January 27, 2022

Mitigating supply chain disruption in the food industry

Supply chains have been significantly impacted by the combination of Covid-19, Brexit and wider economic challenges, creating significant staff shortages, particularly among HGV drivers that transport critical goods from one country to another. Here, Bryan Palma, Senior Manager, Industry and Solutions Kinaxis, looks at ways to reduce the disruption.

There is currently estimated to be a shortage of between 90,000 to 100,000 drivers, and as stocks run low on the shelves as a result, the consumer panic buying that can ensue can make shortages even worse.

As the holiday season approaches, the strain on food supply chains has entered the spotlight, as consumers typically purchase specific items such as meat and chocolate in the lead up to the festive season. The food industry has also been struck by the CO2 shortage, impacting specifically on the process of packaging meat products and fizzy drinks.

Even the biggest corporates in the food industry haven’t escaped disruption, with Nestlé identifying labour shortages as a key factor behind its uncertainty that Quality Street may not make it to UK shelves this winter, a holiday favourite for many households. Ian Wright, chief executive of the Food and Drink Federation, estimated that across the whole UK food supply chain, there were approximately half a million staff shortages, representing a staggering 12.5% of the total workforce required.

In addition to the problems created by staff shortages, shipping containers have been in short supply or in the wrong posts, affecting trans-oceanic trade flows. The image of the container vessel lodged in the Suez Canal earlier in 2021 epitomised organisations’ focus on crisis-management and firefighting disasters instead of undertaking strategic planning.

Changing tack will become even more crucial as natural disasters, brought on by climate change, create more disruption, along with political policy changes and unrest between nations. Organisations need to take action to ensure that sufficient levels of food can reach consumers during times of disruption.

Ensuring transparency and resilience

In times of crisis, organisations frequently discover that they cannot respond as quickly and effectively as they lack the transparency in their supply chain. The focus among leaders is mainly on deducing what is happening on the ground, plus prioritising communication. The ability however to gain a more comprehensive overview of every aspect of the chain is crucial to understanding and reacting to crises.

Organisations understandably want to forecast for demand as accurately as they can, but the successive disruptions of the past few years has made this an almost impossible task to undertake. It also becomes an unnecessary distraction from the truly important elements of supply chain management, which is ensuring greater agility and resilience. When crises hit, a sense-and-respond capability allows organisations to react rapidly and adjust their operations as necessary, avoiding the difficult task of devising a near-impossible accurate forecast.

In addition to enabling this higher level of agility, organisations should look to boost resilience with the removal of a potential single point of failure from their supply chains, and instead shift to dual or multiple-source suppliers or dispersed manufacturing or packing locations. Organisations need to remember that resilience is not purely based in geographical or physical diversity, and also requires logistics partners to provide alternatives when hurdles can materialise, whether it’s government interventions being introduced, downtime hitting a plant, or a critical route being blocked. Having the right balance of central and regional distribution centres has become even more important over the last year to help offset and mitigate risks.

Strengthening the chain

The ability to run multiple scenarios to understand impacts can unlock a more diverse toolkit that is able to prepare an organisation for all kinds of possibilities. Service and cost impacts plus any further outcomes will be visible, enabling organisations to confidently make a difficult decision when disruption happens.

When there is unforeseeable and prolonged disruption to a supply chain, organisations may be faced with increased costs to meet customer needs, making it difficult to stay profitable. Being able to calculate how best to maximise revenue, margin and cashflow is therefore a crucial ability, with technology able to tell businesses the level of margin they’ll make from following a certain strategy. With the correct data leveraged from every area of the supply chain, leaders are more likely to make better decisions in uncertain scenarios.

The events of the last few years have sent a warning to the food industry that simply forecasting for increased demand is not enough as a single strategy. With the transportation of food so critical to the livelihoods of the general public, organisations in the industry need to adopt agility and resilience in their supply chains, along with forecasting for increased demand. Food supply chains need to be able to react to anything, to do so they need to build in the right solutions.