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Supply chains may go hungry, by Karsten Horn, Director of International Sales for the Inventory and Supply Chain Division at INFORM

The extreme volatility of the global food market presents a vulnerability to organisations that must be addressed.

It is expected that 70 per cent more food will be needed to feed the world within the next 40 years, as the world population continues to increase, purchasing behaviour evolves, and consumers demand a wider range of food products. As a result, the rise in consumption will place even more importance on able supply chains that can meet worldwide food demand.

I believe the main challenges facing businesses are balancing future demand and ensuring there is adequate stability in food supplies – therefore protecting the supply chain from volatility is business critical. However, at the present time, I believe many organisations are not equipped to ensure efficient supply amid the challenges that lie ahead within the food market.

The sheer pressure on the supply chain to meet the demands of a rising world population means that some businesses struggle to fulfil their customers’ requirements. In these cases a customer is likely to turn to the nearest competitor who can sell them the item immediately. The threat of not being able to meet food demand is therefore a growing concern within the supply chain.

In my opinion, there is an urgent need for a strategic reappraisal of how supply chains are managed to ensure demand is met; not just for tomorrow, or the next five years, but for the next forty.

Food for thought on the supply chain
Businesses must assess their approach to the way inventory is held within the supply chain. As present, the current economic environment and decline of major industries is forcing many firms to drastically cut stock levels.

Some businesses have taken this lean philosophy too far and have stripped away strategic buffers which protect the supply chain from unforeseen events which have a major impact on global supply chain operations. Companies that take stock cutting measures to extreme levels are also leaving themselves at risk of not being able to fulfil normal orders, when factors such as natural disasters and fluctuating commodity prices, cause a disruption in the supply chain.

The growing world population will also present further availability challenges. Therefore, businesses must take a far more comprehensive view of the supply chain in order to better understand, anticipate and plan for a rapidly increasing and volatile global food market.

The only way to achieve this is to adopt intelligent process management systems. Businesses can use this intelligence to take immediate action to ensure optimal stock levels are reached and availability is maximised. By using these intelligent tools to effectively optimise inventory, organisations can ensure they maintain availability.

Alongside this, organisations must develop closer relationships with suppliers. This will prove essential to meeting future demand, which will require swift, radical and coordinated action by multiple partners.

To develop close ties, tools such as decision support systems should be utilised, which analyse the consequence of every decision. These systems are rapidly forming an integral part of management processes for strategic and tactical planning, and are a valuable tool to increase visibility throughout the supply chain, form all-inclusive networks and identify and build relationships with dependable suppliers.

Technology is the main course
As organisations re-asses their strategies to plan for capable supply chains that are able to meet worldwide food demand and the needs of a rising global population, they will increasingly recognise the inadequacies of the traditional supply chain model.

I believe businesses will begin to carefully deliberate their technology investment priorities, and consider technologies such as planning tools, which can help to identify information which indicates a future shift in demand.

This is critical, as food shelf life is limited and a number of factors, including distribution and storage, can increase the likelihood of spoilage. As the population increases, more food stock will also need to be bought and stored, increasing warehouse costs and the potential for waste.

Intelligent tools can help businesses plan efficient supply chains which can meet global demand quickly, while ensuring peak stock levels remain available so food is not needlessly wasted. These technologies also allow a greater overview of demand profiles, consumer buying patterns, and other demand signals. This is essential as it allows businesses to identify trend curves in popular food goods, and manage their supply chain accordingly.

It can also enable organisations to plan for seasonality; an ice cream producer may consider increasing inventory in summer to meet high demand, but could be taking a risk when recent summers have proved some of the wettest on record. Intelligent systems enable a greater long-term perspective, so businesses can forecast more accurately, optimise inventory, and reduce costs as a result.

Digesting a new supply model
I believe supply chain management will become an ever pressing focus for businesses which do not wish to remain vulnerable to the volatile nature of the market. Proactive organisations will take new approaches; adopting technology that enables them to analyse demand and quickly and effectively manage operations if patterns change.

Organisations with a holistic view over the supply chain will be better placed to take advantage of new consumers and market openings that will emerge, which in turn, may create fresh business opportunities.

To survive in tomorrow’s world, companies will be forced to develop a long-term vision and an action plan. Those that can’t, or are unwilling to react, will be left exposed and unable to take advantage of the unique opportunities that the accelerating global food market presents.

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