Food supply chain management (FSCM) refers to, managing all activities in the supply chain, extending from raw material sourcing to the product reaching the hands of the customer. Tracing the products from the origin and tracking every stage of the food supply chain guarantees the best quality of the product. Implementing food supply chain management can reduce food safety incidents, target food recalls, eliminate food fraud and establish trust among consumers.
This blog talks about what food supply chain management is all about, how we can measure the performance of supply chain management and the 5 factors that influence food supply chain management.
What is Food Supply Chain Management?
The Council of Logistics Management defines Supply Chain Management as, “the process of planning, implementing and controlling the efficient and cost-effective flow of materials, in-process inventory, finished goods and related information from point-of-order to point-of-consumption, for the purpose of conforming to customer requirements”.
57% of companies have poor visibility across their supply chains
Supply chains are today evolving into supply chain networks due to advances in technology. They need to manage business, technology, people and processing beyond enterprises. Companies are adopting Supply Chain management that enable collaboration and cooperation among the various stakeholders. Though there are potential benefits, the food supply chain has its own challenges.
A supply chain management (SCM) system is the need of the hour, with global markets evolving and the volume of trades increasing, an effective and efficient SCM would work wonders. SCM targets in providing optimization of all players in the supply chain, operating by combining resources to offer product satisfaction to the customer and to provide it economically at firm resources.
The problem arises in developing a framework for managing parties in tandem with the most efficiency and effectiveness. Various designers, over the years, have developed and restructured, the characteristics of a good SCM as follows,
- Inclusiveness: The ability to cover all aspects of a supply chain from sourcing of the raw materials to the finished goods reaching the customer.
- Universality: The ability to adapt and compare operations among the various supply chain.
- Measurability: The outcome of a designed framework should be quantitative.
- Consistency: The design should cater to the needs of both the consumer and producer.
Measurement of Performance of Supply Chain Management
To know if an SCM plan is effective, it has to be performance measured. It is important to gauge the set plan of an SCM to restructure, upgrade or know its efficacy. The Supply Chain Council has developed guidance on the types of indicators wherein decision-makers can use to develop a balanced approach towards measuring the performance of an overall supply chain known as the SCOR Model. It is based on six management processes.
Plan: Initial communication and bringing together the players of the supply chain happens in this step. Determining business rules by keeping demand and supply in mind. Planning rules from inventory, assets, transportation, financial and regulatory compliance.
Source: Plan relating to the sourcing of raw material is created. It describes materials sourcing, supplier network, and agreements relating to transfer and payment for goods.
Make: Mainly depends on the type of products made and the requirements of the consumer. Includes processing details, production, packing, tracking, and transportation. Defines, stock to be made or orders to be made, or engineered to order.
Deliver: Inventory management, warehousing, and transportation come under this step. Finished products are received, billed, and transported to the final customer. Distribution and transportation management are key aspects of this step.
Return: Involves post- delivery processes, if products are returned, either from the consumer or supplier, management regarding the receipt of the product, return inventory, regulatory requirements are to be determined.
Enable: Process involves the running of a supply chain. Business rules, network management, contracts, risk, and regulatory compliance should be defined.
As with every other SCM model, SCOR also focuses on the supply and demand of a product, understanding markets situation and customer requirements to fulfill each other’s needs.
Factors that influence the Food supply chain management
Any happening which alters or forces to alter supply chain management is termed as an uncertainty. Environmental uncertainties are those unpredictable events outside the organization which have an impact on performance in the supply chain.
Environmental uncertainty can pose significant challenges for the food supply chain management on account of factors like weather extremities, natural disasters and climate change, all of which result impacts food production and results in food insecurity, biodiversity loss and low quality yields.
Organizations are addressing the sources of uncertainty by formulating management strategies on how to tackle environmental changes and improve the performance of the supply chain. Sourcing from multiple suppliers can reduce reliance on a single supplier and mitigate risks of environmental disruptions. Companies can develop contingency plans to face crop failures and transport disruptions.
Efficient inventory management
With global markets in place, data is entered at each stage of the supply chain. Decision takers have an abundance of data at their disposal. It is necessary to optimally utilize such data to have proper inventory management.
Inventory management plays acritical role in food supply chain management as it ensures that right products are available at the right time in right quantities. Effective inventory management ensures that food is not wasted and helps to improve sustainability of supply chains. Tracking inventory levels in real-time improves supply chain visibility and inventory can be better managed across the supply chain, thereby ensuring better response to disruptions.
- Electronic data capture
Electronic data capture aids in traceability in the food supply chain. The real-time data capture of the food product from source to consumption helps to identify issues that may arise due to food contamination and adulteration. It also helps in the event of food recalls with faster response times . The digital capture of data eliminates manual labor and saves time and costs and provides accuracy.
Data driven insights help in making informed decisions thereby improving the supply chain efficiency and performance. Electronic data is easily shareable thereby helping collaboration between stakeholders in the supply chain.
Supply chain relationships
Collaboration among supply chain stakeholders is crucial for food supply chain management. They must work together to identify common goals and develop strategies to achieve them. A collaborative system will build transparency and cater to innovation and growth. It is said that the most important person in the supply chain is the supplier; through whom innovation and development take place. It is not only the relationships between the stakeholders but also managing people inside the organization that is important.
These partnerships would help in optimizing a supply chain, developing transparency and trust, better planning, forecasting, and replenishment of products. Effective food supply chain management requires a shared responsibility among all stakeholders and each one should take the responsibility for their role in the supply chain as well as their impact on environment, society and economy.
With continuous supply chain disruptions exposing the vulnerability of these supply chains, businesses need to rethink how to engage and collaborate with the other stakeholders. Sustainability and Technology will play a big role in building transparent and resilient supply chains. The data driven approach should foster better decision making across the value chains.
Sustainability requires collaboration with the involvement of all stakeholders right from production, manufacturing, distribution in ways that reduce carbon footprints, reduce waste and ensure social equity.
There have been a lot of technological advancements in the field of SCM ranging from the software which manages quality control to managing cash flow, inventory, security, and distribution.
It is sad that 63% of companies do not use technology to monitor their supply chain performance.
McKinsey emphasizes the importance of digital transformation in food supply chain management. It suggests that companies should invest in building digital capabilities and partner with technology providers to enhance supply chain management practices.
As the volume and cross-border trades increase, Blockchain technology has popularized its ability to smooth functioning along with providing traceability and security over the supply chain. Blockchain is a digital ledger that records data in a decentralized manner that is programmable, secure, unanimous, immutable and time-stamped. It provides end-to-end transparency and builds a resilient supply chain.
All transactions are recorded and shared among the stakeholders in the supply chain. Since the transactions are time-stamped, and the data is immutable, a digital identity of the product is created. This gives credibility to the product. The farm to fork journey of the product can be viewed by the consumer through a QR code.
Given such visibility and disclosure, consumer trust and brand recognition materialize. There is a realization of a secure, safe and transparent supply chain.
Food Supply chain management satisfies the consumer demands on food safety and sustainability. It has to also address the socio-economic and environmental benefits too. Along with the five factors charted, it is a compilation of various aspects that affect the supply chain and the decisions that bring about the rise or fall of an organization. Traceability is an integral part of the food supply chain systems. Technology disruptions with blockchain have empowered traceability systems to counter not only food safety issues but address the sustainability and authenticity of claims of a product.
Check how Blockchain technology is revolutionizing food supply chains