By Robin Kix, Renewal Department Manager, Lance Surety
During the pandemic, the supply chain was pushed to its limits, resulting in delays and shortages. Inflation was triggered, causing corporations to raise prices on nearly everything. Even with the price increases, many businesses are unable to offset the negative effect on their profits. Trade channels remain bogged down and continue to cause havoc, but there are signs that they are slowly returning to normal. There have also been recent signs that inflation is beginning to fall.
However, the dramatic dislocation of the supply chain has greatly affected the food industry, and it could be more than a year before the system returns to normal. Since it is not yet known when the issues will end, shippers must continue to take steps to mitigate risks in the food supply chain. There are multiple ways that shippers can mitigate risks and overcome challenges.
What shippers are doing to mitigate food supply chain risks
According to Mazars, food industry leaders are trying to address food supply chain risks in several ways after almost two years of disruptions. In its annual report on the food and beverage industry, Mazars found that 54% of the respondents identified their top concerns as the costs of shipping, cost of containers, and unexpected port fees. An additional 39% identified the rising cost of commodities as a top concern, and 39% also said that improvements are needed in the food supply chain. Finally, 38% said they faced risks from delays caused by shipping congestion, and 33% said they faced risks from the shortage of trucks and drivers to transport their goods.
The respondents identified multiple steps they are taking to manage both costs and risks. Out of the respondents, 41% stated they are making investments to strategically diversify their supply chains. Another 45% stated that they plan to increase their suppliers, with 30% reporting they intend to source more products domestically or seek alternatives to address bottlenecks and delays in the supply chain. Food and beverage industry respondents also said that they are trying to make improvements by focusing on the following things in order of priority:
- Cost of goods – 22%
- Delivery times – 18%
- Information sharing and education – 16%
- Food safety – 14%
Below are some ways that shippers are trying to mitigate risks in the food supply chain.
Capturing and analyzing data
Shippers are using multiple data streams to capture and analyze data to identify potential risks and mitigate them. Using data streams that offer real-time information about processes, cycles, and trends is critical. Some companies offer analytic services to monitor data streams for you to help increase the security of your cargo, reduce costs, optimize your processes, and monitor the quality and condition of your shipments in real time.
Companies are using end-to-end monitoring of their shipping data to prepare for risks and improve the supply chain to increase its scalability and reliability. Many companies find value in using predictive algorithms to evaluate their food supply chains and to identify problems that might otherwise not be noticed to save resources, labor, time, and money.
Tracking freight payments and costs
Another way that shippers are mitigating food supply chain risks is by tracking expenses and costs in real time to prevent shipping losses. They might use third parties that offer this service or use software applications to track their costs and payments. Tracking applications also provide real-time information to help you ensure cold food goods are transferred successfully.
Taking a second look at fulfillment models
It is critical to be flexible in today’s market and be prepared to adapt instead of staying with a traditional fulfillment model. You might need to take a second look at the model you have been using and modify it to avoid potential losses. Consider whether alternative models, such as micro fulfillment or omnichannel fulfillment, might be viable. You might also consider whether partnering with a flexible platform for warehousing might be an option.
You should regularly review your list of carriers and work to vet and add new ones. A good way to do this is to work with a freight broker. Freight brokers work with many carriers and can help identify carriers who have equipment and trucks that meet the sanitary food transportation rule and are ready to handle your shipments. Since freight brokers must get a freight broker bond before they can obtain a freight broker license from the Federal Motor Carrier Safety Administration (FMCSA), the bond provides additional security that the broker will pay the carriers what they are owed and on time. Working with a freight broker allows you to focus on other tasks while the broker ensures your list of carriers is always vetted and diversified.
Consider new importers and import locations
While it can be costly to change importers, doing so might help prevent total shipment losses. While rerouting your shipments might be more expensive than what you normally pay, doing so might help prevent total losses by ensuring your cold foods arrive on time and in good condition.
Taking advantage of local deliveries
When you take advantage of local deliveries, it can help streamline your delivery routes and optimize your network. You can also enjoy lower costs when you don’t have to pay to ship products across multiple zones when you use shipments into the last mile of delivery. If you regularly ship large amounts of cold food, multi-modal transport might also be beneficial.
While some of the pressures on the food supply chain have diminished, risks can be expected to continue for months. Thoroughly analyzing your data can help identify potential risks so that you can take steps to prevent them. Working with a freight broker to diversify your carriers and investigate local deliveries can help mitigate risks of shipment losses and high, unexpected costs. While the current market might seem unpredictable, appropriate planning and analysis can help identify risks so that you can take steps to protect your company from them.
Robin Kix is currently the Renewal Department Manager. Since joining Lance Surety in 2014, she has helped thousands of businesses throughout the nation remain compliant at the federal, state and local level. She has significant experience supporting commercial bond lines, particularly in the automobile, transportation and construction industries.