.
T

he COVID-19 pandemic has resulted in supply chain adjustments on a global scale that may result in long-term alterations across industries. These adjustments are the result of rapid and significant supply chain changes on the sides of both supply and demand. On the supply side, companies continue to face labor shortages, supply interruptions, transportation disruptions, and other restrictions. On the demand side, consumers are showing panic purchasing patterns and there has been significant growth in electronic orders.  

It is especially important to have strategies in place for food supply chains to survive and recover from the pandemic for several reasons. First, food supply chains have been particularly shocked by supply and demand changes during the pandemic. Second, the frequency and necessity with which consumers purchase food makes it an essential industry for the stability of society. Third, safeguarding food security is a significant humanitarian driver. In this paper, we analyze the challenges of food supply chain and propose a multi-component strategy to deal with its recovery from the pandemic.

Challenges and Opportunities for Food Supply Chains

The pandemic will continue. The COVID-19 pandemic is projected to last between 18 and 24 months, with larger waves of infection yet to come. It is, therefore, important for both consumers and suppliers to plan for the continuing effects of COVID-19 on different areas of supply, demand, and the overall economy. The recovery will be a long process even once the outbreak has been contained and we may never be able to fully return to the pre-COVID-19 operations. In fact, we foresee a “W” shaped recovery with waves of supply chain disruptions as supply and demand adjust following the outbreak. As such, we need to not only handle the effects of the COVID-19 outbreak in the short term, but also have mid-term and long-term strategies to prepare and succeed while the market gradually reaches the new equilibrium.

Food supply chains are particularly challenging. Food supply chains have faced a variety of challenges over the course of the COVID-19 outbreak, limiting their overall operations. In addition to underutilized supply chains resulting from restaurant and hotel shutdowns, transportation disruptions have arisen from attempts to reduce potential infection points. These include efforts made to limit the number of truck drivers in one vehicle and restricted cross-border activities, which not only reduce the speed and but also limit the quantity of food transportation. 

Despite these challenges, several opportunities have appeared in three areas: the accelerating shift to online ordering, the change in consumer loyalty, and the switch to local replenishment. Since the pandemic stresses the importance of health and safety, online ordering presents an increasing appeal to consumers in addition to the convenience it offers. The change in consumer loyalty is a valuable opportunity for brands who can guarantee product availability after consumers have faced many stockouts. Finally, local replenishment is a way to reach consumers using shorter supply channels with fewer failure points. Localization will also avoid potential complications with long distance transportation and unstable international trade policies. Companies that take advantage of these opportunities will likely be in stronger positions following the pandemic.

Our Proposed Strategy 

To handle the challenges presented by the outbreak and take advantage of the opportunities, we propose a four-component strategy focusing on improving supply chain Robustness, Agility, Technology, and Electronic ordering, or, in short, the RATE strategy to deal with food supply chain recovery from the pandemic.

Robustness: Maintenance of a comprehensive supply network for each category of food is needed to meet customer demand during the pandemic. An updated sourcing system should be built to construct a product profile with multiple suppliers and resources utilizing global, long distance, and local productions within each category. Thus, the supply network is robust enough to handle and adapt to sudden changes without stockouts.  This is particularly important for the staple food items such as rice, pasta, flour, and canned foods. Stockouts of these items can cause consumer panic and severely impact customer service level, resulting in the loss of customers in the long-term.

Agility: Food supply chains will have to deal with changes to methods, locations, and services in addition to demand frustrations as consumers determine their new needs for food consumption and demand. Supply agility is essential in response to the dynamics of demand and supply. In order to enhance agility, companies need to frequently check their order profiles and inventory levels and follow the waves of demand to adjust them.  Additionally, supply channels should be shortened to include more small quantity local orders. 

