The COVID-19 pandemic exposed weaknesses in food supply chains around the world, leading to empty grocery store shelves, massive shifts in product demand, supply shortages, and astronomical shipping costs. While some food businesses have rebounded, many still face lingering effects from supply chain breakdowns over the past two years.
In this environment of ongoing uncertainty and disruption risk, food supply chain leaders must take proactive steps to optimize their operations, improve resilience, and better meet customer needs. This article provides best practices across four key areas:
1. Enabling end-to-end supply chain visibility
2. Adopting demand-driven planning
3. Increasing efficiency through digitization
4. Embedding sustainability
Properly addressing these areas through a combination of process improvements, technology adoption, and cultural change will lead to more agile, efficient, and customer-centric food supply chains.
Enabling Complete Supply Chain Visibility
One of the biggest challenges during major supply chain disruptions is the inability to see what is happening across complex, global supply networks. Food businesses need real-time visibility into inventory levels, supplier capacity, logistics delays, and changes in customer demand.
Lack of supply chain visibility leads to misaligned plans, inefficient operations, and poor customer service. Studies show industry leaders have 2X more real-time visibility across their supply chain compared to laggards. They are also 3X more likely to report exceeding customer service level commitments over the past two years.
Here are three strategies food businesses should adopt to enable end-to-end supply chain visibility:
Implement Cloud-Based Control Towers
Control towers amalgamate data from suppliers, logistics providers, and sales channels into a single source of truth. Leveraging cloud platforms like UCBOS, food businesses can gain real-time inventory visibility, track shipments, monitor supplier risk, model demand changes, and coordinate responses across the ecosystem.
For example, UCBOS helped an industrial manufacturer gain visibility into $2B+ of goods spread across 2000+ supplier and distribution sites. This level of real-time inventory transparency is now essential for food supply chains.
Digitize and Share Data Across Partners
Many food supply chains still rely on manual processes like phone calls and spreadsheets to share information between parties. This is no longer sufficient. Food businesses should implement digital solutions like cloud EDI, API integrations, IoT sensors, and shared data platforms to seamlessly transmit information across their supplier network.
Standards like GS1 and eCOM help enable smooth data sharing between partners. Retailers like Carrefour use blockchain to trace supplies across categories ranging from oranges to cotton.
Provide Visibility Portals to Suppliers and Customers
Visibility should be two-way. Food manufacturers can provide customer and supplier portals to share inventory data, forecasts, quality information, and other KPIs. For example, CPG leaders like P&G and Nestlé allow retailers to directly monitor production plans and potential material shortages.
Two-way visibility portals promote collaboration, align plans, and speed responses to potential supply disruptions. They are no longer “nice-to-have” capabilities but essential digital infrastructure.
Adopt Data-Driven Demand Planning
The pandemic showed how quickly consumer demand and buying patterns can shift in the food industry. Hoarding behavior led to 500%+ spikes in products like retail flour, while closures cratered demand from restaurants and hospitality channels practically overnight.
Volatile demand makes accurately planning safety stock, procurement, production, and deliveries incredibly difficult. Food businesses should augment traditional forecasting approaches with predictive analytics and artificial intelligence.
Leverage Demand Sensing Software
Demand sensing solutions ingest a variety of data – POS, inventory, shipments, economic indicators, weather, and more – to sense changes in demand in real-time. Machine learning algorithms process these signals to create short-term demand forecasts.
McKinsey found that demand sensing reduced inventory shortages by up to 25% and write-offs due to product obsolescence by up to 50%. Food businesses using these data-driven capabilities also increased service levels by 3-8%.
| Performance Improvements from Demand Sensing | |
|---|---|
| Inventory Shortages | -25% |
| Obsolescence Write-Offs | -50% |
| Service Levels | +3-8% |
Walmart built an automated weekly demand sensing process across stores to drive forecast accuracy, reduce waste, and improve availability.
Collaborate on Forecasts with Suppliers
No matter how advanced their own demand sensing capabilities, food manufacturers should also facilitate closer forecast collaboration with suppliers.
