COVID-19 has broken the global food supply chain. So now what?

How COVID-19 is disrupting supply chains

From farm to fork, missing links in the food supply chain are causing increasing disruption and damage:

• Harvests: As spring arrives, crops are rotting in the fields. Europe’s asparagus growers, for instance, are dramatically short of staff, with migrant workers from Eastern Europe unable to come to their farms due to border restrictions - or simply afraid to risk infection.
  
  
• Logistics: Food transport, meanwhile, is steadily turning into a logistics nightmare. Where produce does get harvested, border controls and air freight restrictions are making international transport of fresh goods extremely difficult – and expensive².
  
  
• Processing: Food processing plants are scaling or shutting down due to containment measures or staff shortages, with their suppliers scrambling to adjust their output. In Canada, for example, poultry farmers collectively acted to reduce their output by 12.6%³.
  
  
• Go-to-market: Companies that normally sell a significant portion of their output through out-of-home channels (for example soft drink producers) are seeing their sales slashed⁴.
  
  
• Sourcing: Supermarkets, while scoring stellar sales figures, are understaffed and underdelivered⁵. Because of sourcing problems, products based on wide range of ingredients are becoming increasingly difficult to make and are therefore disappearing from store shelves⁶.

Building supply chain resilience

In the post-outbreak era, what can food sector players do to make their supply chains both responsible and resilient? Solutions should run along these lines:

• Go-to-market versatility: Existing go-to-market channels like bars and restaurants have closed down and expectations are that it will take 12-18 months before societies fully recover from COVID-19. Companies therefore need to invest in omnichannel capabilities, especially focusing on online/digital solutions. This should also include product fungibility across channels.

• End-to-end supply chain management: As sourcing ingredients/merchandise becomes harder for businesses, one alternative is to work with a wider pool of suppliers, including regional ones, and keep larger strategic stocks. A broad product range is more expensive to maintain, but spreads risks. An alternative is to simplify recipes and/or remove problem products from the portfolio, resulting in a leaner, more manageable product range, less risk and lower costs. That would also free up time and resources to invest in the development of innovative new products that combine a healthy lifestyle with minimal environmental impact. Meanwhile, it’s important to invest in relationships with supply chain partners. Supplier and customer loyalty and resilience are pivotal to ensure business continuity and to thrive post-COVID-19.

• Industry 4.0: Digital supply networks are going to make businesses less vulnerable in the longer term. Robots, for instance, reduce dependence on migrant labour. Track-and-trace solutions help businesses zoom in on supply chain bottlenecks. And the latest tools based on artificial intelligence revolutionise business processes and scenario management, thereby reducing both costs and risks. AI supports companies in predicting uptake in demand in an early stage, anticipating future bottlenecks and choosing the best course of action.

Make the most of downtime

Nobody knows the timetable for the lifting of COVID-19 containment measures. But when the lockdown is over, businesses that have used the downtime well – by embracing supply chain innovation, diversification and collaboration, preferably also integrating sustainability goals– will come out fitter for the future.

References

1. https://www.economist.com/europe/2020/04/04/when-borders-close-who-will-pick-the-crops
   
2. https://www.nytimes.com/2020/04/10/business/economy/global-trade-shortages-coronavirus.html?referringSource=articleShare
   
3. https://business.financialpost.com/news/retail-marketing/chicken-farmers-to-shrink-national-flock-by-12-as-coronavirus-takes-toll-on-canadas-food-supply-chain
   
4. https://www.bloomberg.com/news/articles/2020-04-21/coke-says-covid-19-impact-on-second-quarter-to-be-material
   
5. https://www.ft.com/content/cb7d0c10-6eb8-11ea-89df-41bea055720b
   
6. https://www.theglobeandmail.com/business/article-food-producers-move-to-make-just-the-basics/
   
7. https://www.forbes.com/sites/daphneewingchow/2020/03/31/five-ways-that-coronavirus-will-change-the-way-we-eat/
   
8. https://www.forbes.com/sites/siminamistreanu/2020/03/13/covid-19-to-further-dampen-us-china-trade/#79721b7e668b
   
9. https://www.nytimes.com/2020/03/27/opinion/sunday/coronavirus-climate-change.html