Technology: Data-based analytic models should be adopted to analyze supply and demand risks and to follow the demand dynamic. Technologies such as machine learning and AI systems can be used in this context. In risky operations with threats to worker safety, robots can be used to replace human labor to maintain stable and sanitized operations. In practice, meat packing companies such as Tyson Foods have already invested in robotic butchers to reduce the required manual labor for their products. They are now focused on advancing the technology and transitioning quickly for worker safety during and after the pandemic.  Additionally, as food supply chains expand and update to increase agility and robustness, blockchain technology connected with Internet of Things (IoT) can be used to enhance security in tracking material flow and quickly build trust with smaller and newer suppliers. 

Electronic ordering: Food supply chains should take advantage of the accelerating shift towards electronic ordering by expanding the capacity and range of products available for online order and delivery. Apps should be re-designed and updated to enhance functionality and convenience.  For example, the Walmart App is connected with Walmart’s online grocery service to ensure timely and convenient pickup services.  Additionally, we have seen partnerships adding delivery services to on-site operations, such as the Costco and Instacart partnership, that can quickly and efficiently meet the personalized demand of customers. Electronic ordering is likely a continuing trend in food distribution. Every entity of the food supply chain will be responsible for innovatively coping with this development.

Although the COVID-19 outbreak has caused widespread changes in supply chain operations, the disruptions also bring an opportunity for companies to develop a robust, convenient, and direct-to-consumer supply network that can cope and thrive with market dynamics in the long run. Food supply chains with a deliberate strategy can meet the fluctuations during the COVID-19 pandemic and flourish after the long recovery.

About
Yu Amy Xia
:
Yu Amy Xia is an Associate Professor of Business Analytics at Mason School of Business, William and Mary. She is currently a Dean’s Research Fellow of Mason and a Mellon Faculty Fellow of W&M.
About
Gillian Doby
:
Gillian Doby is a 2021 MBA Candidate specializing in supply chain management at Mason School of Business, William and Mary. Ms. Doby has a background in supply chain management and data visualization for humanitarian organizations.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.

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COVID-19 isn't Going Anywhere, Food Supply Chains Must Adjust

September 2, 2020

COVID-19 will continue to impact the world for the foreseeable future, posing particular challenges to food supply chains. These supply chains must respond by becoming more robust, agile, technologically sophisticated, and accessible.

T

he COVID-19 pandemic has resulted in supply chain adjustments on a global scale that may result in long-term alterations across industries. These adjustments are the result of rapid and significant supply chain changes on the sides of both supply and demand. On the supply side, companies continue to face labor shortages, supply interruptions, transportation disruptions, and other restrictions. On the demand side, consumers are showing panic purchasing patterns and there has been significant growth in electronic orders.  

It is especially important to have strategies in place for food supply chains to survive and recover from the pandemic for several reasons. First, food supply chains have been particularly shocked by supply and demand changes during the pandemic. Second, the frequency and necessity with which consumers purchase food makes it an essential industry for the stability of society. Third, safeguarding food security is a significant humanitarian driver. In this paper, we analyze the challenges of food supply chain and propose a multi-component strategy to deal with its recovery from the pandemic.

Challenges and Opportunities for Food Supply Chains

The pandemic will continue. The COVID-19 pandemic is projected to last between 18 and 24 months, with larger waves of infection yet to come. It is, therefore, important for both consumers and suppliers to plan for the continuing effects of COVID-19 on different areas of supply, demand, and the overall economy. The recovery will be a long process even once the outbreak has been contained and we may never be able to fully return to the pre-COVID-19 operations. In fact, we foresee a “W” shaped recovery with waves of supply chain disruptions as supply and demand adjust following the outbreak. As such, we need to not only handle the effects of the COVID-19 outbreak in the short term, but also have mid-term and long-term strategies to prepare and succeed while the market gradually reaches the new equilibrium.

Food supply chains are particularly challenging. Food supply chains have faced a variety of challenges over the course of the COVID-19 outbreak, limiting their overall operations. In addition to underutilized supply chains resulting from restaurant and hotel shutdowns, transportation disruptions have arisen from attempts to reduce potential infection points. These include efforts made to limit the number of truck drivers in one vehicle and restricted cross-border activities, which not only reduce the speed and but also limit the quantity of food transportation. 

