Food supply chain: Reacting to a famine mentality

Food producers are understandably focused on short term supply chain disruptions brought about by the pandemic and crises in Ukraine and Indonesia. With a growing number of countries declaring limits on agriculture exports, producers need to gear up for a longer-lasting and more transformational demand side challenge: the end of abundance thinking among consumers.

The new mentality of scarcity, and resulting demand reactivity, has huge implications on supply chain planning especially when it comes to adopting innovation for sustainable growth.

This volatile consumer demand mindset combined with supply side challenges will be difficult to reverse. But the good news is food producers can strengthen resilience using existing relationships and increase supply chain agility with creative solutions.

For food producers, successful sourcing no longer means procuring for the lowest cost; in the next decade, leaning into who you know and how well you know them will also be a key factor.

Post-pandemic, the emphasis on human connection in negotiations has stimulated new levels of trust between food producers and suppliers. This has paved the way for the deeper collaboration necessary to respond more flexibly in a volatile consumer landscape.

Recently, leading food producers have sought deeper relationships with retailers to increase demand predictive capabilities. These collaborations enable food producers to think creatively and harness bigger, structural and technology-based solutions with a long term view.

Food producers don’t need to look far for creative solutions and the past has a great deal of sources of inspiration.

The reintroduction of regional production centers is allowing food producers to react quickly to local market demands, with consumers also benefiting from preferred local tastes.

Localized food production also has other benefits. It can address the impact of increased shipping costs growing as a proportion of unit costs. For example, an Accenture CPG client was able to reclaim lost revenue by adopting a regional production model. By shipping their products more densely they reduced unit distribution costs and increased supply chain agility.

Adopting this form of creative thinking may be a necessary step. This is nothing new – in the 1930s, Campbell’s revolutionized food manufacturing when it condensed its soup products and pushed product finalization into the consumer’s hands.