Among the many “gifts” of the coronavirus pandemic is a hard lesson about the fragility of food supply chains.
Companies that consistently placed cost savings above resilience are discovering how risky that strategy can be. The notion of cheapest price becomes irrelevant when there’s no product to be had.
Lean supply chains are, of course, a noble goal to pursue. Who can argue about the need to minimize waste at every possible stage required to get product to market? But when efficiency becomes the chief driver, the definition of “waste” can cut too deep.
When the coronavirus hit, buyers and suppliers discovered that they lacked the flexibility to adjust sourcing and fulfillment patterns, notes Lauren Adler, director of product management with Transparent Path, a provider of supply-chain visibility tools. Making matters worse were wild variances in demand, based on panic buying and consumers stocking up on odd items such as frozen cookie dough and hair dye. All of which served to demonstrate “how complex the modern supply chain is,” adds Paulé Wood, Transparent Path’s director of experience and storytelling.
Wood says too many companies remain stuck in the “industrial supply chain” mindset, one that envisions a linear path of raw materials passing through production and delivery to the end consumer. The modern-day digital supply chain, by contrast, is “omnidirectional” and involves multiple channels and sources of product.
Single-source food supply chains are at particular risk when traditional channels break down, as they so often have during the pandemic. Of course, when a disruption occurs on a global scale, having an alternative supplier in another geography won’t necessarily solve the problem of interrupted supply. But it nevertheless gives manufacturers, retailers and distributors additional options and ways to get around discrete bottlenecks or the sudden shutdown of a factory.
One misapplication of the term “lean” is the assumption that it minimizes the role of human beings, especially when it comes to negotiating the last mile of an e-commerce order. Wood says companies have placed too much emphasis on “doing things in a mechanized way, when actually people are at the center of all these systems.” So much for the idea of artificial intelligence completely taking over the task of making key decisions about sourcing, stocking, routing and delivery.
The pandemic has taught companies the need for at least some amount of safety stock, which was slashed to the barest minimum by those who consider inventory at rest to be nothing more than a drag on the balance sheet. But Wood suggests that while some additional product should be in the pipeline, the more effective long-term strategy lies in achieving visibility over the entire supply chain.
Obtaining a comprehensive view of information flowing between supply-chain partners is just as important as seeing physical product. For supply chains that lack such capacity, “it feels like 1999 in the automotive business, when pricing was hidden from the consumer,” says Eric Weaver, chief executive officer and founder of Transparent Path. He recalls speaking at the time to a group of Lincoln Mercury dealers, trying to convince them of the importance of being on the internet. Today, gaining visibility over the flow of product and information from end to end requires much more than simply having a website.
Businesses have spoken for decades of the need for having such capability, only to be stymied by “black holes” of information. Reasons for their failure to make good on the promise of total visibility include a general sense of complacency, and tight margins that made it tough to argue for the necessary investments in people and systems.
That’s an increasingly difficult position to maintain today, especially with the availability of new technology. Wood cites the growing use of sensors attached to food products and transportation equipment, which are making possible a degree of visibility that wasn’t possible before, especially in outlying rural areas. Better network coverage, through the use of labels that are cheap and disposable, is at last fulfilling the dream of sharing data across the supply chain in real time.
The result will be systems that are far more flexible, and better able to react to severe disruptions such as the COVID-19 pandemic. Manufacturers can also improve visibility under “normal” conditions. Weaver speaks of the ability to continuously monitor perishable goods moving through the cold chain, with alerts sounding whenever prescribed parameters of temperature and humidity are violated. Consumers, for their part, are better served by instant access to information on where products are sourced and manufactured.
Will the lesson be learned over the long run? The COVID-19 virus has caused such disruption to global food supply chains, laying bare their structural deficiencies, that “it’s going to shock people out of their complacency,” says Weaver. “They’ll have to reconsider how business gets done.”
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