How resilient are fresh produce supply chains?

 

The coronavirus crisis has highlighted the resilience of our food supply chains, especially fresh produce. Reports speculate that fresh produce shortages are just around the corner - the result of a potent mix of panic-buying, labour shortages and travel and trade restrictions brought on by the virus.

While we are clearly living through unprecedented times, questions are being posed about whether stronger supply chains would’ve left us better prepared. This article examines the industry’s response to the crisis and asks how we can respond better to future challenges.

Impact of the pandemic

The effect of the Covid-19 pandemic on the fresh produce industry has been remarkable, as we discussed in our recent summary. Everyone in the supply chain from growers to packers to wholesalers to supermarket staff has been catapulted onto the frontline of the battle against the virus.

Many fresh produce businesses have compared the demand from consumers to that of the Christmas period as they work flat out to keep the world fed. However, unlike at Christmas, they didn’t have time to prepare for the rush and there is no defined end in sight.

The empty shelves and shortages of certain items that many of us have become accustomed to over recent weeks have been caused by multiple issues. For instance on the production end:

  • Disrupted shipment. The restrictive measures implemented by most of the world to curb the spread of the virus are strangling many supply chains at source. As reported by Reuters, produce destined for Europe is being left stranded in its country of origin. This is due to grounded or more expensive flights and a lack of available delivery drivers because of the lockdown measures.

Meanwhile on the retail end:

  • Stockpiling. A much-discussed phenomenon, stockpiling (and panic buying) has been in evidence, although market research has shown it’s not been as severe as many first thought. In the UK, the reality has been most people adding just a few extra items to their usual shop.

Pre-existing weaknesses in global food supply chains

While itself a once-in-a-generation “black swan” event, the coronavirus has nevertheless exposed fragilities in the world’s food supply chains which have exacerbated the crisis. Experts have long warned that the system is inherently vulnerable and unprepared for future shocks.

A report by KPMG highlighted volatility as a big problem for global food supply chains. They argue supply chains are increasingly coming under threat from climate, political and social changes. Fluctuation in supply levels for staple products relative to demand proves that these changes have not been dealt with appropriately well.

We have identified two major pain points in fresh produce supply chains that cause them to suffer in volatile times:

Just-in-time model

‘Just-in-time’ is the prevailing food distribution model in many parts of the world, designed to reduce wastage and storage costs. While not in itself a weakness, the just-in-time nature of the food supply chain restricts the industry’s responses to problems.

For the fresh produce industry, the model is to an extent a necessity - after all, retailers cannot keep large amounts of fruit or vegetables stocked as much of it would expire before even getting to the shelves. However, the amount of produce that major supermarkets stock is now so precisely attuned to normal sales levels that there is no slack in the system. When demand rockets without warning, we see produce selling out rapidly.

The reason this model exists is so retailers can keep operational costs low and, like so much in the fresh produce industry, this dictates how growers, packers and distributors run their businesses. The issue this creates during times of greater demand is twofold. Retailers are left scrambling to replace stock, while fresh produce businesses often aren’t equipped to scale up quickly enough.

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Seasonal labour dependency

So many links in the fresh produce supply chain are reliant on seasonal labour. From crop pickers to packhouse staff, warehouse workers to part-time supermarket assistants, the number of people involved who work in a casual or short-term capacity is enormous.

While at the retail end of the chain, there is always the demand for these jobs and the financial power to employ more workers, the same often isn’t the case at the other end. Fresh produce businesses in Western Europe have historically relied on workers joining en-masse, largely from abroad, to deliver harvests.

With Covid-19 severely restricting the movement of workers, some have predicted major food shortages later this year. However, a lack of seasonal workers is an established problem with numbers dropping across the board, and the issue is particularly acute in the UK post-Brexit. The solutions to this need to be longer-lasting than just the duration of the pandemic. A focus on automation and incentivising the local workforce would start to repair the deficiencies in the current system.

How should fresh produce businesses react?

With many businesses operating at maximum capacity, making big changes to their operations will be the last thing on their minds. However, given the deficiencies identified in supply chains exposed by the virus, many will feel they need to give themselves greater protection against any future eventualities.

While it’s impossible to predict the future, it is possible to plan for it and to make your business more flexible. Enterprise Resource Planning (ERP) is a transformative technology solution that integrantes all a business’ systems into one holistic platform. Its ability to eliminate the siloing of information and to provide big data insights makes fresh produce companies more agile. For instance, LINKFRESH’s ERP products include forecasting and planning capabilities to help businesses improve their production scheduling so they’re more prepared for changes in demand.

When the fresh produce industry emerges from this crisis, it will have made an invaluable contribution to keeping society afloat. But there will be future challenges to face, especially in the form of climate change. The preparation that businesses put in sooner rather than later could make all the difference.

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