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Expert's Opinion: Food & Beverage Supply Chain Trends

AUGUST 15, 2022
Expert's Opinion: Food & Beverage Supply Chain Trends

Author: Öykü Sorgun

Ruptures are occurring in the supply chains, and the food & beverage industry has been one of the most affected. We had a conversation with Cavide Tekin, ICRON’s Customer Service Manager, and talked about the food industry’s current situation, trends, and the contributions of developing technologies to manufacturing companies in the supply chain. 

We are going through a period of uncertainty and intense risks. Starting with the pandemic, the supply and demand balances have changed both on a product and a supply basis.  On top of that, problems with logistics have resulted in even more uncertainty and the imbalance of supply-demand has been directly reflected in food prices. 

There are two impacts of Ukraine-Russia war on the food supply chain 

We might have avoided the negative effects of the pandemic; however, with the Ukraine-Russia war, the supply-demand imbalance deepened. For example, Germany has been supplying most of its sunflower oil supply from these countries.* After the war, the supply came to a standstill, causing the product price to double, while the influx of consumers to supermarkets caused the stocks of the products to run out quickly.  

We can say that the war will have two important effects on the supply chain. Especially in Europe, the search for new suppliers will emerge, and logistics costs will increase accordingly. While going through a period in which oil prices increase, the locations and transfer costs of new suppliers will also negatively affect food prices. 

Consumer habits are changing in the food industry 

In addition to the global crises, consumer habits have begun to change. For example, we have started shopping more in e-commerce, and the consumption trends of some products and consumer demands have changed. This leads some manufacturing companies to start creating direct-to-consumer sales channels. ** 

When we put all these together, estimating in the supply chain has become extremely difficult and critical. No forecasting algorithm or experience has been able to provide projections of those expectations. Therefore, the risks have grown and have been reflected in the prices of consumer products. 

The return of technology investments is very fast compared to other sectors 

Technology has had positive impacts on this negative period. The food industry operation is mostly managed globally. End-to-end visibility is very important, and you can only manage this with digital transformation. On the other hand, globally managed food industry operations are very difficult processes for supply chain planners. For example, for a company whose purchasing decisions are made at a global level, it is a very complicated process to plan and manage without the help of technology, considering all operational needs and operations. The contribution of decision support platforms to this process is undeniable because these platforms provide sustainable efficiency to companies by providing the global optimum. 

As the food supply chain is a global operation, cooperation is another critical point. It is also possible with technology for the teams to communicate with each other in an accurate and traceable way. 

In the food sector, transformation can be achieved rapidly by benefiting from technological solutions. In other words, the return on investment is very fast. There is a lot of activity and circulation in the FMCG sector, so you can feel the returns on your investments very quickly. A global FMCG company that we started to work with during the pandemic managed to reduce its costs and inventories by up to 30%. In short, the effects of technological transformation in food and FMCG are rapid and permanent. 

Digital transformation in the food industry in Turkey needs to accelerate 

The digital transformation in the food industry in Turkey is progressing very slowly. When we look around the world, companies are turning their attention to improving their supply chain operations. It has become very important to control it, to make it visible from end to end, to make it efficient, and to manage it. 

Manufacturing companies in Turkey, on the other hand, have a tendency to refrain from making technology investments from a traditional point of view. There is generally a short-term approach rather than a medium- and long-term approach and there is little or no budget for technology applications. However, especially in the food sector, the return on these investments is swift. Digital transformation in the value chain has the potential to increase turnover by up to 25% while reducing costs between 5% and 30%.*** 

In the near future, food and water crises await us. The digitalization efforts in these areas will positively impact increasing productivity and facilitating access to food. At the same time, every crisis contains its own opportunities. Many issues that appear to be crises now can be turned into opportunities with the right strategy. 

In summary, digitalization is inevitable for realizing opportunities, determining the right strategies, and operational activities that will carry these strategies to success. The world is digitalizing very fast. It is important for companies to catch up with this transformation. It should not be forgotten that managing supply chains efficiently, in a controlled manner, and with minimum cost can be achieved with digitalization. 

If you would like to see ICRON in action, please contact us. If you have enjoyed this blog, you can find more content that you might enjoy here.

Resources:

https://tr.euronews.com/2022/04/13/ukrayna-savas-almanya-da-g-da-fiyatlar-n-nas-l-etkiledi 

**https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/us-food-supply-chain-disruptions-and-implications-from-covid-19

*** https://blog.se.com/sustainability/2021/02/11/how-digital-accelerates-agility-and-transparency-in-food-and-beverage-next-generation-industries/

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