Tag Archives: sourcing

Shub Degupta, Mesh Intelligence
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Driven by COVID-19 Disruptions to Find a Better, Data-Driven Way to Manage Food Supply Chain Risk

By Shub Degupta
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Shub Degupta, Mesh Intelligence

The COVID-19 pandemic emphatically laid bare the supply chain and supplier vulnerabilities that we face in our increasingly global food supply chains. Last month my company, Mesh Intelligence, convened a group of 14 leading supply chain, risk, sourcing and food safety executives drawn from some of the largest and most innovative food companies around the globe and in all aspects of the supply chain—from manufacturing, importing, distribution, logistics and retail. They volunteered their time to explore new solutions to better manage risk in their global food supply chains and are working together to develop and guide a lasting solution to address the challenges they faced across the past few months and manage supply chain in a more uncertain environment.

Zeroing In on the Need for Practical Solutions to Address Critical Issues

The group discussed how the tools and processes they currently use to manage supply chains are inadequate in identifying the scale, scope and intensity of new issues that arose during the pandemic and, more importantly, how these solutions need to be augmented in the future. To zero in on practical solutions, this group focused on the most critical challenges to address; understanding the best practices to tackle these issues; and guiding the development of data driven, practical and scalable solutions to predict risk.

Key insights from the group discussion include:

  1. The need for early, actionable warning on risk. Food organizations are seeking actionable, early warning signals about upcoming supply chain issues. Risk alerts, if they do exist, currently tend to be disaggregated and dispersed within an organization and executives struggle to understand the full picture.
  2. The need to communicate risk across the organization and the supply chain. Executives are seeking ways to communicate forecasted risk in fact-based and data-driven ways across key stakeholders within and outside the organization. There was clear interest in ways to engage suppliers and parties up and down the supply chain.
  3. Focusing on the most important risks and scenario planning a workable approach. Organizations are seeking ways to future proof their supply chains and increase resilience. By ensuring that their strategies are tested to withstand likely scenarios and situations, organizations improve their ability to work under increased uncertainty.
  4. The ability to continuously monitor and vet suppliers, even in a remote setting. Organizations are looking to get ahead of supplier issues and are seeking ways to work with suppliers to continuously monitor, vet and manage issues as they arise. This requires increased transparency and greater communication across parties in the supply chain.

Participants of the group are also getting early access to the solution and data to support them in their food safety and supply chain risk management efforts. The group will continue to meet on over the next few months to continue to guide the development of a food supply chain risk management solution. We look forward to keeping you updated. If you have insights on this issue, we encourage you to reach out. If you are interested in learning more about us or joining the group, please contact us at nicole@meshintel.com

Kevin Kenny, Decernis
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COVID-19 Supply Chain Disruptions on the Horizon

By Kevin Kenny
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Kevin Kenny, Decernis

On the one level, it’s still too early to see full supply chain stoppages, other than growing port and customs delays. While one does not need a crystal ball to see that significant issues are already on the horizon, it takes time for both positive and negative supply impacts to wend their way through the chain.

My company, Decernis, a FoodChain ID Company, provides a complete regulatory intelligence software suite that covers more than 100,000 global regulations in 219 countries, and as such, we have a unique global perspective on how the pandemic is going to affect the supply chain.

Among the countries to watch is India, which imposed a nationwide 21-day shutdown on March 25 and thus far is the tightest lockdown in the world. In the large cities, the lack of public transportation has forced newly unemployed to walk home, often over a period of days, to their home villages. This creates a challenge for the economy because India depends on seasonal migrant and factory workers.

Unlike most countries, pharmaceutical and supplement manufacturers, as well as food processors, are entirely shut down. While farm operations and their supply chains are exempt, there is no harvest without migrant labor. Moreover, truckers transporting frozen goods often are stopped en route due to uneven permit enforcement across states. Add to this the problem of export foods stuck in containers or ports with limited market access, combined with import/export restrictions, and a crisis is at hand.

And, while the Indian government has not banned rice exports, India’s Rice Exporters Association effectively suspended exports because of dramatic labor shortages and logistical disruptions. So, while buyers exist, there is no practical way to harvest, process or ship those exports.

Combine the lack of migrant agricultural workers with the closing of restaurants and schools in many countries and economies are left with a steep drop in demand. As a result, unprocessed food including pork, eggs, milk and early-harvest fruits and vegetables are being destroyed or “tilled under.”

Countries whose leadership is turning a blind eye to the pandemic (i.e., Brazil) will ultimately see a more significant impact.

