Aug 7, 2023
Food supply chain - What is it?
A supply chain is a process by which a company produces its products. It starts at the beginning when the raw material is sourced and ends at the end when the finished goods are delivered to the consumer.
Knowing your entire supply chain from start to finish helps you identify potential issues and ensures that everything runs smoothly.
We'll look at the food industry from an international perspective, including the UK and Europe. We'll discuss some of the significant issues facing the food industry today and examine some key trends and innovations that could shape the future of our food system.
How does it work?
The global supply chain work is similar to any supply chain, but there are more regulations and compliance requirements for ensuring safe foods.
For example, Jo Blogs runs a food-to-go company mainly selling sandwiches and wraps in education, retail and leisure channels. He buys bread and fillings from importers or manufacturers and packaging and chilled storage from another seller — these are his suppliers. Once he processes and packages the sandwiches and wraps, he sells them to his distributors or direct sales channels.
Depending on the industry, food supplies may vary slightly. International business processes can be much more complex and time-consuming than domestic ones. It may take a team in the receiving countries to ensure that the product arrives at its destination safely and is correctly handled by customs officials.
Small food manufacturers have their suppliers, but they're usually not as large as the ones for larger companies. Instead of having a separate team manage suppliers, the procurement manager may handle that as one of their responsibilities.
The food supply chain starts with producers and finishes with consumers.
What are the challenges?
Food disruptions and supply chain issues can lead to shortages of ingredients, processing, packaging and distribution.
Food supply chain challenges in the UK
Lack of domestic food production
According to a recent BBC article, the United Kingdom heavily depends on the European Union (the EU) for its food supply — about 30 per cent of all the food consumed by the British people comes from the EU, which makes the UK’s food supply chain more vulnerable.
War in Ukraine
Russian warships and sea mines block Ukrainian ports in the Black Sea. Before the war, Ukraine was exporting an average of six million tons of agricultural products per month to countries in the Middle Eastern, Asian, and African regions. Currently, only about 15 to 25 per cent of this quantity can be transported by rail, the Danube River, and trucks (approximately 700,000 tonnes in April 2022 and nearly one million tonnes in May 2022).
Sanctioned countries have increased their export restrictions against Russia, which has increased the risk for Russian exporters. This led to price hikes and supply chain disruptions, significantly undercutting the ability of poor exporting countries to feed their people.
About 20% of global cereal production goes into exports. Total global agricultural output is enough to meet the needs of every human being on Earth, but there are regions where agriculture is not sufficiently productive. That’s one reason trading plays a vital role in balancing global supply and demand. During the 2020/21 season, Russia supplied 7.8% of the world’s cereal supply and Ukraine 11.3%.
Fast-changing consumer habits
It's no longer just about convenience; it's also about quality and value for money. Consumers nowadays don't need to buy from stores that dictate their choices. They can now access more options and varieties online. It led to greater variety — from global online retailers and local organic producers.
Maintaining transparency
Today’s consumers expect more from their food than a label saying “100% organic.” They want to know if it’s truly organic. Fast food restaurants have begun various marketing initiatives to explain their food production methods and supply chains in greater detail.
Because they found that one reason why people didn't visit McDonald's was due to poor perceptions of its menu, McDonald's ran a marketing initiative called "Our Foods Your Questions" in 2014.
The campaign asked people to answer a simple question such as “What are McNuggets made out of?”, “Is the chicken real?” etc. After one year, they found that their customers were becoming more informed and loyal.
Fast food restaurants often face increased complexity and sometimes incur additional costs when they add new menu items. To be transparent about their entire production process, they'd need to implement systems that provide greater visibility in the whole production process, from upstream to downstream. They would need to be part of the supply chain and manufacture their products.
Waste in the food supply chain
Poor inventory management means wasting resources. Waste can occur for several different reasons. A new business may be unable to forecast product demand, have a human error when placing an order, or fail to follow up on best-by dates.
We need to use good programs to process our foods, so we don't lose any of them. These programs include features such as tracking and serial numbers, inventory management capabilities, and forecast tools.
Sustainability in the food supply chain
As companies become more aware of their environmental impact, they're starting to incorporate sustainable practices into their business models. Many companies acknowledge the demand for sustainable foods from their customers.
For instance, many companies are making efforts to improve the efficiency of their food supply chains through recycling waste and packaging materials at every stage of the food chain, from consumers to farms, and by using renewable energy sources whenever possible.
Delays and losses
One of the main reasons for the food supply shortage is our food travels so far before we get to consume it.
Distance refers to the distance between the place where something originates and the place where it ends up. Depending on the kind of food, these distances can be extended. Delays and losses of products occur when they have to travel by air. Delays caused by managerial and technical issues can lead to further delays in a business whose success relies heavily on the timely execution of each step in its manufacturing process.
Labour issues
Large companies that employ workers exposed to dangerous, unhealthy working environments, lack of benefits, or low pay create ongoing labour issues that affect the entire industry.
Without people, there would be no chain. When a disaster like a pandemic occurs, the chain can quickly break down if there aren't enough workers to keep up with demand.
Exploitative labour practices also contribute to a vulnerable global supply chain.
Big corporations, such as large agricultural conglomerates, dominate the global food industry.
Large corporations, including large agricultural companies, big fast-moving consumer goods (FMCG) firms, and even multinational fast-moving consumer goods chains, reaped most of the profits from our current globalised supply chain. Without adequate consideration for worker rights, the consequences for human well-being and environmental sustainability can be dire.
