Dedication: is the way to go

It’s not only the meat supply chain under strain, the global food chain is too and needs transformation, according to a new report that suggests dedication is the   way to go.

Global bankers Rabobank recently released a new report Transforming the Food and Agribusiness Supply Chain, which argues that the operating environment for food and agribusiness (F&A) companies is becoming increasingly complex as new external influences compound traditional pressures like rising agri-commodity prices. The banker looks at the flaws in the current structure and identifies the dedicated supply chain model “as the next best step” for F&A companies.

It points to the ongoing “food versus fuel” debate, speculation in agri-commodity prices and the regulatory responses this has triggered from governments worldwide as all adding to the complexity of the environment in which the sector operates.

The new pressures exacerbate the flaws in the current supply chain model – currently structured in linear form, featuring short-term partnerships between suppliers, processors and retailers independent from the influence and interests of other members of the chain. Rabobank believes this model is “highly inefficient”: “restricting F&A companies’ ability to respond to changes in supply and demand dynamics, whilst fleeting partnerships limit productivity and restrict innovation.”

A new supply chain model has the potential to transform the industry, the bank proposes. In a dedicated supply chain structure, upstream suppliers and processors enter into long-term partnerships with each other and a downstream leader. Crucially, information and insights are shared along the chain’s length for the benefit of all leaders.

Justin Sherarrd, Rabobank’s global strategist says, “Closer co-operation of this sort will transform the nature of food and agriculture partnerships from transactional ones that are centred around chasing price, to a system focused on creating value.”

Companies embracing this thinking will benefit from reduced risk, improved productivity, access to new markets, enhanced brand and reputation and improved access to capital, according to the report.

The report cites several examples of leading F&A companies that are already active in this space, such as Mars’ decision to release the cocoa genome sequence into the public domain as part of its broader commitment to sustainably sourcing all cocoa purchases by 2020. Furthermore, sector leaders undertaking such initiatives must become advocates for dedicated supply chains by sharing their experiences with the wider industry.

Gilles Boumeester, Rabobank ‘s global head food and agribusiness coverage commented: “F&A financing institutions also have a part to play in creating an environment that is conducive to adopting this new model. To this end, Rabobank is developing new financing solutions that support and encourage companies embracing dedicated supply chain thinking.”

 

 

 

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