COVID-19 has exposed vulnerabilities in our various institutions and systems, but none perhaps so dramatically as in our supply chains. In fact, the pandemic has resulted in some of the greatest supply chain disruptions ever experienced in food and agriculture, affecting trade into both domestic and export markets and challenging producers to employ creative freight and operational strategies.
The first phase saw panic buying, which spiked retail sales and caused food processors to rapidly respond to demand. Markets then began to close and export channels were shut down. This was followed by a short consolidation phase as panic buying eased. We are currently in a third phase where demand impacts are affecting global pricing for many commodities.
In this phase, we continue to see some disruption to supply chains with reports of delayed shipping, increased costs in airfreight, and restricted access to imported packaging and ingredients. All told, world trade is expected to fall between 13 percent and 32 percent in 2020 as the pandemic disrupts normal economic activity and life around the world, according to the World Trade Organization.
In light of these disruptions, it has become more important than ever to know where our food and other agricultural supply comes from and to reimagine our supply chains for greater resilience—because COVID-19 will not be the last pandemic to challenge us, let alone the last major disruption. Indeed, I expect agricultural supply chains will refocus and rebuild in several ways that will have lasting impacts upon logistics and freight. Where we produce food, how we produce food and how we manage transportation are likely to face long-term transformation.
The world has for some time been dominated by a dispersed production model, with internationally sourced components brought together in a single location for assembly and subsequent distribution. But when borders started closing, the inherent risk of over-reliance on overseas sourcing was starkly underlined.
Going forward, I expect 'micro' supply chains—where value-added products are made close to where they are sold and ingredient inputs are similarly co-located—to become much more prominent. This reduction of reliance on international supply will likewise lead to greater prevalence of local supply chains, enabling flexibility and continuity of domestic food production. I also expect digitization and 'smart' supply chains—highly efficient and responsive to disruption—to rise in stature and use. Improving both the quality and quantity of data allows businesses to quickly analyze the impacts of disruptive events and proactively restructure their logistics.
Meanwhile, the extent to which consumer purchasing habits have changed for the long-term is not yet known. We do know that face-to-face shopping has reduced dramatically and that contactless delivery has thrived. There has also been an increase in home cooking, ready-made or convenience meal consumption, and loyalty toward certain brands. Overall, customer expectations on the ability to consistently source food, and trust its quality and safety, have increased dramatically.
This is driving food retailers and service providers to improve not only their supply of physical goods but also when and how they sell it—a shift away from typical contract risk controls toward customer-centric outcomes through holistic, whole-of-company and multi-product risk management strategies. As this shift unfolds and expands, companies will need to adopt and invest in new technology capabilities, such as intelligent automation, advanced track and trace, connected devices, predictive tools and blockchain platforms. These solutions will leverage improved data processing and AI to better predict possible product supply and food safety incidents, allowing retailers and service providers to be proactive rather than reactive in their response and mitigation management to better meet customer expectations.
The fact is, it has never been more important to know how, and from where, we are getting our food. Canadians should therefore be making a concerted and collective effort to support domestic food supply to ensure we never reach a mass critical stage of food shortages. With Canadian food standards already among the highest in the world, our first objective should be building a system that can effectively feed Canadian citizens without relying on global supply or production. Then, after we feed the nation, we stand a better chance of feeding the world.
And while it remains to be seen how rapid the rebuild from COVID-19 economic impacts will be, what we do know is that organizations that build resilience into their operations today will increase their—and all of our—ability to survive and thrive tomorrow.
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