June 30, 2023 | Supply Chain Strategy
The food supply chain is responsible for bringing food on everyone’s table. It comprises steps from the original source, the farmer, to the consumer, and the dinner table. This chain encompasses multiple stakeholders, including manufacturers, distributors and retailers.
This blog will discuss different models of the food supply chain, current challenges of the fourth supply chain and food supply chain best practices.
The food supply chain consists of four distinct stages, each playing a crucial role in the overall process. These stages are categorized based on consumption level, considering whether food requires processing or not, and also taking into account factors such as food packaging and transportation.
To effectively comprehend the different stages of the food supply chain, it is best to examine each section, commencing with production.
The food supply chain commences at the production level, where the sourcing of food takes place. Food products are either grown or developed in accordance with local and international guidelines. Laws and regulations are implemented to ensure the quality, appearance and safety of the food.
Once the products are harvested, they undergo necessary preparations. For instance, certain potatoes require washing before being packed for transportation, while others can be directly placed in bags and sent on their way. Alternatively, some products are sent to food processing plants to be transformed into chips or crisps. The specific handling method depends on the food source and its intended destination.
Food products must meet stringent food safety requirements before proceeding to the packaging stage. After meeting the necessary criteria, they are appropriately packed and prepared for the subsequent steps in the food supply chain.
Once packed and ready, the food products are shipped from the packaging plant to their final destinations. Typically, these destinations include markets; however, food can also be transported to other segments of the food industry. While most food products are transported by ship, some are transported by air. The distance between the producer and the consumer is often referred to as a “food mile,” which serves as a measure of the environmental impact caused by food production, also known as a “food print.”
There are six models of food supply chains, each model is chosen by a business depending on its specific needs.
Used within high-demand production as it offers inventory and raw material stability. This model is ideal for well established brands for their mature supply chain where the customer profile is not likely to change.
A fast food supply chain model is used for trendy, perishable products. It helps businesses capitalize on high-demand food items. Just like fashion, food trends change quickly. Restaurants adapt swiftly by updating menus with innovative dishes. They use a fast supply chain to source fresh ingredients and develop new recipes. Staying ahead of culinary trends allows them to introduce and sell exciting food creations before trends fade. When a trend ends, they establish a new fast supply chain for the next trend.
This is beneficial for businesses operating in highly competitive environments. It emphasizes high efficiency in delivery logistics to maintain a competitive advantage. This model prioritizes effective inventory management and maximizing productivity from production equipment and labor. In industries with tight competition and thin profit margins, businesses recognize the importance of reducing costs throughout the supply chain while ensuring product availability for vendors. By adopting the efficient chain model, companies can optimize their operations and enhance profitability in competitive markets.
This model, in the context of the food supply chain, comprises four key components: virtual integration, process alignment, network base, and market sensitivity. Virtual integration involves real-time tracking of market demand changes for food products. Process alignment entails sharing supply chain responsibilities throughout the food business, including co-managed inventory and collaborative product design, while ensuring synchronization among all supply chain operations . Network-based refers to the equal contribution of every actor involved in the food supply chain. Lastly, market sensitivity allows for immediate adjustments in production rates in response to fluctuations in food demand.
This combines agile and continuous flow models to accommodate multiple product configurations in the food supply chain. It is suitable for situations where consumer customization options are offered. This model ensures adaptability to changing preferences and requirements.
This enables food businesses to effectively handle both high-demand peaks and low-demand periods. It encompasses three components: part segmentation, accurate stocking algorithms, and flexible planning. By diversifying suppliers and implementing automation, the supply chain can respond to fluctuations in demand while optimizing inventory levels and production efficiency.
The food supply chain is vulnerable to various disruptions that can have widespread consequences. These disruptions can lead to food shortages, increased prices, and other complications. Here are some common factors that can disrupt the food supply chain:
A health crisis, like the COVID-19 pandemic, can disrupt the workforce, affecting farms, manufacturing plants, and grocery stores. This shortage of workers hampers the smooth functioning of the food supply chain. Additionally, outbreaks or contamination incidents at specific farms can result in product recalls and waste, reducing the availability of safe food.
