Featured

Industry stakeholders look to strengthen supply chain for the future

supply chain

The impact of the COVID-19 pandemic on the food and beverage industry was significant and highlighted some areas in the supply chain that need to be addressed.

The international and local supply chain has faced unprecedented challenges over the past two years as the COVID-19 pandemic crippled so many industries.

In recent months the supply chain issues faced in Australia left supermarket shelves bare, or close to, and logistics companies having to navigate state borders and changes in local COVID-19 restrictions.

Food and grocery remains the largest manufacturing sector in the nation and one of the six national priority areas, worth almost $133 billion and employing more than 270,000 people.

By late 2021 the voices of industry were being heard loud and clear and the federal government made changes to its COVID-19 restrictions around workers in the food and beverage industry, essential workers, after mandates had left many factory floors being able to operate, if at all.

The end of 2021 and beginning of 2022 was a great microcosm of what the food and beverage industry has faced for the entire two years, and running, pandemic.

Now, just as things look to be on a clearer road to recovers, the industry can ask itself important questions and assess important lessons learned, should it face a similar situation in the future.

AFGC CEO Tanya Barden said the COVID-related disruption to food and grocery manufacturers has been broad and unprecedented, impacting shipping, domestic freight, and other shortages.

“Global shipping delays have affected, and continue to affect, the availability of imported inputs such as ingredients and packaging, as well as finished goods, while exports of goods have also slowed,” she said.

“There is an ongoing shortage of domestic freight such as road transport, there was a shortage of the diesel additive Ad Blue, which fortunately has now resolved, and there is an ongoing shortage of timber pallets that are used to store and move products through the supply chain.”

Barden said the industry was working tirelessly to rectify these negative impacts and having to make difficult decisions while doing so.

“The industry has also worked collaboratively with supermarket retailers to minimise disruptions to consumers,” she added.

“However, the supply chain disruptions and mitigation measures have resulted in significant additional costs of supplying food and grocery products, which will likely lead to some price inflation.”

supply chainLast year Barden also called for a ‘supercharging’ of Australia’s sovereign food and grocery production capabilities coupled with measures which would support investment, create jobs, and develop more advanced manufacturing onshore.

A more robust local supply chain working with more advanced local manufacturing would be an important step towards strengthening the supply chain again external factors, such as a global pandemic.

Barden said one thing the COVID-19 pandemic had shown was that the Australian food and grocery manufacturing sector is strong.

“Its performance in maintaining supplies in the face of the enormous challenges COVID has thrown up is clear evidence of that,” she said.

“That said, Australian food and grocery manufacturers are facing unprecedented pressure, not only from COVID-19-related disruption but also from supply chain pressures and rising input costs.”

In early 2022, when the federal government, and some state governments, started to relax isolation rules around close COVID-19 contacts, it was seen as a big win for the food and beverage manufacturing industry.

Many workers were prevented from working due to existing isolation mandates at the time and due to the nature of many manufacturing plants, close contacts spread across companies quickly.

The AFGC called for a consistent national approach to COVID-19 isolation for essential workers, after only New South Wales, Victoria, and Queensland had pledged to do so.

“We urge all state and territory governments to develop a uniform approach that will allow asymptomatic workers to return to their critically important jobs, subject to strict controls to protect public health, so that they can continue the work of supplying food and groceries to the nation,” said Barden.

“However, for these arrangements to be effective, there needs to be either priority access to Rapid Antigen Tests for daily testing of food and grocery manufacturers or a more pragmatic approach such as the Day 6 testing in Queensland.”

Barden said the same approach to consistent rules and access to testing must include all food and grocery production (such as personal care and cleaning products) as well as key supply chain inputs such as packaging companies and ingredient suppliers, without which food and grocery manufacturing will simply stall.

The Australian government’s Department of Agriculture, Water and the Environment conducted an analysis on Australia’s food security in the face the COVID-19 pandemic.

The analysis makes it clear that as a nation Australia is one of the most food safe on the planet, ranking equal first for lowest undernourishment and seventh for affordability.

Australia also only imports around 11 per cent of its food, which includes processed products like frozen vegetables, and some out-of-season fruit, while producing far more for export.

