Are Our Agri-Food Supply Chains In Crisis?

Are Our Agri-Food Supply Chains In Crisis?

Feature Article by Dr. Marco Tieman, Chief Executive Officer at LBB International

 

Background

The world is going through more than just turbulent times, with what I would describe as a toxic cocktail of the aftermath of COVID lockdowns and related measures, rising inflation, an energy crisis in Europe, the Ukraine war, and global climate change measures reducing agriculture production by leading agriculture exporting countries. The result of this cocktail is an unfortunate reduction in global agri-food production, export, and rapidly increasing agri-food commodity prices. Are our agri-food supply chains in crisis? Do we need to relook at how we organise our agri-food supply chains?

 

Agri-food supply chains under pressure

The discipline of agri-food supply chain management aims to bridge the supply and demand gap of agri-food chains to achieve optimal place and time utility. In terms of location, some countries have the climate and conditions allowing for a naturally higher productivity of certain crops and animal farming. As a result of these God given advantages, farmers have exploited these and through innovation managed to feed a big part of the world far beyond what that country or region needs for their own consumption.

A good example is the Netherlands, which is a very small country in Europe, but with its fertile river delta and with an estimated 80% of its land dedicated to farming and cheap natural gas to heat its greenhouses, it has been able to become the world’s second largest agriculture exporter. This country created an advanced agri-food cluster with supplying and supporting industries to create an interdependent ecosystem. These include palm oil refineries and also ingredient producers such as DSM*), trade of seeds and agriculture commodities, FMCG industry leaders like FrieslandCampina and Unilever, financial institutions such as Rabobank), research and education institutions of higher learning (like Wageningen University) and even an agri-food ecosystem called Foodvalley.

In terms of time, the agriculture sector also needs to deal with seasons, where harvesting goes in cycles. These cycles are based on the position away from the equator, creating four seasons: winter, spring, summer and autumn. Even for countries around the equator, many agriculture crops still experience fixed harvest cycles.

Through trade, countries are able to buy agri-food produce from other parts of the world that are not able to grow efficiently on their own land (or region) or are not in season. This allows for a more effective allocation of resources, better availability of fresh agriculture produce throughout the year, lower storage requirements of agri-food commodities, and lower agriculture prices for consumers. You could argue that this success story was the result of an optimisation of agri-food supply chains at a global level.

COVID and related measures have shown the world the high degree of interdependence of countries for their basic food supply, risks of lean supply chains where inventories in the supply chain have been reduced or eliminated, and the fragility of this global agri-food supply chain architecture to disruptions. The current climate change agenda, which is being rolled out by various governments, is also questioning the environmental footprint of these global agri-food supply chains as well as the environment footprint of the human diet itself.

Some governments, like the Netherlands, have identified farmers as the greatest contributors to climate change and have started buying farmland from farmers to reduce farming activities and as a result also its agri-food production. By having mega food production hubs and countries importing food from these hubs, countries are exporting environmental impact (and climate change contribution) to these hubs. Maybe from an efficiency and global environment perspective it is a better allocation of resources, but at country level under the current calculation mechanism this is not an advantageous approach for the current big agri-food production hubs in the Americas and Europe.

The environmental footprint of a meat based human diet has also been argued by some governments and NGOs to be a major contributor to climate change and unstainable with a further growth of the human population, forcing food industries to look for alternatives like lab-grown meat as well as insect based processed food that have a lower environmental footprint than ‘real’ meat.

As a result our agri-food supply chains are in crisis, and we need to relook how best to organise a country’s agri-food system and optimise agri-food supply chains locally, regionally, and globally.

 

The way forward for future agri-food supply chains

First of all, self-sufficiency at a national level in agri-food production will become an important key performance indicator. In other words: the degree the country is able to meet the needs of its own population by domestic farming, including of course its visitors to the country, against possible higher costs. Due to the availability of mega global agri-food production hubs, self-sufficiency in many countries have been deteriorating over the past 50 years.

Second, the development of agri-food production clusters to increase agri-food production and meet local and regional agri-food needs. An agri-food cluster is a complete agri-food ecosystem, a geographical concentration of interconnected companies and institutions with a particular agri-food focus providing as complete a value chain as possible.

Clustering allows for shorter agri-food supply chains and therefore lower costs, but also a source for synergy (through collaboration) and innovation. Instead of economies of scale and economies of scope, agri-food clusters need to address sustainability by looking at creating what I call ‘economies of chains’, where agri-food supply chains are linked to other ecologically fitting supply chains that increase the business value significantly. For example, by combining the coffee chain with the mushroom and animal feed chains, you can triple or quadruple the economic value of coffee. Cluster strategies contribute to a reduction of the carbon footprint of agri-food supply chains. Government incentives are urgently needed to develop these advanced agri-food clusters, as agri-food production clusters will be a key solution to boost domestic agri-food production.

Third, urban farming initiatives are required to create local agri-food production capacity in cities and metropoles of easy to grow, high volume agri-food produce, such as lettuce and tomatoes. These need to leverage building rooftops for basic farming and bee hives, as well as more advanced aquaculture and vertical farming inside buildings using the latest technologies in lighting, water, and nutrition management. There have been great urban farming success stories in Singapore and Hong Kong but it needs to be more widely adopted and further developed.

Food waste programmes are urgently needed to reduce food waste. Central kitchens programmes have been successful in several countries to collect (close to) ‘expired’ food from supermarkets to central kitchens and process these products by chefs into high-value food products, such as: ready-to-eat meals, juices, cakes, pies, and other types of food. These products are distributed back into the retail channel. Some supermarket concepts in Malaysia have already integrated the processing of ‘expiring’ food products into the supermarket design, through introducing its own bakeries and restaurants located at the supermarket. Finally, education of the consumer is critical to change buying behaviour and create higher awareness on reducing food waste within homes, in the office and when outside.

The bottom line is that the redesign of the agriculture sector and agri-food supply chains will need to become a high priority agenda for national and local governments to address. This can be a complex puzzle to solve with many stakeholders to make this transformation a success. I believe there are enough entrepreneurial opportunities for a new generation of farmers and the agri-food supply chain partners to transform the agriculture sector from global to local and regional agri-food supply chains.About the Author” heading_tag=”h5″ alignment=”left”]

Dr. Marco Tieman is the CEO of LBB International, a supply chain strategy consultancy and research firm, advising companies and governments on supply chain analysis, supply chain design, and market research. He has been the architect of agri-food clusters in Indonesia and Malaysia. He is also an Adjunct Professor with UTM Azman Hashim International Business School in Malaysia, conducting research on halal procurement strategy, halal supply chain management, and halal risk and reputation management. He is the author of ‘Halal business management: a guide to achieving halal excellence’.[vc_text_separator title=”MORE FROM THIS EDITION” border=”no”][vc_single_image image=”19533″ img_size=”medium” qode_css_animation=””][ult_layout layout_style=”4″ list_style=”6″ s_image=”0″ s_excerpt=”0″ s_categories=”0″ s_metas_o=”0″ s_metas_t=”0″ quick_view=”0″ taxonomies=”post_tag” price_font_weight=”” atcb_font_weight=”” title_font_weight=”normal” title_font_style=”normal” title_text_transform=”capitalize” metas_font_weight=”” excerpt_font_weight=”” filter_font_weight=”” tab_font_weight=”” pagination_font_weight=”” title_font=”Lato” title_font_size=”12pt” i_taxonomies=”353, 354″ d_i_filter=”353″]