The food, beverage and ingredients industry is transforming and becoming more oriented towards new production technologies and healthier habits.
Such developments are revolutionizing the market and shifting focus to consumer health. This comes off the back of using new technological platforms. Such developments are constantly influencing and transforming consumer buying habits.
This article is the second in a series from Sebastian Jaimes about the transformation of the food and beverage industry. Connect with Sebastian here.
The Effects and Aftermath of COVID-19
The consumer markets took a huge hit during the peak of the COVID-19 pandemic, no doubt. However, they are also a dynamic sector, constantly innovating to provide Americans with food and necessities. As a result, corporations have been pouring resources into security, production, and supply to keep sustaining the economy.
However, companies have faced several challenges in terms of their production processes. This has resulted in increased production and logistics costs, which in turn is reflected in increased consumer prices. Some of these barriers include:
- The rising price of raw materials.
- High logistics costs.
- The need to transform and build valuable products.
- Ensuring sanitary conditions.
- Reassuring the consumer that the product is sustainable and safe.
The demand for food products increased due to panic buying, a situation to which retail companies have had to adapt quickly. Health is on people’s minds now more than ever. As many look for healthier versions or products that meet particular dietary needs, the pursuit of a healthier lifestyle is permeating the food industry in full force. Companies throughout the food supply chain are activating their business continuity plans.
Retail companies continue to struggle to keep basic products on their store shelves. At the same time, manufacturers continue to actively adjust their production and distribution strategies. The ultimate aim is to supply food products with the highest demand and make the supply chain more efficient in the short term. As a result, the variation and customization of products, such as product presentations and range of flavours has decreased. Instead, the number of companies offering home delivery, online shopping or self-service has increased.
Operations after COVID-19
In the medium term, companies will face the challenge of gradually reactivating their operations, with a probable peak in demand in various sectors due to the lifting of restrictions everywhere.
But in the long term, a larger challenge exists – developing a highly resilient supply chain reactive to different types of events and crises. To do this, companies must generate an action plan that incorporates both the usual optimization initiatives and those in progress. They also need to develop additional prevention initiatives against possible disruptive events.
Businesses should seek to:
- Develop an end-to-end resilience strategy within its supply chain, identifying crisis scenarios and evaluating existing gaps between the current model and the potential crisis situation.
- Invest in developing capacities (example: digital transformation) that encourage closing the identified gaps, evaluating different alternatives, suppliers, and sourcing strategies, and conducting a cost / benefit analysis, among others.
- Businesses must also be able to measure and monitor changes in their supply chain: to establish models that analyze abnormalities and exposed risks and define situations and events that trigger the execution of action plans. There is also the need for specific response plans for certain situations: Define a ‘Plan B’ for certain events; develop specific procedures on how to act; disseminate communication protocols; clarify responsibilities and delegations of autonomy.
Other crucial things for businesses to keep in mind:
- Accelerate digital transformation through the use of new technologies such as Big Data or Blockchain. This vast amount of data can allow companies to anticipate strategic decisions or optimize resources in uncertain scenarios.
- Technological platforms can also be used to continuously monitor the performance of suppliers.
- Continue to promote, more than ever, a collaborative supply chain between all involved actors, which allows for traceability and accountability throughout the whole chain.
- In the case of manufacturers or builders, review the location map of factories, distribution hubs and logistics warehouses.
In conclusion, most supermarket chains have had to demonstrate the adaptability and flexibility of their logistics operations by changing their daily delivery frequency at their points of sale due to the uncontrolled increase in demand. Likewise, logistics operators whose main activity is based on providing services to food industry or high-consumption food platforms are also experiencing a notable increase in activity.
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