How current supply chain disruptions could have been predicted in 2020 and why data transparency will be key to avoiding future disruptions
Article contributed by Frederic Van Roie
It’s safe to say that we’re all a little tired of hearing the words ‘supply chain’. Despite this, these are the words on everyone’s lips, which have moved from industry niche to everyday conversation.
Why? Today’s supply chain issues are global, cut across all industries, and have very real and lasting impacts on businesses and consumers.
Supply chain slowdowns have several reasons, including labor, transportation and container shortages, as well as inflation-fueled cost increases. However, the current supply chain issues got really out of control when another hot topic took hold: the pandemic.
feast and famine
Industries have been disproportionately affected. Demand for products and services in some sectors has skyrocketed, while it has fallen in others.
Across the food and beverage industry, the grocery sector has grown as consumers moved into the kitchen at home, rediscovering baking and relying on comfort foods . Not to mention the surge in panic buying that caused the Bullwhip effect (Forrester effect). All this means that forecast planning errors have increased by 59% compared to pre-pandemic levels, according to a study by E2open. While the supply needs of on-site restaurants have all but evaporated.
As our understanding of COVID-19 has grown, consumers have become more comfortable with their food being prepared by other people. Takeaway businesses and QSR restaurants offering curbside pickup found themselves busier.
However, the food industry as a whole has faced far-reaching challenges. There was a general labor shortage in packing plants and processing areas due to COVID-19 infections, employee welfare (social distancing) and low pay rates. There was a labor shortage even before the pandemic in inland transportation (trucking carrying goods from ports or warehouses to stores). All of this adds to delays and uncertainty in supply chains.
Around the world, the actions people take are also playing a part in supply chain chaos. There have been blockades at the Canada-US border protesting Canadian policies, which means a 14-day quarantine for truckers who have not been vaccinated twice, wreaking havoc on trade and threatening the Canadian food supply. With up to 90% of fruits and vegetables imported from the United States into Canada during the winter, delays lead to supply shortages at grocery stores.
Of course, Russia’s invasion of Ukraine has put multi-directional pressure on agribusiness supply chains. Oil and gas prices are skyrocketing, impacting agricultural supply chains, production and transportation. In addition, Russia and Ukraine are among the world’s leading exporters of foodstuffs such as wheat, corn and sunflower oil, as well as raw materials, including key ingredients for fertilizers such as phosphates and potash. If the conflict continues, the problems of supply of fertilizers and other food raw materials will worsen, with disastrous international consequences, in particular for certain African countries.
Functional ingredients and more
On the ingredient side, processed foods often use specific functional ingredients that may come from overseas. It could be a specific emulsifier used to keep ice cream smooth or an anti-mold additive used in bread. These ingredients, like anything that has to travel long distances, take longer to reach their destination.
The responsibility does not end there, however. Long backups exacerbate delays, including in North America, where ships have sometimes had to wait days or even weeks to unload their cargo. In addition, labor shortages at ports compound delays. President Biden announced in October 2021 that the Port of Los Angeles would be open 24/7 in an attempt to reduce some of the backlog. Diverting some of the volume to the east coast finally brought relief.
Manufacturing disruptions and a disparity in imports and exports with China have exacerbated the container imbalance. Empty containers are piling up on the American side of the ocean, leaving containers scarce in Asia. The resulting imbalance led to a dramatic increase in shipping costs and times. The amount can range from $5,000 to $25,000 per container, which is up to ten times more shipping costs.
The container imbalance has also created packaging problems for manufacturers. Some packaging materials – such as polystyrene foam for meats and films used to wrap food – also come from abroad. So even when all the ingredients are available, not being able to package the products prevents their production.
Natural disasters such as drought, fires and floods also affect crops and commodities. Then there are stricter regulations regarding the use of coal, which have led to power outages in places where packaging materials are produced.
Shore improve your technology
Maintaining the core offering while developing new products in a changing market requires flexibility and adaptability. So being on top of your entire product management and development process is an absolute must if you want to keep up with changing industry challenges.
As a manufacturer, you may need to reduce the number of SKUs and focus on producing your short-term majors. As a retailer, you may need to diversify your supplier base, make wording changes, or even adjust your assortment as manufacturers cut back and put customers on hold.
Food and beverage brands, retailers and manufacturers need more than food supply chain software: they need a digital solution that provides visibility across entire supply chains and streamlines the entire product life cycle, from concept to consumer. A modern product lifecycle management (PLM) system centralizes all product data and workflows into a single, actionable source of truth. It enhances transparency along supply chains and enables companies to become agile enough to respond to market demands.
But in addition to overcoming industry challenges, food and beverage companies must stay innovative and keep pace with consumer demands, developing new food products for an evolving market. It makes sense to compress product development timelines to stay close to consumers. Systems like PLM speed time to market so products hit store shelves while they’re still relevant. Make sure your technology is up to the task. Manage ingredients and specifications, find alternative functional ingredients or national substitutes by calling multiple suppliers at once and tracking responses through a portal.
food for thought
As supply chain challenges evolve, the future of the food and beverage industry remains uncertain. There’s never been a more important time to future-proof your business against current and future challenges – and digital transformation is the answer to overcoming obstacles and keeping pace with consumer demands.
Frederic Van Roie is a business solutions expert in the global grocery industry, with a diverse background and in-depth knowledge of retail, brand development management, manufacturing and of restoration. Its goal is to help retailers and manufacturers take advantage centered PLM to quickly and efficiently deliver more innovative, sustainable and amazing products to market.