising product portfolios

Over these past few months, it has become clear that the crisis is also affecting product portfolios. “We’ve seen major retailers struggling to replenish the shelves as they shift to stocking up just enough and just in time,” says Van Houten. “Food manufacturers have responded by limiting their portfolios to their most popular items, allowing for a more efficient operation.” Optimising product portfolios may, in the short term, lead to a smaller range of products and packaging sizes, as well as the replacement of difficult-to-acquire ingredients.

Collaboration is key

Will supply chains become steadily shorter, more regional and more diversified? Van Houten is not so sure. “Roughly 80 percent of the planet’s consumers are fed by imports. From a sourcing perspective, farms are by their very nature obviously still local businesses, but almost every other link in the supply chain is global.” Food companies certainly recognise that regional reliance will play an important role in the post-COVID-19 era. However, with the projected two billion extra mouths to feed by 2030 and the reality of how crops are distributed geographically across the world due to climate and soil conditions, there are limits to how regional a supply chain can get. Collaboration in the supply chain is necessary to bring about real changes, and all the major players in the food industry know it.

Waste and sustainability

A big inefficiency in the current food system is food loss and waste. Studies project that up to one-third of all produced food is wasted or lost somewhere along the supply chain, including retail and consumer levels. Could the current crisis present an opportunity to make the supply chain more sustainable? “We’ve already seen a couple of Asian companies leverage their advanced e-commerce platforms to connect farmers with a surplus to actual end users who can buy their produce and thus reduce waste,” says Van Houten. “Ecosystem plays like this are definitely up and coming.” Knipscheer adds: “And with the entire industry being shaken up by COVID-19, we expect the topics of waste and sustainability to become even more important.”

Creating a highly resilient and responsible supply chain is challenging and will require careful review of all the key supply chain levers. Visibility and adaptability through smart decision making across all levers should be the common goal for all businesses. This will require upstream and downstream collaboration far beyond what most companies are currently used to.

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