Sharing downstream demand signals provides critical visibility for raw material producers to align planning. Joint business reviews between food manufacturers and suppliers to converge on consensus forecasts improves end-to-end coordination.
Collaborative Planning Improves Alignment
CPG leader Kimberly-Clark increased forecast accuracy by over 5% through enhanced data sharing and integrating planning with key suppliers. The improvements in supply-demand coordination reduced revenue misses by over $100M.
Increase Efficiency Through Digitization
Despite increased technology adoption during the pandemic, food supply chains still suffer from significant manual paperwork, disjointed processes, and limited automation. These deficiencies slow response times, increase costs, and limit flexibility.
Food businesses should focus on end-to-end digitization, smart warehousing capabilities, and analytics to drive step-change improvements in supply chain efficiency.
Implement Integrated Planning Suites
While many food manufacturers have optimized portions of their supply chain, less than 15% have end-to-end integration across long-term planning, S&OP, inventory optimization, logistics execution and delivery.
Transitioning from functional silos to integrated business planning enabled by cloud suites like OMP improves coordination across sales, marketing, operations and finance. Food companies using these tools have reported 15-30% improvements in forecast accuracy, 5-8% reductions in inventory costs, and 2-3% increases in customer service levels.
| Benefits of Integrated Planning | |
|---|---|
| Forecast Accuracy | +15-30% |
| Inventory Costs | -5-8% |
| Customer Service Levels | +2-3% |
Automate Warehouses with AI
Automating warehousing and logistics operations through AI-embedded technologies offers some of the largest efficiency improvement opportunities within food supply chains. Robotics can rapidly accelerate picking and packing while computer vision and sensor networks provide real-time visibility into storage locations and product movement.
CPG leaders like Unilever cut warehouse labor costs over 20% through increased automation and orchestration. And Ocado’s fully automated warehouses can process 3.5 million items weekly with precision unmatched by human workers.
Analyze End-to-End Supply Chain Data
The food industry still significantly lags behind other manufacturing sectors in leveraging advanced analytics. By applying data science capabilities to the influx of new information from IoT sensors, satellites, transportation fleets, and smart warehouses, food businesses can uncover network insights that would previously be impossible.
Analytics improves delivery reliability, optimizes production scheduling, tightens inventory buffers, and allows rapid adaptation to changes in product demand, supply conditions, or logistics capacity.
Supply chain analytics delivers $2.7M average annual value through cost reductions and revenue increases according to Forrester Research.
Plan for Disruptions with Simulation
In addition to data-driven planning, food manufacturers should use digital twin simulations of their supply chain to assess risk, prepare contingency response strategies, and evaluate the network impact of potential investments.
Recreating complex supply chains virtually allows businesses to run “war game” scenarios analyzing the effects of shocks like regional supplier outages, port closures, product recalls, natural disasters, demand surges, and other relevant stress tests.
The insights uncovered through systematic simulations help inform mitigation plans to minimize operational and financial downsides. Software platforms like AnyLogistix allow creating interactive supply chain digital twins that integrate with live data feeds and predictive models to keep contingency plans grounded in reality.
Adopt Emerging Transportation Innovations
Many food supply chains struggle with high logistics costs due to constant refrigeration needs, fragmented transportation routes, and variability in shipment times. Emerging smart transportation solutions offer ways to overcome these challenges.
Autonomous Vehicles promise dramatic savings in freight costs and improved safety. Startups like Plus and established truck manufacturers are currently testing driverless systems optimized for port terminals, refrigerated transport, and daily distribution routes common in food supply chains.
Predictive Fleet Routing powered by AI considers changing road conditions, weather, traffic, and equipment health to generate optimal shipping plans that minimize delays and spoilage risk. Software from vendors like FourKites decreases supply variability by 25-50% through smarter ETAs and re-planning capabilities.