Environmental concerns
As with many other industries, the food sector is constantly affected by environmental changes.
Agriculture is threatened by "anthropogenic" issues or environmental harm caused by humans. These factors, including climate change, deforestation, and so forth, are some of the causes of water scarcity.
Over time, global warming will likely affect agriculture, as changing weather conditions could limit the kinds and amounts of plants we can grow.
Experts say that without long-term access to land and clean, fresh air, we cannot produce safe and healthy food for our bodies. We must be careful not to cause further damage to natural resources, especially as we confront climate change, which threatens their viability.
Food waste at a farm level. Farms continue to be overlooked sources of waste, contributing to massive amounts of environmental damage and exacerbating hunger worldwide.
The decline in biodiversity. Deforesting land to grow crops and raise livestock decreases the diversity of plant and animal species worldwide. Biodiverse ecosystems provide us with clean air, fresh water, and fertile soil from which we can grow food.
The importance of food varieties. If we continue growing the same crops yearly, our ability to feed ourselves becomes increasingly vulnerable and exacerbates climate change. Diversity in crop varieties allows soils to adapt to changing conditions, which results in healthier plants.
Traditional and indigenous diets. Food security is essential for human health. It's crucial to ensure that culturally appropriate, nutritious food is available to everyone.
Land and water access. Without secure access to farmland and clean water, we cannot be sure that we will always have enough nutritious foods available for everyone. As we face the effects of global warming, which affect the availability of these resources, it is essential to take steps to protect them.
Opportunities in the Food Supply Chain
Vertical farming
Vertical farming uses artificial light to grow crops indoors without soil. It can help increase crop yield, solve the space problem, and even reduce the environmental impacts of agriculture by cutting down on food miles.
Eden Green Technologies develops technologically advanced solutions for indoor agriculture. These approaches may use less land, energy, and water than conventional farming methods.
They also shield local communities and their economy from global markets by protecting them from fluctuations in international prices. They could help increase agricultural production by providing nutritious foods for people who need them.
Blockchain
Blockchain has become increasingly popular among food manufacturers and retailers. According to Gartner, 20 per cent of the world’s top ten grocery retailers by revenue will use blockchain technology to improve their supply chain management systems.
Blockchain technology ensures transparency throughout the entire life cycle of each food item as it moves from farm to fork. Blockchain records the details of every transaction in a single shared ledger, so no one can alter them after they've been entered into the system. This ensures that consumers know that the products they buy are precisely what they claim to be and that they were produced under safe and legal conditions.
Blockchain technologies can help improve the quality of a company's products and services by reducing the risk of human errors.
Blockchain technology allows for secure and transparent tracking of food production and distribution. Blockchain can help solve some of the world’s most critical challenges related to agriculture, including tackling issues like agricultural fraud, supply chain inefficiency, and global hunger.
Aptean is developing blockchain-traceable solutions for the food industry.
According to the company, more than 20% of the world’s largest food companies have already committed to using blockchain technology by 2025. These include large corporations like Tyson and Kraft.
Their greenhouse and vertical farm technologies can help prevent wasted foods by growing them without soil, which uses up 98% less water than traditional agriculture.
Automation
Combining AI, machine learning, and predictive analysis, the food industry can automate operations, speed deliveries, proactively monitor inventory levels, and minimise food waste at every production stage.
Robots and cobots are becoming more common in the manufacturing industry, including in the production of foods.
This model can help improve employee health, lower costs, and boost productivity and performance.
Software, data, and science
Science is also making significant advances in understanding the environmental impacts of our food supply chains.
Enteric Methane is a greenhouse gaseous produced by burping cows. Several research teams and companies are developing feed additive products that help cows not generate methane in their stomachs. This could help reduce the emissions from cattle farming.
A new study suggests that a dairy cow feed supplement called NOP could help reduce greenhouse gas emissions by up to 35 per cent. However, no adverse health or environmental side effects were associated with using the product.
Data can help improve regenerative agricultural practices. The US Department of Agriculture launched COMET-Farm, an online tool to help farmers track their farm’s GHG (greenhouse gases) output.
This free software allows farmers to calculate their greenhouse gas emissions and save money by reducing them. Metadata from the tools is also being analysed to determine its impact on agriculture.
Potential trade-offs
Technology isn't perfect. For instance, if we adopt more automation in the production of our foods, we might save labour costs, but at the same time, we'd use up more fossil fuels. As a result, we would likely see an increase in greenhouse gas emissions.
However, suppose we combine these two approaches with a push towards greater sustainability across all aspects of our lives. In that case, technology might help us solve some of the problems that have led to our current broken systems.
Food supply issues need widespread structural reforms, but we can start by making small changes in our daily lives.
If you're willing to spend some extra money, you could help support companies that produce their goods ethically, sustainably, and locally. By doing so, you'll vote for an ethical, healthy, sustainable way of making food.
For instance, you could look for labels that indicate they were produced using sustainable farming methods, such as "organic" and "sustainable."
Summary
The supply chain can be challenging for any size business, whether they're a small start-up in the fast-moving consumer goods (FMCG) sector or a large multinational corporation. To avoid these issues, companies in the FMCG sector can implement an effective inventory management solution to track their inventory levels, manage recent trends in marketing, and identify potential bottlenecks in production. Blockchain technology could trace products from farm to table and automate processes, so they don't rely on human labour.