Pandemic food supply shifts that should stick. By Are Traasdahl
Covid-19 sent shockwaves through the food supply chain. Purchase and consumption patterns changed overnight. Distribution channels shuttered. Many supply chain partners rose to the challenge with heroic efforts, remarkably quick pivots and the creation of new business models. In the process, critical opportunities and weaknesses in the supply chain were exposed. As we head into the seventh month of the pandemic in the US, these issues and opportunities are placed front and center as food companies look to shore-up supply chain resilience and make their fast-turn fixes operationally sustainable. Here are some examples of recent food supply chain trends that should stick beyond the pandemic.
For decades, supply chains focused on efficiency, aligning with a limited number of downstream suppliers, putting pressure on input costs, and minimizing inventory. While effective in an environment of relatively consistent sell-through, this approach is untenable in the face of dramatic disruptions and erratic recoveries that phase-in over time and differ based on location. The pandemic spotlighted the need for flexibility and agility to move quickly from one supply source to another. Identifying, vetting and engaging with a pool of strategic suppliers is now a strategic imperative.
Consumers want to know where their food comes from, and they increasingly prefer it comes from nearby sources. Research from EY found that source of product origin transparency is important to 86 per cent of consumers, and that sourcing products locally is important to 85 per cent of consumers. Local means both domestic (vs. international) and from/near the community.
Bringing the supply chain closer to market can accelerate speed to delivery, provide greater transparency, win consumer trust, reduce reliance on foreign markets, and increase resiliency.
Trending in the arena of local sourcing is the growth of indoor agriculture. AgTech venture capital investment totaled $2.2 billion during the first half of 2020, after a 2019 record $2.7 billion. The indoor farming market is projected to be worth $40.25 billion by 2022. It delivers many advantages during normal or disruptive times, including hyper-local farm to market; ability to quickly pivot crops; built-in protection against pests, weather, and other outdoor impacts; improved yield; automated harvesting; longer shelf life; and more intense flavor. Geographic expansion of regional grow centers and store-level applications are currently in place at retailers such as Albertsons, Publix, and Whole Foods. These collaborations can only be expected to increase in the future.
Real-time inventory visibility from source to shelf
A major speed bump in responding to the rapid-fire impacts of the pandemic was the lack of visibility in the entire supply chain. The need for transparent access to information related to raw materials, finished goods, warehouse inventory, goods-in-transit, retail inventory on shelf and in the store backroom, integrated with sales transactions and demand forecasts became clearer. A missing piece in this equation is in-store/on-shelf inventory status. New tools and resources are being developed to close the data gap, including FedEx’s new package location sensors, robots, Instacart data modelling from shopper audits, Shelf Pulse; IRI CPG Supply Index; and hand-held mobile devices for frontline employees. Better real-time data from stores about what is happening at the shelf and online can provide an early warning system to predict rapid depletions of inventory.
Online shopping fulfillment
To meet the sudden, exponential growth in online grocery demand, retailers quickly pulled together a patchwork of people, partnerships, and processes. Now the focus has shifted to replacing stopgap measures with operationally and financially sustainable solutions.
Building out warehouse infrastructure and automated solutions for more efficient, effective order picking and fulfillment are becoming a top priority. Retailers are now establishing micro-fulfillment centers across their platforms, either by converting existing locations to curbside pick-up only, building new ‘dark stores’, specifically intended only for online order fulfillment, or creating hybrid stores by bolting on fulfillment space.
Curbside pick-up, initially a safety practice, is now used for convenience and is table stakes. Reduced wait time is critical to shopper satisfaction. Implementation of order status via text messages, arrival technology that alerts in-store personnel when shoppers are approaching, prioritized parking, drive-through areas, contactless loading, and payment options are all top initiatives.
A number of high-tech solutions for last-mile home delivery have moved from back-burner experiments to front-and-center pilots. Driverless delivery is being tested at Stop & Shop, and even drone delivery pilots are underway at Walmart, Rouse Markets, McDonald’s, 7-Eleven, Walgreens, CVS, and Amazon.
Algorithmic Commerce: Data integration, utilization, sharing, and collaboration
The common thread woven across all these innovative solutions is the necessity of understanding and leveraging data, analytics, artificial intelligence (AI), machine learning (ML) and technology, to expedite informed, agile decision making and implementation, ensure shopper satisfaction and deliver profitable growth.
There is no shortage of data, however, there is a lack of integration and data understanding, with an abundance of data silos in different formats, so it becomes less useful. Algorithmic commerce – the ability to harness data by way of AI/ML analytics – is critical, and will result in accessible insights across the supply chain. AI/ML-enabled systems continuously learn and adapt, providing advance warning of subtle shifts in behavior, which is particularly important given the volatility and complexity in today’s environment.
For some, digital transformation initiatives in the supply chain have been slow to advance over the last few years. But time is no longer a luxury we can afford. Powerful analytical tools are available today through cloud-based platforms that can receive, normalize, and integrate massive amounts of qualitative and quantitative inputs in real-time, providing an unparalleled platform for retailer-supplier/internal-external collaboration and informed decision making.
The food supply chain demonstrated remarkable resilience and responsiveness in the face of changes wrought by the pandemic. Many of these changes will be long lasting, if not permanent. Continuous improvement and innovation in the food supply chain – from accessibility to consumers, to reinventing the shopping experience, will be key to surviving and thriving no matter the challenges we face today or in the future.
Are Traasdahl is the co-founder and CEO of Crisp. Crisp leverages the power of the cloud to connect and analyze disparate data sources to provide real-time insights and trends. Food suppliers, retailers, distributors and brokers use Crisp to manage supply more efficiently, reduce waste and skyrocket profitability.