Despite these challenges, several opportunities have appeared in three areas: the accelerating shift to online ordering, the change in consumer loyalty, and the switch to local replenishment. Since the pandemic stresses the importance of health and safety, online ordering presents an increasing appeal to consumers in addition to the convenience it offers. The change in consumer loyalty is a valuable opportunity for brands who can guarantee product availability after consumers have faced many stockouts. Finally, local replenishment is a way to reach consumers using shorter supply channels with fewer failure points. Localization will also avoid potential complications with long distance transportation and unstable international trade policies. Companies that take advantage of these opportunities will likely be in stronger positions following the pandemic.

Our Proposed Strategy 

To handle the challenges presented by the outbreak and take advantage of the opportunities, we propose a four-component strategy focusing on improving supply chain Robustness, Agility, Technology, and Electronic ordering, or, in short, the RATE strategy to deal with food supply chain recovery from the pandemic.

Robustness: Maintenance of a comprehensive supply network for each category of food is needed to meet customer demand during the pandemic. An updated sourcing system should be built to construct a product profile with multiple suppliers and resources utilizing global, long distance, and local productions within each category. Thus, the supply network is robust enough to handle and adapt to sudden changes without stockouts.  This is particularly important for the staple food items such as rice, pasta, flour, and canned foods. Stockouts of these items can cause consumer panic and severely impact customer service level, resulting in the loss of customers in the long-term.

Agility: Food supply chains will have to deal with changes to methods, locations, and services in addition to demand frustrations as consumers determine their new needs for food consumption and demand. Supply agility is essential in response to the dynamics of demand and supply. In order to enhance agility, companies need to frequently check their order profiles and inventory levels and follow the waves of demand to adjust them.  Additionally, supply channels should be shortened to include more small quantity local orders. 

Technology: Data-based analytic models should be adopted to analyze supply and demand risks and to follow the demand dynamic. Technologies such as machine learning and AI systems can be used in this context. In risky operations with threats to worker safety, robots can be used to replace human labor to maintain stable and sanitized operations. In practice, meat packing companies such as Tyson Foods have already invested in robotic butchers to reduce the required manual labor for their products. They are now focused on advancing the technology and transitioning quickly for worker safety during and after the pandemic.  Additionally, as food supply chains expand and update to increase agility and robustness, blockchain technology connected with Internet of Things (IoT) can be used to enhance security in tracking material flow and quickly build trust with smaller and newer suppliers. 

Electronic ordering: Food supply chains should take advantage of the accelerating shift towards electronic ordering by expanding the capacity and range of products available for online order and delivery. Apps should be re-designed and updated to enhance functionality and convenience.  For example, the Walmart App is connected with Walmart’s online grocery service to ensure timely and convenient pickup services.  Additionally, we have seen partnerships adding delivery services to on-site operations, such as the Costco and Instacart partnership, that can quickly and efficiently meet the personalized demand of customers. Electronic ordering is likely a continuing trend in food distribution. Every entity of the food supply chain will be responsible for innovatively coping with this development.

Although the COVID-19 outbreak has caused widespread changes in supply chain operations, the disruptions also bring an opportunity for companies to develop a robust, convenient, and direct-to-consumer supply network that can cope and thrive with market dynamics in the long run. Food supply chains with a deliberate strategy can meet the fluctuations during the COVID-19 pandemic and flourish after the long recovery.

About
Yu Amy Xia
:
Yu Amy Xia is an Associate Professor of Business Analytics at Mason School of Business, William and Mary. She is currently a Dean’s Research Fellow of Mason and a Mellon Faculty Fellow of W&M.
About
Gillian Doby
:
Gillian Doby is a 2021 MBA Candidate specializing in supply chain management at Mason School of Business, William and Mary. Ms. Doby has a background in supply chain management and data visualization for humanitarian organizations.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.