More consumers are thinking about how the delicious food they consume arrives on their dinner plates. There are a lot of steps involved, and some of them can be unappetizing or even unsafe.
And the businesses that bring food to consumers have a lot to consider as well. Every farmer, processor, and seller is responsible for some form of food management. Organizing delivery, arranging suppliers, and figuring out food costs are all part of the supply chain process.
The food supply chain is complex because it involves every touchpoint of a food item from farm to table. Depending on the type of food involved, there may be multiple stages in the process, such as farm, processing, distributing, and retailer. Here is what you need to know about a few of the challenges this process faces and five ways to optimize the food supply chain.
Main Challenges with Food Supply Chains
The food supply chain is an elaborate system of production that maintains food security and sustainability on both a local and global scale. Although most people take food supplies for granted, there is a delicate balance happening, which can be disrupted by things like spoilage, shortage, and price increases. Some of the main challenges facing food supply chains include:
1. Labor and Farm Shortages
The most important and first step in the food supply chain takes place at the agricultural level. Most farming operations require labor, which has been a struggle thanks to the COVID-19 pandemic. Various regulations and restrictions have also made it more costly and challenging for farms and processing facilities to operate.
2. Increased Regulations
Speaking of regulations, more rules have been put in place to protect workers and consumers. At the same time, some of those rules are causing roadblocks in the supply chain. For example, regulations requiring drivers to log hours have led to increased prices and delivery delays.
3. Poor Communication Among Stakeholders
Because the food system and supply chain are fragmented, participants have their own logistics and information systems. This makes sharing data and communicating challenging, which may lead to delays and food spoilage.
4. Inventory Management
The lack of visibility among supply chain participants has caused many problems for grocers and restaurants. Without a real-time view of inventory, these businesses may be under or over-ordering inventory, resulting in food spoilage, customer dissatisfaction, and damage to brand reputation.
5 Ways to Optimize the Food Supply Chain
Proper supply chain management ensures that food products arrive on time at their desired destinations. It also helps prevent and identify potential issues such as spoilage, contamination, and foodborne illnesses, before they can impact consumers. Here are five ways you can optimize the food supply chain so you can deliver a positive customer experience and achieve better overall results.
1. Evaluate and Audit Suppliers
Unless your company is growing, processing, and transporting the food, you need to partner with suppliers you trust. This involves the proper evaluation and audit of suppliers relative to things like recordkeeping processes, sanitation, food safety criteria, recall programs, and environmental monitoring.
Once you have a relationship with suppliers, the evaluation process should continue. There should be periodic internal audits. If the supplier hires subcontractors, they need to be examined under the same scrutiny.
2. Understand Your Budget
Whether you manage your supply chain in-house or are working with a third-party logistics company (3PL), your budget is going to be an ongoing concern as it impacts your bottom line. While various programs and solutions may cost money, it’s essential to analyze the impact of implementing them or forgoing them altogether.
For example, a well-run supply chain will likely outshine the competition and pick up more customers due to its positive reputation. At the same time, a poorly-run one may lose customers or even end up facing fines due to food safety issues.
3. Improve Transparency and Visibility
When stockout of essential supplies happened early in the pandemic, companies began paying more attention to what was happening within the supply chain. Likewise, consumer interest has soared with respect to where their food is coming from, making it important for companies to address transparency in the food supply chain.
Fortunately, visibility can be achieved with various technology solutions. Things like RFID tags combined with a warehouse management system (WMS) can deliver real-time data to business partners and consumers about food products. This technology can also assist with cold-chain compliance by recording the temperature and humidity of items as they travel along the route.
4. Focus on Inventory Management
The days of handling inventory using a scratchpad or spreadsheet are long past. Those methods are simply too inefficient and error-prone. Automation and digitization are the foundations of an efficient and successful supply chain. There’s just too much at stake with food products not to make inventory management a priority.
In addition to the transparency provided by RFID tags, this technology can also assist with inventory management. For example, a warehouse worker can use a mobile computing device to improve the accuracy and productivity of operations, creating a more efficient and cost-effective process.
5. Improve Sourcing and Forecasting
One of the biggest issues with the food supply chain during the pandemic has been the reliance on a single source for procurement. When an unforeseen event happens, and that source can’t come through, it creates a ripple effect throughout the supply chain, consumers get mad, and reputations are tarnished.
Moving forward, it makes more sense to manage this risk with a multi-sourcing strategy, even if it means paying a slightly higher price or forgoing international sourcing options. With local sourcing, shorter lead times give you more flexibility if there are spikes in demand.
While just-in-time (JIT) inventory models can keep costs down, the approach causes issues when there is an unexpected demand for products. Whatever strategy you choose, have confidence in your forecasting methods.
Food supply chains have a history of facing various challenges like transportation issues, spoiled products, and counterfeit items. To optimize the food supply chain, businesses need to implement effective strategies that include the use of technology solutions to provide transparency throughout the supply chain.