Another major player to watch is China, where the tariff crisis initially exposed supply chain vulnerabilities. Combined with the current pandemic, businesses now see that sourcing can often be a more substantial factor than price.

Prior to COVID-19, the United States, among other countries, initiated a trend toward blatant economic nationalism, which significantly accelerated this year. In an effort to protect their populations and national security, countries (i.e., Cambodia, India, Kazakhstan, Russia, Serbia and Ukraine) halted the export of vital commodities. As a result, critical supplies have been diverted to more developed countries that can outbid and pay a higher price, leading to food security risks in smaller and weaker markets.

These factors will trigger a rethinking of supply chains in the medium and long term. The cost savings realized in China, India, Vietnam and Thailand will be weighed against the threats to supply chain stability. The result may be a subtle new form of supply chain nationalism, where companies prefer more reliable local production to lower-cost, more vulnerable foreign production. The recent sourcing trend for large multinationals to partner with fewer, trusted providers could reverse once the dust settles from this pandemic.

The decrease in air cargo capacity (due to the grounding of passenger aircrafts) has also played a significant role in supply chain disruption and will lead to dramatic short-term increases in the cost of air freight.

Last, but certainly not least, will be the fallout from obvious bankruptcies. As an early indicator, 247,000 Chinese companies declared bankruptcy in the first two months of 2020, with many more closures expected.

Obvious candidates include movie theaters, airlines, cruise ships, retailers, and hotels, but any company caught carrying a large debt load is also endangered. Pharma companies and those in oil, gas and petrochemicals will also be affected by a perfect storm of oil market collapse.

On a positive note, any supplement (i.e., Vitamin B, C and D) food commodity (i.e., blueberries, oranges) and processed food products (i.e., juices, yogurts) perceived to have immunity-boosting potential will likely see a short and long-term boost in sales. Botanicals, however, may soon have significant new sourcing problems.

As they deal with consequences of this pandemic, global companies will need to strategize for building a more durable and flexible supply chain. These unprecedented times are sure to spark more innovation and technological growth to address the challenges industry is facing.

Carla Zarazir, Lebanese University
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Coronavirus and Food Security

By Carla Zarazir
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Carla Zarazir, Lebanese University

The novel coronavirus (COVID-19) has been quickly spreading across the globe, which triggered most affected countries to officially declare a state of public health emergency. The World Health Organization (WHO) has labeled this rather fast outbreak as pandemic. Food companies were urged to apply proper hygiene practices such as regular handwashing and surface cleaning to keep the risk of contagion at its lowest level.1 At the moment, there are many ongoing clinical trials evaluating potential treatments for COVID-19 but no specific vaccine or medicine have been publicly made available, as of this writing.

COVID-19 belongs to a family of viruses that cause respiratory issues and can be passed on directly through contact with an infected person’s body fluids (i.e, cough or sneeze discharge) and indirectly, through contact with contaminated surfaces.2 But can the virus be transmitted through edible goods?

Coronavirus Transmission through Food
According to the CDC, there is no current indication to support the transmission of COVID-19 through food since, in general, it needs a living host on which to grow. However, sharing food and beverages, especially in public places, is discouraged. Moreover, good food safety practices are highly recommended, including refrigerating, keeping raw and cooked goods separated and heating food at suitable temperature (around 75 ̊ C).3

If the consumed food is hypothetically contaminated with the virus, the stomach acid (due to its acidic nature) will immediately inactivate it. In addition, COVID-19 cannot affect the body internally via the intestines. One rare exception to the previous statement occurs when the virus gets in contact with a specific type of respiratory cells.

According to food safety experts, foodborne illnesses are generally caused by bacterial cells that have the ability to grow in food and multiply rapidly within a short amount of time. On the other hand, viruses are dormant particles floating around living cells; only when they successfully breaks into the aforementioned cells, the multiplication process can take place.1,3

General Food Safety Advice for Food Businesses

Food manufacturers must follow good hygiene and safety practices to help ensure the consistent quality and safety of their products:4,5,6

  • Purchase raw material from reputable sources
  • Cook food thoroughly and maintain safe holding temperatures
  • Clean and sanitize surfaces (such as cooking boards, refrigerators handles, etc.) and equipment
  • Properly train staff in taking extreme hygiene measures
  • Employees showing signs of infectious illness must not attend work
  • Implement appropriate risk management strategies (e.g,. encourage social distancing and endorse online meetings when applicable)
  • Number of staff in a kitchen or food preparation area should be kept to a bare minimum
  • Space out workstations and food preparation areas, when possible

