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How Food Supply Chain Disruptions Could Impact Your Bottom Line

Posted by Chris Dixon

Jan 15, 2016 9:00:00 AM


Supply chain disruptions can mean trouble for nearly any type of business, but it's an especially pressing concern when it comes to the food service industry. Major events like the West Coast port labor dispute of 2015, where western farmers saw their produce rot on the docks and meat overflow cold storage during nine months of stoppages and slowdowns, or even smaller incidents like a sudden storm that diverts a truck carrying a new order have the potential to damage a business’ reputation and dramatically impact bottom line at the exact same time. It is the job of any procurement professional to be ready for these types of events — even natural disasters that have little to no warning. Your customers still expect to see product on the shelf even when there’s a hurricane in the gulf or a strike at a local distributor.

It is for these reasons that logistics plays such an important role in food supply chain management and will continue to do so moving forward.

Lessons from the West Coast Port Labor Dispute

In February of 2015, a labor dispute that began over contract negotiations at West Coast ports in the United States caused a nearly catastrophic disruption that many industries — the food industry included — are still feeling the effects of. Nearly half of all cargo entering into the United States came through these West Coast ports.

While this would be a devastating situation under normal circumstances, consider the fact that many in the food industry have implemented lean supply chain strategies since the economic downturn in 2007 and 2008. Falling back on the best practice of "ship things so that they arrive just as they're needed" and "only keep as much inventory on hand as you have to," coupled with a labor dispute that paralyzed down a good portion of the nation’s distribution nodes, created a perfect storm of supply chain failures that even larger companies are still struggling to truly recover from.

While a smaller number of domestic food retailers felt the hit quite as keenly as their suppliers — who also exported their goods to Asian markets — the incident still has much to teach.

From a food industry perspective, this type of significant delay in the supply chain means a great deal. It means not having enough product on hand for customers, causing those who leave empty-handed to look for what they need elsewhere. It also means, at least temporarily, raising prices—an inconvenience for shoppers who aren’t privy to the behind-the-scenes details of supply and distribution. All of this represents business that may never come back, which can be problematic, to say the least, even for larger retailers.

Avoiding Disruption Means Looking Forward

From a logistics perspective, the key to avoiding the types of supply chain disruptions that have the potential to ruin a business' reputation and profitability involves understanding exactly what problem you're trying to solve in the first place. Supply chain disruptions are not something you will ever be able to prevent - anyone who has operated in the food industry long enough will tell you that "Murphy's Law" very much applies. Instead, the key involves being prepared for those types of events when they DO occur, allowing you to circumvent the issues they present and maintain smooth operations and business continuity as much as possible.

Protecting your food supply chain against these types of disruptions means performing regular vulnerability audits that begin with you and work back to your suppliers. A rigorous analysis of hypothetical scenarios is required. What do you do if there is another major event like the port dispute? Do you have a plan in place? What do you do if that plan fails? Do you have another? These are all questions that logistics and supply chain management solutions help you to answer so that you can be as prepared as possible for events that you can predict and, more importantly, for ones that you can't.

If you assume that food supply chain disruptions are something that you can avoid, you've already lost a battle that you didn't know you were fighting. Only by using the type of valuable insight provided by supply chain logistics will you be able to identify the types of situations that can potentially disrupt your operations and develop the types of actionable plans that will help you overcome the challenges they present as efficiently as possible. inside-the-mind-of-millennial-cta

Written by: Chris Dixon

Topics: Supply Chain