By Eric Linxwiler, Senior Vice President of TradeBeyond
Constant disruptions have become the new normal for global food and beverage supply chains. So far this year, supply chains have been rocked by geo-political tensions, most notably the ongoing Russian invasion of Ukraine, which has led to a dramatic reduction in the availability and affordability of essential commodities such as wheat and sunflower oil. That crisis has been further compounded by relentless attacks by Houthi rebels in the Red Sea that have disrupted one of the world’s most crucial shipping lanes, which in turn have exacerbated challenges posed by recent shipping disruptions in the Panama Canal, where cargo has been limited by low water levels. The result has been surging delivery times and transportation costs.
These delayed delivery times are a challenge for any industry, but for food and beverage they pose a unique risk due to the shelf life of many products. Any delay in the supply chain can lead to catastrophic consequences for businesses, including a significant increase in the rate of returns. Retailers, in response, are demanding longer shelf lives for shelf-life sensitive items, further complicating sourcing and logistics strategies. Disruptions also often mean acquiring new suppliers, which requires agile quality control to ensure the ingredients’ quality and composition remain consistent, since any alteration in an ingredient list or nutritional panel due to a change in suppliers can be costly.
From the pandemic to extreme weather events and raw material shortages, it’s clear that supply chains now exist in an almost permanent state of disruption, a reality that underscores the urgent need for a more agile and resilient approach to supply chain management. To mitigate mounting risks, companies need to diversify their sourcing and logistics strategies, reducing dependence on volatile regions. That requires digital solutions with real-time data and predictive analysis, which enable companies to anticipate disruptions and reconfigure their supply chains dynamically, enhancing transparency and resilience in their operations. These technologies can also help companies build stronger relationships with a diverse range of suppliers and logistics partners, which can provide alternative options when their usual supply channels are disrupted.
With their real-time data sharing capabilities and predictive analytics, multi-enterprise supply chain platforms allow companies to swiftly respond to these challenges. The right platform can enable companies to quickly adapt to changing circumstances, such as finding alternative suppliers or rerouting shipments in response to geopolitical sanctions or natural disasters. These capabilities are important for all businesses, but given the delicate nature of the global food supply chain, having a centralized system like this to provide complete, real-time information is even more critical for food and beverage retailers.
This technology helps food and beverage retailers mitigate disruptions by enhancing visibility and control throughout the supply chain, enabling companies to quickly adapt to and manage disruptions and ensuring minimal impact on operations. A multi-enterprise platform acts as a control tower, providing supply chain managers with real-time insights and analytics that empower them to understand, assess, and respond swiftly to any disruption and limit its impact.
Building a more resilient food supply chain
In addition to gearing up to make the supply chain more resilient and agile, retailers and brands must also consider the evolving consumer expectations around sustainability and ethical sourcing. Consumers are increasingly aware of and concerned about the environmental impact of their food choices. Controlling the use of precious water, or minimizing water wastage, in growing critical crops in developing countries has become a key aspect of sustainable sourcing, emphasizing the need for practices that protect this vital resource. Also, regulatory changes aimed at both food safety and environmental impact are demanding increased vigilance and adaptability from companies. For instance, the EU’s new deforestation regulation requires companies to prove that commodities like coffee, palm oil, and cocoa are not linked to deforestation. These changing consumer preferences and regulations have introduced additional complexity to supply chains, necessitating that food and beverage retailers invest in robust traceability solutions.
This heightened focus on sustainability is particularly consequential for food and beverage retailers, where confirming the Nth-tier origins of ingredients like spices is especially demanding. Any required changes, such as addressing deforestation, reducing carbon footprint, or complying with regulations concerning specific regions like China’s Uygur region, necessitate a thorough validation of all downstream suppliers. Efficient digital tools are required to conduct all necessary audits and certifications to ensure a company’s standards of social and environmental sustainability are met at every stage in the supply chain.
The complexity of supply chain mapping is further amplified in the food and beverage industry by the extremely high number of ingredients that are included in many food products, especially prepared dishes. This complexity makes the chain of custody for products far more intricate than in industries like apparel. For the food and beverage sector, regulatory requirements demand an even more stringent level of detail in tracking and verifying the source of each ingredient. Traceability tools can allow businesses to map their supply chains down to the Nth-tier and track and document chain of custody, ensuring compliance with global ESG laws and consumer expectations. Moreover, a comprehensive approach to supply chain management helps companies maintain quality and sustainability standards even amid rapid market changes and supply chain disruptions. This unified approach ensures that companies can adapt to evolving market demands while maintaining their commitment to sustainability and ethical practices.
If there’s one lesson supply chain managers have learned from recent disruptions, it’s to always be prepared for the unexpected. Ongoing disturbances in the Red Sea shipping lane are anticipated to extend well into 2024, with little hope for cessation of the conflicts, underscoring the critical need for agile, technology-driven strategies that can adapt to the unforeseen. Multi-enterprise platforms have become an essential asset in this unstable landscape, offering businesses the tools to navigate uncertainty, uphold sustainability initiatives, and ensure the uninterrupted delivery of the staple foods that consumers depend on.
Eric Linxwiler is Senior Vice President of TradeBeyond. He has over 30 years of experience in enterprise software and cloud-based service companies with a specialty in supply chain optimization and workflow management.