References

  1. World Health Organization. (2020). Coronavirus disease: advice for the public.
  2. Food Standards Australia & New Zealand. (2020). Novel Coronavirus and Food Safety.
  3. CDC. 2020. Food Safety and Coronavirus Disease 2019 (COVID-19).
  4. Harvard Health Publishing, Harvard Medical School. (2020). Coronavirus Resource Center.
  5. European Food Safety Authority (EFSA). 2020. Coronavirus: no evidence that food is a source or transmission route.
  6. USDA.(2020). Coronavirus Disease (COVID-19).
Are Traasdahl, Crisp
FST Soapbox

Creating a Disruption Database in Response to COVID-19

By Are Traasdahl
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Are Traasdahl, Crisp

The spread and impact of the COVID-19 pandemic has been fast and furious across the globe.1 The toll on human life and the economy is being felt by everyone, everywhere. Closures of schools and restaurants, restrictions on social gatherings, the shift to working from home, and other social distancing practices have created sudden, unusually high demand spikes across a number of categories, particularly related to food.

COVID-19 in the Food Industry: Mitigating and Preparing for Supply Chain Disruptions | Attend  this complimentary webinar on-demandRepercussions from these dramatic demand surges are being felt across entire supply chains. Growers, producers, processors, manufacturers, wholesalers, and retailers of all sizes are scrambling to fill immediate shortages.2,3 At the same time, foodservice operators are reassessing their needs in response to government mandated take-out/delivery-only service. Schools are consolidating preparation and pick-up points for breakfast and lunch programs, while on-campus foodservice venues have closed at colleges and universities. Food companies are scrambling to redeploy and redirect existing inventories, as well as forecast short and mid-term demand and production requirements in the face of an unprecedented situation.

In the first several days of disruption, the immediate response is all-hands-on-deck damage control. Rightfully so. But in the flurry of activity, it is critical that those responsible for demand forecasting document the disruption as it is happening. Why? Because sales history is the foundational input of sales forecasting algorithms. Outlier events, such as COVID-19, natural disasters, extreme weather, short-term international trade restrictions, etc., have the potential to distort demand trends if they aren’t recognized and weighted appropriately in forward-looking projections. Formally documenting extraordinary events allows organizations to:

  1. Explain unusual variances to history and/or forecast
  2. Create evergreen institutional knowledge (vs. relying on individuals, scattered notes, and memory)
  3. Build a “disruption database” that can be used to make fact-based overrides to algorithm-generated statistical forecasts when a similar disruption is predicted or occurs in the future.

These “disruption databases” could ultimately serve as the foundation for even more sophisticated disruption forecasting models. As machine learning and artificial intelligence continue to evolve, these models could potentially be customized based on the type of event. Importantly, this annotation of events needs to occur within your forecasting platform so that it is permanent and visible to inform insights for all forecast users.

So, what information should you capture?

