Time is now to tackle emissions

One of the bright spots of this year’s COP26 climate change conference was the commitments from the business sector to reducing their impact on climate change. In fact, according to Greenbiz, a US-based sustainable business outlet, the Glasgow event could be termed ‘Business COP’ for the efforts put in by the corporate world to be part of the solution. Read more

How to de-risk food and beverage’s procurement and supply chain functions

The role of procurement is about ensuring that business operations continue like clockwork and involves understanding the current environment as well as foreseeing the potential future environments. COVID-19 has demonstrated how market changes can be challenging and the importance of reducing risk along the food and beverage supply chain. The challenge is that all businesses currently operate under the pressure of market volatility, uncertainty, complexity and ambiguity. Going forward, food and beverage manufacturers are likely to operate with more uncertainty and face more unexpected crises, placing extra burden on the Procurement and Supply Chain functions.
According to a recent McKinsey report Risk, Resilience and Rebalancing in Global Value Chains, “companies can now expect supply chain disruptions lasting a month or longer to occur every 3.7 years, and the most severe events take a major financial toll.” McKinsey analysts also calculated the damage associated with a severe and prolonged disruption (100 days) and used probabilities to estimate the financial impact that companies can expect over a decade. The report predicts the global food and beverage sector can, on average, expect losses equal to almost 30 percent of one year’s profits over a decade.
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To help manage the disruptions caused by the pandemic and plan for the unexpected, food and beverage manufacturers should look at a four-step strategy to de-risk procurement and supply chain functions in the wake of global vulnerabilities.
Step 1: Anticipate and plan for uncertainty
Today, the rigorous process of gathering information is being replaced with a data-driven approach. This enables real time decision-making with businesses building AI-driven integrated data ecosystems that are underpinned by predictive analytics and can then be applied in forward planning on both strategy and performance.
Food and beverage manufacturers and distributors can also use technologies such as Enterprise Resource Planning (ERP) to accurately forecast items like demand, stock availability, supplier lead times, cost, raw ingredients and contingency stock requirements; and integrate this into their unique business model. ERP can help procurement de-risk as it provides a single integrated platform that shares all the information across all functions. This allows manufacturers to optimise inventory forecasting capabilities and improves the quality of the decision making within the organisation.
By making a direct link between supply and demand, food and beverage manufacturers and distributors can anticipate and better plan for uncertainty and ultimately improve the cash flow of the organisation.
Step 2: Embrace the limitless potential of digitalisation
With the pandemic, many manufacturers now realise the true potential of digital transformation in the procurement process.
Digitalisation can assist strategic sourcing to become more predictive, transactional procurement more automated, and supplier relationship management more proactive. Digital procurement solutions are enabling the future by providing access to previously unavailable insights or bringing order to massive (but unstructured) data sets, ultimately driving more complex analysis and better supplier strategies, enabling more efficient operations.
Step 3: Enable end-to-end supply chain visibility
World crises have resulted in procurement teams scrambling for alternative and locally based suppliers to ensure that they can still fulfil existing orders and continue to produce with new orders. End-to-end supply chain visibility is therefore a necessity to ensure procurement accuracy and resilience. Such advanced insights are needed to improve customer service, reduce costs and mitigate interruptions that will affect supplier inventory levels and product delivery. With customers demanding better service, embedded AI capabilities provide real-time intelligence, actionable insights and recommendations that reduce disruption time from days to hours, improving customer service in line with expectations.
Step 4: Focus on building a robust procurement model
There are no standard business models to help food and beverage manufacturers manage what we are currently facing.  This pandemic has exposed the fragility and thin margins on which many businesses run. Highly indebted companies, working from lean inventory, supported by just-in-time supply chains, and staffed by short-term contractors are suffering the longer-term impact of market unpredictability.
Food and beverage manufacturers and distributors need to identify their own business model that will suit their business and consider how to reengineer their supply chains to reduce risk through design, factoring in increased complexity and uncertainty as the new normal. In future, effective supply chain management will be all about agility and finding the perfect balance between just-in-time processes and just-in-case scenarios, while reducing risk as much as possible.
Global crises are an inevitable factor of life. By planning for the unknown, implementing the right technology for end-to-end supplier visibility and building a robust procurement model, food and beverage manufacturers and distributors can de-risk procurement and supply chain functions and enable resilience in an uncertain world.

 Globalisation commitment wavering post-Brexit

Signs the international community are moving away from their commitment to globalisation has been reinforced with the release of the latest CIPS Risk Index. Risk relating to global supply chains has reached its highest levels since 2013 due to a convergence of international issues including uncertainty around the post-Brexit relationship between the UK and the European Union as well as economic and political instability across the Middle East.

Global supply chain risk Q3 2016

The Index, produced for the Chartered Institute of Procurement & Supply (CIPS) conducted by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains. The upward trend in supply chain risk can be partly attributed to a breakdown in political consensus over globalisation, with the World Trade Organisation reporting an average of 22 new trade restrictive measures introduced each month in its latest report.