Adoption of Transportation Management Systems (TMS) increases load efficiency, consolidation, and equipment utilization – improving sustainability while cutting variable logistics overheads up to 15%. TMS capabilities tailor-made for food manufacturers come integrated in platforms like Blue Yonder, E2Open, and BluJay.
Build Future-Ready Operational Backbones
To sense and respond to ongoing disruption risks, food manufacturers will need state-of-the-art central nervous system capabilities augmented by emerging technologies:
- AI-Powered Control Centers orchestrate end-to-end flows from suppliers through production, warehousing and delivery based on millions of signals. Think of them as supply chain autopilots, freeing planners to handle exceptions.
- Digital Twins of facilities, distribution infrastructure, and product flows empower simulation-based contingency planning and capacity growth decisions.
- Augmented Reality (AR) enables remote assists for field workers to improve equipment effectiveness. Workers wearing AR glasses get real-time guidance on maintenance procedures or resolving production line issues.
- 5G and Edge Computing drastically reduces latency allowing real-time control of semi-automated equipment and near instantaneous data sharing across partners.
These technologies require revamping core ERP, MES, WMS and other legacy systems. But their enterprise-wide coordination and resilience benefits warrant the modernization effort and investments.
Embed Sustainability
Finally, food supply chains must accelerate their sustainability transformation. Between agriculture, processing, transportation, and packaging, food accounts for over one-third of global GHG emissions. And consumers increasingly demand transparency into fair, ethical sourcing and production practices.
Embedding the following sustainability capabilities now represents a competitive necessity:
Tracing Supply Chains via Blockchain
Blockchain solutions like IBM Food Trust and SAP Leonardo provide full traceability of ingredients, materials, and transportation steps across food supply chains. QR codes on packaging connect consumers to the origin details and travel history for the product in their hands – even tracing specific batches of food to the farm where ingredients were harvested.
Increased transparency through blockchain helps food companies highlight environmentally and socially responsible sourcing. It also strengthens supply chain security and allows rapid tracing of issues should food safety problems arise.
Carrefour reported a 70% increase in sales of chicken tracked via blockchain given consumer preferences for responsibly sourced meat.
Sustainable Sourcing Drives Sales
Prioritize Sustainable Sourcing
Food manufacturers should reorient supplier selection and management to prioritize sustainability. This includes working with suppliers to set science-based environmental targets for water use, carbon emissions, and waste reduction.
It also involves partnering more closely with local producers, encouraging sustainable agriculture practices, and potentially using predictive modeling to optimize transportation routes and packaging.
| Key Sustainability KPIs | |
|---|---|
| Water Usage per Ton of Production | -10% YoY |
| GHG Emissions (Scope 1, 2, 3) | Set science-based targets |
| Percent of Spend with Eco-Certified Suppliers | 50% by 2025 |
| Percent Food Waste | -20% by 2030 |
| Renewable Energy Usage | 60% by 2027 |
Reduce Food Waste
Roughly 30% of the world’s food supply is lost or wasted – equal to 8-10% of global GHG emissions. Food manufacturers should address waste starting from minimal processing and safe storage early in the supply chain through dynamic pricing, improved demand management, and channel mix optimization closer to consumers.
AI-based inventory management, dynamic routing, and automated warehouses prevent supply from perishing before it reaches retail shelves. Partnerships with food redistribution charities make sure unsold edible food gets efficiently to communities in need rather than landfills.
Conclusion
The pandemic exposed significant areas for improvement within food supply chains globally. However, the crisis also accelerated innovation and technology adoption across the industry. Food supply chain leaders now have an opportunity to double down on modernization.
By taking an integrated view and addressing end-to-end visibility, planning agility, process digitization, analytics adoption, and sustainability, food manufacturers and retailers can build more resilient, efficient, and customer-centric networks. This transformation won’t happen overnight but promises compelling benefits both in future disruption response and performance in “normal” times.
Supply chain excellence, powered by data and technology, represents a key competitive differentiator for food businesses entering a new era of growing consumer expectations alongside unrelenting market uncertainty.