Severe weather events such as storms or blizzards can cause damage to factories, farms, and transportation routes. This damage severely limits food production and distribution capabilities, leading to delays and shortages within the food supply chain.
The energy supply is crucial at every stage of the food supply chain. Farmers require energy for crop cultivation and livestock maintenance, while manufacturers rely on electricity for processing and packaging. Transportation services heavily depend on fuel for delivery. Any disruptions or shortages in energy supply can significantly impact the food supply chain, resulting in scarcity and price hikes for consumers.
Geopolitical conflicts pose a substantial risk to the food supply chain. If a country involved in such conflicts is a major producer of specific food products, infrastructure damage and reduced workforce can occur. This disrupts both domestic and international food trade, causing ripple effects throughout the global food supply chain. This was evident in the wheat shortage during the early months of the Russia-Ukraine war.
Visibility is essential in a consumer-driven market. Modern consumers care about the origins of their food, right down to the smallest ingredients. Data accuracy brings this visibility. It also enhances food safety and reinforces brand integrity. Lack of visibility creates blind spots and unnecessary risks, this erodes consumer trust, leading to decreased profitably and increased legal risks. Lack of digital infrastructure is often to blame for the lack of visibility in the food supply chain. Enter blockchain – it is a promising technology to boost supply chain visibility and traceability. Transactions are visible in real-time, and once added to the blockchain, data becomes permanent and incorruptible. It enables producers, suppliers, distributors, retailers, and consumers to gain access to reliable information, for instance raw material origin, supplier data, product conditions and more.
Product safety and quality pose growing challenges for manufacturers today. Factors like poor storage, transportation delays and weather impact food products’ integrity. In the U.S. alone, according to FDA data, there were 111 recalls in June 2022, affecting profits and brand image.
The solution lies in meticulous raw material selection, adherence to international production standards and thorough testing. Partnering with accredited labs with advanced equipment ensures impeccable quality assurance. Better packaging safeguards product freshness and safety. Working with experienced logistics companies, especially for refrigerated goods, enables real-time tracking and temperature control.
Inadequate collaboration hampers the food supply chain, causing errors, waste, and mistrust among stakeholders. This issue is exacerbated in global operations. An advanced supply chain collaboration software is designed to facilitate seamless collaboration among supply chain partners. Leveraging cutting-edge technology, this software empowers organizations to engage in real-time collaboration with material suppliers, freight forwarders, logistics service providers and customs.
Using advanced AI, analytics, and machine learning capabilities, the software drives action-oriented resolution, enhances collaboration and improves profitability.
Inventory management is a critical aspect that can impact costs, quality, and customer satisfaction. Striking the right balance is key: having too much inventory leads to spoilage and waste, while having too little disappoints customers. Achieving customer happiness while keeping inventory levels low is a constant challenge. The solution lies in modern inventory management solutions. These tools provide real-time visibility of inventory throughout the supply chain, whether on-site, off-site, or in transit. They support advanced technologies like RFID , IoT, telematics, and automated tracking, ensuring accurate inventory data.
Additionally, integrating the supply chain with sales at stores or restaurants helps gain control and reduce inventory levels. Advanced network solutions can detect changes in demand at the point of sale and automatically adjust or create orders on the go. This optimization ensures optimal inventory levels, high service levels, satisfied customers and minimized waste.
In conclusion, the food supply chain is a critical process that brings food to our tables. Traceability is crucial for enhancing safety and customer loyalty, and technologies like blockchain enable secure traceability. Different supply chain models cater to specific needs, from demand fluctuations to competitiveness. Implementing best practices, such as ensuring safety, promoting collaboration, and efficient inventory management, helps overcome challenges. Investing in a supply chain software is essential in optimizing operations, meeting consumer demands, enhancing collaboration and driving profitability in the food industry.