The Supply Chain’s Role in Food Security


March 13, 2014

“If current growth patterns continue,” writes Doug Austin, Senior Vice President of Growth & Innovation, “‘extra mouths to feed’ will be an understatement in 2053, when our planet’s population is predicted to jump by 2 billion people. That’s going to be a big challenge for the food industry, and everyone from farmers to distributors to restaurant owners are asking the question, ‘What does this mean for us?'” [“The Future of Our Food,” Progressive Grocer, 14 October 2013] A lot has been written about the coming challenge of how the agricultural sector is going to feed the world. The good news is that many experts believe that we can raise enough food to feed the world. For example, Jeremy Oppenheim, a director of McKinsey & Company, and Tristram Stuart, a British author and campaigner against food waste, assert, “The earth is capable of feeding everyone.” [“Food for All,” Project Syndicate, 13 November 2013] The bad news is that the food that is raised may not reach the people who need it. Oppenheim and Stuart write, “Failing to address problems affecting supply and demand amounts to grotesque mismanagement.” More attention needs to be given to how harvested crops travel from farm to fork. If the food security challenge is going to be met, the food supply chain is going to play a significant role.

Karsten Horn, director of international sales for the inventory and supply chain division of INFORM, writes, “It is expected that 70 percent more food will be needed to feed the world within the next 40 years, as the world’s population continues to increase, purchasing behaviour evolves, and consumers demand a wider range of food products. This rise in consumption will place even more importance on global supply chains.” [“Supply chains may go hungry,” Business Review Europe, 19 March 2013] Oppenheim and Stuart obviously dispute that “70 percent more” food will be needed. They believe more of the food already grown needs to get to the right people. They note, “An estimated one-third of global food production is wasted.” They would agree with Horn, however, that changes in consumption patterns are going to have a major impact on food security in the future. There is a difference between desired and required foods. They probably all agree that changes in the food supply are required if the world is going to be adequately fed. “I believe,” writes Horn, “many organisations are not equipped to ensure efficient supply amid the challenges that lie ahead within the food market. For example, the pressure on the supply chain 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.”

Lest you think that pundits are trying to lay the responsibility for food security totally at the feet of supply chain professionals, Oppenheim and Stuart note, “This focus on the supply side misses half the problem.” The demand (i.e., consumption) side of the problem constitutes the other half. Ambassador Ertharin Cousin, Jose Graziano da Silva, and Dr. Kanayo F. Nwanze, add, “No single activity on its own is likely to build resilience, yet together and if taken to relevant scale, each can contribute to improved resilience overall.” [“Principles and Practice for Resilience, Food Security and Nutrition,” Huffington Post The Blog, 25 January 2013] Back in 2011, Steve Banker related how Fonterra, a leading multinational dairy company owned by 13,000 New Zealand dairy farmers and the world’s largest exporter of dairy products, uses Big Data analytics to help it make product selections and reduce waste. [“The Farm-to-Fork Supply Chain,” Logistics Viewpoints, 29 August 2011] He reported:

“This process is complicated because as a cooperative Fonterra is contractually obligated to take all of the milk its farmers produce. The company cannot cut production to balance to demand. Fonterra forecasts how much milk it will produce based on where it rains, using GIS (global information systems) and satellite maps to determine the latter. The more it rains, the more grass will grow, the more milk cows will produce. Once it has forecast the supply, the company turns fresh milk into inventory by figuring out how much cheese and powdered milk it can profitably sell over a multi-year period. Having the supply/demand plans in place allows Fonterra to optimally move the milk to the correct production facilities.”

This same kind of analysis would greatly improve the global food supply chain. It would help farmers, distributors, and manufacturers determine which products should shipped fresh and which ones should be processed for longer term use. There are other efficiency efforts that can be made. Gurjit Degun reports, “A report by the WEF, in collaboration with Bain & Company, said that supply chain inefficiency contributes ‘significantly’ to the 1.3 billion tons of lost food each year.” Although food quality remains a major global concern, the report entitled “Enabling Trade: From Valuation to Action,” claims that “overly strict product standards” is one reason that perfectly edible food is wasted. Fortunately, there are some positive changes being made in some countries. Oppenheim and Stuart report, “The public is more willing to forgo cosmetic perfection: ‘ugly’ fruit and vegetables are the fastest-growing sector of the UK’s fresh-produce market, last year [2012] saving 300,000 tons of produce that would otherwise have been wasted for being the wrong shape or size.” The WEF report also claims that “poor transportation infrastructure, border delays, and poor business climates are the main supply chain barriers for agriculture.” According to Degun, “The report said improvements in the supply chain can increase flexibility and cut losses. It added that better border management can ‘dramatically improve’ supply chain efficiency.” You might recall how a shipment of Chobani yogurt intended for consumption by U.S. athletes at the Sochi Winter Olympic Games never reached them as a result of difficulties with Russian customs officials. If high profile shipments like Chobani’s experience difficulty, you can imagine the difficulties faced by normal food shipments.

One source of waste in the supply chain that gets little attention is packaging. According to one source, “Excess packaging … could cause food to expire before it is ever eaten.” [“Food packaging costs could impact supply chain,” The Strategic Sourceror, 11 January 2013] On the other hand, the article reports that packaging could also contribute to the solution. “The latest trends in flexibles and rigids would be in active and intelligent packaging with sustainability focus,” said C.S. Purushothaman, chair professor and director at SIES School of Packaging. “Some of them are in flexible edible films, life extending packs with embedded nano materials, oxygen and ethylene oxide scavengers as packaging components. In rigids there may not be so much push as sustainability is the word of the day. Hence keeping the 3 Rs (Reduce, Reuse, Recycle) in mind, flexibles will be preferred.”

The challenges faced by the food supply chain vary greatly depending on location. In the developed world, infrastructure isn’t generally the biggest problem (unless you are trying to deliver truckloads of food through the narrow streets of a major city). On the other hand, infrastructure is a huge problem in many developing nations. Degun reports, “Almost 95 per cent of food loss and waste stems from supply chain inefficiencies in poorer countries.” Those inefficiencies include poor roads, lack of adequate warehousing, and so forth. If those infrastructure shortcomings remain unaddressed, food security in those and neighboring regions is much less tenable. Oppenheim and Stuart contend that “in very poor countries and regions, where people cannot afford to buy food on world markets, the supply side should not be neglected. Boosting yields of locally grown staple foods (rather than cash crops) would increase self-sufficiency and strengthen resilience when international food prices are high.” Consuming food locally dramatically reduces spoilage and waste. This is true in both developed and developing countries. Austin reports, “We’re approaching a future where stores like Kroger, Safeway and Walmart might even own their own farms.”

I agree with Cousin, da Silva, and Nwanze that “no single activity on its own is likely to build resilience.” All stakeholders (i.e., farmers, distributors, transporters, manufacturers, retailers, governments, and consumers) have a role to play. Small changes in by each stakeholder will have a synergistic effect in making the food supply chain more resilient.