By Shaun Bossons, SVP Global Sales at Trace One.
The vast and scattered nature of today's supply chains is creating a breeding ground for risk in the food industry. Globalisation, increased numbers of stakeholders, and customers' desire for ever increasing product sophistication and innovation, are all making it harder to track the provenance and integrity of ingredients throughout the supply chain. The industry now needs to work together to reduce risk by creating true farm to fork transparency, protecting both consumers and the bottom line.
Understanding the threat of risk
Insight into the supply chain is no longer a 'nice to have', it's now essential to manage risk. According to a report published by Deloitte last year, "transparency goes beyond gaining visibility into the extended supply chain. It is the process by which a company takes action on the insights gained through greater visibility in order to manage risks more effectively." There are a number of factors that can introduce risk into the supply chain; from toxic ingredients to scarcity of raw materials to simple human error. Scarcity of food ingredients is already having a real effect on the supply chain – causing a rise in fraudulent activity as producers replace scarce, expensive ingredients with cheaper substitutes. The recent 'nuts for spices' food scare shows how consumers are no longer just being misled, since those with nut allergies now face a real and urgent health risk from food fraud.
This increased risk stems from the increasing complexity of the global supply chain. One ingredient can be used in thousands of separate food products in different countries, offered by many different retailers and manufacturers. Certain products are more at risk than others: complex products like ready meals have multiple components and, as such, are exposed to more risk. The key to managing this risk is understanding for certain what problems in the supply chain exist and making sure that they are minimised as much as possible. This needs transparency throughout the whole supply chain and a collaborative approach to create trust between retailers, manufacturers and food suppliers; allowing all parties to meet these challenges together.
Counting the cost
The level of risk that a retailer or manufacturer is exposed to can also have a strong influence over revenue and whether they remain profitable in the long run. Coupled with shrinking margins and changing consumer demands, understanding this level of risk is essential. Typically a retailer can have as much as 60% of private label sales made up by at-risk products. Retailers which do not understand the risks associated with their products lie exposed to having to remove them from sale for a period of time or indefinitely. This in turn could lead to a significant amount of lost revenue, potentially escalating into the millions of pounds.
Farm to fork transparency
The food industry as a whole needs to work together to create true 'farm to fork' transparency to reduce risk. This is particularly true in the face of future global food shortages, such as the recent shortage of organic wheat in Australia where suppliers could not meet global demand. A shortage of many key ingredients could cause similar chaos in the market so it is essential that food producers have greater redundancy by working with multiple manufacturers and suppliers to stop a shortage jeopardising thousands of products.
To enable this level of insight, food producers need to start by identifying which products expose retailers the most and work back from this basis. They can then share this information transparently throughout the supply chain, so that problems are dealt with effectively and risk is reduced. Food producers need to go beyond legislation and corporate social responsibility targets to create the transparency needed. This will not only remove the threat of penalties from regulatory bodies, but also of missed revenues from increasingly canny consumers. These savvy shoppers may well choose competing, more transparently produced products if their trust is irreparably damaged by another scare.
Farm to fork visibility is the ultimate goal to reduce risk in the food supply chain, but to achieve this every part of the chain needs to have the right tools and collaborate with partners to map the landscape of threats. Understanding problems and working to become more transparent can then allow retailers and manufacturers to protect the long term future, both for themselves and their consumers.