  1. Timing of the event
    • This includes specific days or weeks as well as information across the event lifecycle, including pre, during, and post event completion.
  2. Geography impacted
    • The scale of the event should also be noted. Some events are market-specific (i.e., the 2020 Nashville tornado), while others are state or region-specific (i.e. California wildfires, Hurricane Katrina) or result in national or global level impacts (COVID-19).
    • The ship-to locations of your customers relative to the disruption will influence the demand impact of the event.
  3. Customer gains & losses
    • During shortages, changes to current customer strategies should also be accounted for, such as potential volume reallocations. This could mean realignment of current customer distribution centers, temporarily not shipping to or losing specific customers, and/or even securing new customers based on your ability to supply when competitors cannot.
    • Customers may also shut down temporarily and/or delay previously scheduled new store openings. They may also reduce their hours of service and/or increase frequency of deliveries.4
  4. Channel shifts
    • The use of different channels in response to the event should also be captured. For example, in response to COVID-19, grocery retailers are seeing a significant increase in home delivery and click-and-collect orders.
    • Collaborate with your customers to quantify this shift. It may explain your volume trends (if your products are or aren’t typically purchased online) and/or suggest alternative product forms, packaging, etc. to meet both immediate needs and longer-term demand.
  5. Products impacted
    • This includes both items with demand spikes as well as those realizing unexpected demand declines. Shifts may also occur between product forms. For example, some consumer concern about bulk produce has been expressed with COVID-19 since the produce is manually stocked and shopped.5 While efforts are underway to dispel this misconception, it has impacted short-term demand for both the bulk items and their pre-packed counterparts.6,7
    • Adjacent, complementary and/or substitutable items should also be considered.8 Focusing short-term production on core varieties, cuts, forms, etc. vs. a complete assortment may allow a faster return to category (if not item-specific) in-stock levels.
  6. Ordered vs. filled quantities
    • Typically, sales reporting systems only capture what was shipped/invoiced, not what was ordered. Capturing and comparing both enables quantification of the demand “opportunity loss,” which could be factored into future “event” forecast models.
  7. Consumer sentiment and behavioral shifts
    • Specific to COVID-19, Nielsen IRI and Crisp DemandWatch have identified “phases” of consumer behavior and anticipated category purchase impacts. Noting when these phases occur in your forecasting system can provide insight into performance analysis and inform future projections. These consumer patterns may also have application to other extreme events, such as natural disasters.9,10
    • In the face of significant disruptions, look for, leverage, and annotate relevant consumer insights to inform the forecast. Link the annotation to a central archive of relevant research and data to expand access and understanding across your organization.
  8. Raw material, ingredient, packaging, labor or other sourcing issues
    • Note any shortages that impacted your ability to meet demand. Your ability to satisfy demand may be impacted by your own suppliers’ ability to get you the necessary inputs and/or your ability to staff production runs.
  9. Distribution & logistics issues
    • Access to truck, rail, and/or air transportation of products may also be disrupted by the event. Note any logistics constraints to delivering finished goods to customers.
  10.  Competitor activity/disruptions
    • New product launches, delivery systems, ownership, facility fires, labor shortages or disputes, weather patterns, and more that impact your competitors can also influence demand for your products, both in the short and long term.

In the heat of the crisis, this level of documentation may sound burdensome. Even if you start with notes on a scratch pad, email chains, and a collection of industry newsletters, set aside one morning or afternoon a week to annotate within your forecasting platform the factors that impacted demand that week. Continue to post notations in the week each specific disruption-driving factor begins and each week thereafter until its impact has dissipated. Keeping up with annotations as you go along will keep things fresher in your mind and can help inform immediate and near-term plans.

Disruption Database
Disruption databases can serve as the foundation for more sophisticated disruption forecasting models. As machine learning and artificial intelligence continue to evolve, these models can be customized based on the type of event. (Figure courtesy of Crisp).

Don’t forget that pantry loading shelf-stable items early in a disruption may significantly impact post-disruption sales, as consumers work through inventory they have at home. Track this as well. Best-in-class forecasting platforms, such as the example shown in Figure 1, can effectively leverage advanced computing power and analytics to help visualize the impact of COVID-19 on supply and follow-on effects predicted to be felt in your markets. The disruption information you track can be gathered, organized, and analyzed along with trillions of data points from disparate sources to generate high-quality statistical demand forecasts and actionable insights with speed and precision.

When the dust settles on this current event, take the time to document other historical disruptions. Working in reverse chronological order, gather as much date-specific archived data and tribal knowledge as you can, and add it to the annotations in your forecasting platform. The next time a disruption occurs (and it will!), you will be equipped to draw on this “database of disruptions” to proactively predict and respond to future impacts on demand.

References

  1. Coronavirus Disease 2019 (COVID-19). (2020. Centers for Disease Control and Prevention.
  2. Fares, M, Baertlein, L. (2020). Factories shift operations in scramble to restock supermarket shelves. Yahoo! finance.
  3. Redman, R. (2020). Coronavirus: How leading grocery chains are responding to keep customers safe and shelves stocked. Supermarket News.
  4. Wells, Jeff. (2020). Grocers modify store hours to clean and restock amid panic buying. Grocery Drive.
  5. Naidu, R, Fares, M. (2020). Wary of coronavirus, U.S. shoppers skip the fresh produce aisle. Reuters.
  6. Ward, A. (2020). COVID 19 Coronavirus Prevention: A dozen things to know about leafy greens. California LGMA.
  7. Koger, C. (2020). No reason to avoid fresh produce during outbreak. The Packer.
  8. (2020) Nielsen Investigation: “Pandemic Pantries” pressure supply chain amid COVID-19 fears. Nielsen Insights.
  9. (2020) Key consumer behavior thresholds identified as the coronavirus outbreak evolves. Nielsen Insights
  10. (2020) IRI Brief – COVID-19: Impact on CPG and Retail. Retail Wire.