According to Bodhi Ganguli, Lead Economist, Dun & Bradstreet, the CIPS Risk Index reflected the general unease about the state of the global economy with its increase in operational risk.

“Political and economic uncertainties, such as the extent of the growth slowdown in China, emerging markets’ financial vulnerabilities, the impact of terrorism on cross-border movements, and the fallout from Brexit, continue to weigh on global business sentiment,” Mr Ganguli said.

In addition, growing disillusionment with globalisation is contributing to political risk. Elections over the next 12 months are expected to see gains for far-right parties across the globe. Incumbent governments are also demonstrating worrying responses to the growing issue of cross border movements with the Australian government proposing radical changes to immigration policy in response to perceived terrorist threats stemming from violence in the Middle East.

All told, increased political and economic risk globally is beginning to effect the bottom line of businesses as they look to navigate an increasingly hostile global trade and supply market.

Mark Lamb, General Manager of CIPS Asia Pacific, said: “Supply chain managers are facing a new wave of impediments to the flow of goods across borders. With international trade deals under threat around the world, supply chain managers must be as aware of political risks as they are of natural disasters and economic hardship.”

Asia Pacific has bucked the global trend with slight improvements in risk levels for domestic businesses. Australian suppliers in particular have benefited from rising coal and iron ore prices together with an increase in national defence spending. In the short-term, Australian businesses are also showing improved payment performance. Of concern is a continued reliance on an unstable Chinese economy. A major issue likely to have deep effects on Asian trade is the recent bankruptcy of South Korea’s Hanjin Shipping. Responsible for 3 per cent of global shipping, it has left cargo as large as $14bn unable to dock. The bankruptcy is likely to have wide-ranging impact on trans-Pacific and Asia-Europe supply chains.

A further breakdown of region-specific results shows the highest increases in risk can be found in Western & Eastern Europe, Central Asia, the Middle East, and North & Sub-Saharan Africa, while there is Improved risk in the Asia Pacific region.

A full copy of the latest CIPS Global Risk Survey can be found here.

“Clean Supreme” leads top trends for 2017

Growing calls for transparency throughout the supply chain are taking clean & clear label to a new and supreme level. This comes as the inherent benefits of plant-based products are being active marketed to a more health conscious consumers. “Clean Supreme” and “Disruptive Green” lead Innova Market Insights’ Top Ten Trends list for 2017.

“Interest in naturalness and clean label continues to feature strongly,” according to Lu Ann Williams, Director of Innovation at Innova Market Insights. “It has become somewhat of a running theme through our trends forecasts in recent years. In 2008, ‘Go Natural’ led our trends list, and since then the theme has featured each year in different forms, such as ‘Processed is Out’ in 2011, ‘From Clean to Clear Label’ in 2015 and ‘Organic Growth for Clear Label’ in 2016. This year, clean & clear is a theme weaving throughout the entire list, but is specifically the case for trend #1 (‘Clean Supreme’).”

Innova Market Insights has revealed its top trends likely to impact the food industry in 2017 from its ongoing analysis of key global developments in food and drinks launch activity worldwide.

The top five trends for 2017 are:

  1. Clean Supreme: The rules have been rewritten and clean and clear label is the new global standard. The demand for total transparency now incorporates the entire supply chain, as a clean label positioning becomes more holistic. Trending clean supply chain claims include “environmentally friendly,” which has shown a CAGR growth of +72% from 2011-2015 and “animal welfare,” which has grown at +45% per year during this period.
  2. Disruptive Green: As plant-based milks, meat alternatives and vegan offerings have rapidly moved into the mainstream, consumers are looking for innovative options to take the inherent benefits of plants into their daily lives. Even dairy companies are now leveraging the functional and technical benefits of plants in new product development, driving more variety and excitement into their category. Innova Market Insights has reported CAGR of +63% for new product launches with a plant-based claim from 2011-2015.
  3. Sweeter Balance: Sugar is under pressure, although it remains the key ingredient delivering the sweetness and great taste that consumers are looking for. The quest to combine taste and health is driving NPD, as the industry faces the challenge of balancing public demand to reduce added sugars and create indulgent experiences, while at the same time presenting clean label products.
  4. Kitchen Symphony: Italian Lasagna is no longer enough – we want Melanzane Aubergine Al Forno! The connected world has led consumers of all ages to become more knowledgeable of other cultures. As a result, there is growing demand for greater choice and higher levels of authenticity in ethnic cuisines. At the same time, pride in local and regional foods is also seeing an upsurge in some countries, with a resulting rise in availability and authenticity of local cuisine.
  5. Body in Tune: Consumers are increasingly personalizing their own nutrition intake, making food choices based around what they think will make them feel better. They are also experimenting with free from products and specific diets like paleo and low FODMAP. At the same time, consumers continue to increase their intake of foods and beverages with ingredients that they consider to be healthy, like protein and probiotics.

The other trends identified by Innova Market Insights are Plain Sophistication, Encapsulating Moments, Beyond Pester Power,Fuzzy Borders, and Deeds of Change

All of the top ten trends will be discussed in a live webinar to be broadcast on November 22.