How Disruptions in the Food Industry Impact Supply Chains: A Research Report on Challenges Faced

Introduction

Before a customer purchases a product, it would have been transported along a supply chain. A supply chain includes all parties that are involved in the products journey from raw materials to customer. This involves, but is not limited to, “manufacturer, suppliers, transporters, warehouses, retailers and the customer themselves” (Chopra, 2014, pg. 1). When an occasion occurs that causes a delay or blocks the supply chain, a disruption occurs. This disruption is likely to affect the whole supply chain. These disruptions are likely to result in lost profits. Although firms across the globe have always been faced with supply chain disruptions, globalisation has caused these disruptions to become more complex. With some firms choosing to outsource or single source the complexity of the disruption and the risk of occurrence increases. This research report will be focussed on supply chain disruptions that occur in the food industry sector; this is an extensive industry due to the need to feed the world’s population of over 7 billion people. To illustrate the size of this market, in the UK alone the total expenditure on food and catering in 2020, was “£208 billion” (UK GOV 2022). “54%” (UK GOV 2022) of these products have processed through nationwide supply chains, the other 46% have processed through global supply chains. Disruptions in this industry are considerably more fractious due to it containing many perishable goods. Therefore, long delays can result in the product being unsellable, and so the costs of disruption are high. The supply chain for most of the food industry’s products begins on farmlands producing raw materials. Many fruits and vegetables can only be grown in certain climates, this makes many food supply-chains global, and goods sold having to travel long distances to reach their destination. Using a range of academic literature and newspaper articles the many causes of disruptions in the food supply chain (FSC) have been critically analysed to discover the challenges faced by the FSC in this research report. Research has also been conducted to find methods to overcome and limit these disruptions, as well as and mitigating the risk of them occurring.

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Mehtodology

Research Design and Collection

An inductive approach has been exercised using an emergent research design (Saunders et al 2012), this has allowed for a richer perspective to be established. A qualitative study has been achieved using secondary research by conducting a literature review. Secondary data is “data that has already been collected for another purpose” (Saunders et al 2012). This includes both raw data sets and published summaries. This method is advantageous due to the ability to collect wide data sets with the limited time frame for research. It is also advantageous as comparisons can be made across data sets and so trends can be established. This method includes using a wide range of peer-reviewed academic research from journals. Documentary resources were utilised by using newspaper articles from publishers, including The Financial Times (FT). Previously published data sets from government websites (including GOV.UK) was also used. By using a range of different secondary data resources, it has ensured high levels of validity and the ability to generalise the findings of this research report.

Literature Review

LeMay Et Al (2017) defines ‘supply chain management’ as the “design and coordination of a network through which organisations and individuals use [and] deliver… material goods; acquire and distribute services and make their offerings available to markets, customers, and clients” (LeMay et al, 2017, pg. 1146). This definition is appropriate to apply to FSC’s. It describes the methods and activities in which food products, are processed from farmlands to retail stores. The definition is inclusive of many different supply chains as it includes both products and services, as well as three different recipients “markets, customers and clients”. (LeMay et al 2017, pg. 1146). This is advantageous to this report as not all supply chains, especially in the food industry, finish with a “customer”. For example, with humanitarian logistics, delivering food, it may be more appropriate to describe the recipient as a “client”, as they may not purchase the item through monetary means. The definition is also inclusive of products that may not go on to be sold. These are all possibilities for the end of a supply chain in the food industry. A disruption to the supply chain is “any significant breakdown… between production and consumption activities” (Reddy 2016). The consequences of a disruption in a FSC are signified by Wicaksono et al (2022), who stresses the importance of resilience in FSCs, due to the high levels of vulnerability faced. The levels of vulnerability are higher in this industry sector, because of the perishability of products making delays costly to suppliers. Disruptions at any stage will have amplified effects along the supply chain. One disruption that effects FSC’s is the increased frequency of extreme weather events that can cause a variety of disruptions across the chain. Failed crops (Karl 2009) caused by both droughts and floods, will result in a limited supply of items causing a major disruption. An example that shows the scale of losses to be made includes the 2012 drought in America that reduced the supply of corn and soyabeans, leading to a loss of $35billion (Reddy et al 2016). Additionally, these disruptions cause other effects along the chain. Transportation in a supply chain limited as roads may be blocked, or airports may be closed. The supply of fuel for transportation may also be disrupted causing further delays. These types of disruptions have an increased risk for supply chains that pass coastal areas due to sea levels rising (Reddy et al 2016). The delays caused are more expensive in this industry, due to the requirement of temperature-controlled storage and transport which uses more fuel (Reddy 2016). Variability of demand, by customers for food products, also causes disruptions upstream in the supply chain. Chocolac et al (2016) investigates and confirms the existence of the “bullwhip effect” in the food industry. This phenomenon defines the increased negative effect of variability the further upstream the disruption reaches. Chocolac et al (2016) confirmed the existence by finding an increased standard deviation as demand increases through from customer to supplier. The bullwhip effect is disruptive in the food industry, as if a firm cannot deliver supply levels that meet the demand levels the firm will make limited profits. Customers may also go on to choose a substitute firm. A final and current disruption to FSCs, is the impact of pandemics. With many countries declaring a state of emergency and introducing legal restrictions on a global scale, many workforces have been limited. This causes major disruptions from production through to retail stores. With people staying at home there was major increase in demand of food which would have triggered a bullwhip effect across many foods supply chains. Although COVID19 is a current disruption, it is important to consider previous epidemics which have also disrupted the production of food such as bird flu, foot and mouth disease and E. coli (Aday et al 2020). Aday et al (2020), suggests further effects of a pandemic on the food supply chain including the limited migrant workers due to travel restrictions. This reduced the workforce further across the supply chain. This along with staff off either ill or quarantining resulted in major staff shortages. This causes delays. This shows both a negative economic impact as well as a negative social impact due to many of the population without work and therefore without pay. It is important to consider that this staff shortage was apparent before COVID 19 (Aday et al 2020), and that the pandemic has amplified the issue, causing further disruption. Aday et al (2020) focuses on the short-term effect on the FSC, however Arianina et al (2020) focusses research on the long-term effect. They state that the pandemic is likely to have a lasting effect on the FSCs, on the way they “operate and… prepare for crises in the future” (Arianina 2020). The disruptions that firms have faced along the supply chain should be used to detect and make changes so that supply chains are resilient in future global emergencies. (Arianina 2020).

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