Australian households spend just 11 cents in the dollar on imported products as a share of total food and beverage expenditure

The government department concluded that although supermarket shelves were hit with unexpected shortages during the pandemic, it was caused just as much by a surge in demand because Australia doesn’t have a food security problem.

“Uncertainties around the impacts of COVID-19 triggered a sudden increase in purchasing by consumers of a range of items, resulting in disruption to stocks of some basic food items in supermarkets,” the analysis stated.

“This disruption is temporary and not an indication of food shortages. Rather, it is a result of logistics taking time to adapt to the large and unexpected surge in purchasing.

“The purchasing surge already appears to be abating, and supply chains are adapting. Panic buying and stockpiling of staple goods, such as rice and pasta, is likely to be balanced over time by a reduction in future purchases.”

The government analysis also concluded any disruption to Australia’s 10 per cent of food imports would not be significant enough to impact on the country’s food security.

“In terms of ensuring a sufficient supply of healthy and nutritious food – although higher prices or limited availability of specific products may disappoint or inconvenience some consumers,” the analysis stated.

The analysis did highlight the importance of international arrivals for industries such as agriculture, to help get fruit processed and to the consumer, and touched on the critical role national freight services play.

“Road and rail transport are likely to continue to operate with minimal disruptions, with arrangements in place to safely exempt freight services from restrictions designed to limit the community spread of COVID-19,” the analysis stated.

“Trucks appear to be moving freely between regions, including interstate, and will continue to do so. This will facilitate the distribution of inputs to farms, outputs (including livestock and produce) from farms to processing facilities, and food from processing facilities to retail outlets.”

Air freight did take a significant hit during the COVID-19 pandemic, with meat exports being the most impacted food stuff. However, meat import only accounts for three per cent of Australia’s export.

Despite the large percentage of nationally supplied food and beverages many within the food and beverage sectors still believe more can be done to strengthen local manufacturing, and with it, the local supply chain.

National Farmers’ Federation chief executive Tony Mahar was one of the early voices calling on a renewed push towards more regional manufacturing centres.

“COVID-19 has been an absolute disruptive force,” said Mahar.

“The NFF’s Regionalisation Agenda urges government and industry to work together to capitalise on the disruption and ensure the bush can deliver for all Australians.

“Regional Australia should be the host of a world-leading export industry in food and fibre manufacturing. The fact we are not, is a missed opportunity.”

And according to NFF research, up to 80 per cent of Australians believe the government should invest more to support regional food manufacturing.

Meanwhile, in a submission to the federal government on the effects COVID-19 has had on Australia, the Institute for International Trade submitted that the view that Australia is self-sufficient in agriculture was ‘mistaken’ after a weak point in the supply chain was identified in early 2020 after drought and the onset of the pandemic.

“A lack of these crucial inputs posed a major risk to Australian farmers seeking to plant crop,” the submission read.

This only compounded the lack of itinerant workers, predicted to be about 40,000 per season, from overseas helping to pick produce for the market.

In a decision designed to ease the impact, the federal government allowed seasonal workers from the Pacific Islands before international borders were opened on February 21 for vaccinated tourists and other visa holders.

The National Manufacturing Priority Road Map’s focus points for the food and beverage industry includes an increase in smart manufacturing and the onshoring of commercialisation and manufacturing activities.

These two steps are designed to improve processing and packaging through co-investments in translation, integration, and collaboration by the end of 2022, and if successful it could help strengthen local manufacturing, and by extension, the supply chain.

This year will hopefully see a return to something resembling normal supply chain practices with minimal disruptions from COVID-19, however, the Australian industry seems to be working towards fixing any gaps that the pandemic identified in the process.

“Global shipping is likely to take another 12 to 18 months to stabilise while in road transport there are ongoing issues with driver and vehicle availability, in part due to COVD-19 and in part due to pre-existing issues,” said Barden.

“We remain concerned about a shortage of pallets in the lead up to Easter and the longer-term outlook for this critical supply chain item.”

JOIN OUR NEWSLETTER

JOIN OUR NEWSLETTER
Close
Send this to a friend