Volatile market forces, labor disputes, and unpredictable weather events are having a negative impact on food companies’ supply chains today. So what can be done to anticipate these forces that can cause major food chain disruption?
There is a myriad of events, either natural or man-made, that can cause major disruptions in today’s supply chains. Think about events in recent months or years that have caused significant disruptions in food chains – ranging from the Covid pandemic’s impact on labor and changes in consumer behavior and buying patterns to geopolitical uncertainties like the Ukraine war that have impacted port delays/congestion.
Of course, other things can have a significant impact on supply chains, such as economic factors like inflation, market factors such as over-the-road truck capacity, or government/labor disputes such as the recent issue involving Canadian railroads and government, and the labor dispute that led to disruptions at ports on the gulf and East Coast. Unpredictable weather ranging from hurricanes like Helene to tornadoes and flooding also play a substantial role in destruction and supply chain disruption.
What are some of the biggest supply chain operations challenges that can exacerbate supply chain disruptions? According to the recent Food Shippers Guide to Supply Chain Digital Transformation, a research project that was deployed in the first quarter of 2024 on behalf of a content sponsor with Food Shippers of America (FSA), some of the biggest supply chain challenges include freight market fluctuations/rising costs, global supply chain disruptions, supply chain management collaboration and effectiveness.
Food companies are addressing such predictable and unpredictable forces head-on. Businesses also are resetting their operations with digital capabilities and renew logistics operating models to help them increase operational efficiency, effectiveness, and resilience of their supply chains in order to make them more resilient to future disruptions.
Here are five strategies that food companies can deploy to navigate and mitigate disruptions in their food chains:
Diversification of suppliers and partnerships. Historically food companies sometimes have relied heavily on suppliers and strategic partnerships – which ultimately helped them to build up volumes of business so they could more effectively negotiate pricing and rates and streamline their operations through a small number of sources. This is no longer common practice for many food companies.
Relying on a small number of suppliers for crucial components or materials (or worse, a single supplier) can be extremely risky. Today, food companies are establishing relationships with multiple suppliers, located in different regions of their supply chain networks, which helps to distribute and mitigate any supply chain risks. In addition, building strong partnerships with suppliers and other stakeholders fosters enhanced collaboration and open communication, which enables companies to quickly adapt to changes in customer demand or disruptions in their food chains. A diverse supplier base also provides a greater opportunity for negotiating power during times of scarcity.
For example, Agropur Ingredients Supply Chain manages the supply chain for Agropur Ingredients, a global leader in supplying ingredients to the food, beverage, and nutrition industries. Agropur Ingredients is part of the Agropur Dairy Cooperative, which is owned by 3,000 dairy farmers who process and market their milk. Agropur Ingredients has a Procurement and Supplier Relations team that manages business relationships with suppliers, and seeks suppliers who provide high quality goods, services, and solutions. Agropur offers a free Supplier Portal (CSP) to help manage relationships and transactions with suppliers.
Real-time visibility and data analytics. Embracing technology that provides real-time visibility into the supply chain can be a game-changer. Advanced data analytics tools can help companies monitor inventory levels, track shipments, predict demand fluctuations and identify potential bottlenecks. With accurate data, companies can make informed decisions and respond promptly to any changes, minimizing the impact of disruptions and optimizing resource allocation.
Resilient logistics and transportation strategies. A comprehensive logistics and transportation strategy that is robust is vital for a nimble supply chain. Food companies can explore options like multi-modal transportation (road, rail, sea, air) to diversify their shipping routes and reduce dependence on a single mode of transportation. Collaborating with third-party logistics providers (3PLs) and truck brokers also can provide access to expertise and resources during times of crisis.
Other food companies are reinventing their supply chains to be more focused on a self-distribution model to buck the decades-old trend to outsource and they are developing their own supply chain operations and infrastructure for maximum control. For example, ADUSA Supply Chain is a family of supply chain companies that together support one of the largest supply chains on the East Coast, serving the omnichannel grocery brands of Ahold Delhaize USA – Food Lion, Giant Food, The GIANT Company, Hannaford and Stop & Shop – through a self-distribution model. Included in this group are ADUSA Distribution and ADUSA Transportation, which provide supply chain operations for one of the largest omnichannel grocery retail groups in the United States through an integrated self-distribution model.
Inventory management and demand forecasting. Maintaining excessively high inventory levels can tie up capital and increase storage costs, while too little inventory can lead to items running out of stock during disruptions. Finding the right balance is key.
Advanced demand forecasting techniques, fueled by historical data and market trends, can provide insights into future demand patterns. By optimizing inventory levels based on accurate forecasts, companies can reduce the impact of supply chain disruptions and better manage their resources. By optimizing and effectively managing inventory levels based on accurate forecasts, food manufacturers, retailers and distributors can significantly reduce the impact of supply chain disruptions and better manage their resources.
Be Proactive, Adapt Swiftly. Food companies operating in today’s complex and interconnected global marketplace must recognize the inevitability of supply chain disruptions. By adopting a combination of strategies that encompass supplier diversification, data-driven decision-making, effective inventory management, resilient logistics and robust risk management, food companies can position themselves to weather changes in the supply chain more effectively. The ability to adapt swiftly and make informed decisions during disruptions not only minimizes short-term disruptions but also enhances the company’s overall resilience and competitive advantage in the long run.
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