Delivering Performance in Food Supply Chains

Carlos Mena, Graham Stevens

• Publisher: Woodhead Publishing
• Year: 2010
• Print ISBN: 9781845694715
• eBook ISBN: 9781845697778
• Topic: Technology & Engineering
• Subtopic: Food Science
• Index: Technology & Engineering

Food and drink supply chains are complex, continually changing systems, involving many participants. They present stakeholders across the food and drinks industries with considerable challenges. Delivering performance in food supply chains offers expert perspectives to help practitioners and academics to improve their supply chain operations.The Editors have identified six key challenges in managing food and drinks supply chains. Each section of the book focuses on one of these important issues. The first chapters consider the fundamental role of relationship management in supply chains. The next section discusses another significant issue: aligning supply and demand. Part three considers five different approaches to effective and efficient process management, while quality and safety management, an issue food companies need to take very seriously, is subject of the next section. Parts five and six review issues which are currently driving change in food supply chains: the effective use of new technologies and the desire to deliver food sustainably and responsibly.With expert contributions from leaders in their fields, Delivering performance in food supply chains will help practitioners and academics to understand different approaches in supply chain management, explore alternative methods and develop more effective systems. - Considers the fundamental role of relationship management in supply chains including an overview of performance measurement in the management of food supply chains - Discusses the alignment of supply and demand in food supply chains and reviews sales and operations planning and marketing strategies for competitive advantage in the food industry - Provides an overview of the effective use of new technologies and those that will be used in the future to deliver food sustainably and reliably

1

Delivering performance in food supply chains: an introduction

C. Mena and G. Stevens, Cranfield University, UK

Abstract:

The aim of this book is to provide a supply chain perspective of the food and drinks industry from farm to fork. The focus is on managing across functions and improving performance by addressing the challenges affecting the industry. The book is targeted at both practitioners and academics who are interested in understanding the key levers of performance in food supply chains. This introductory chapter provides an overview of the scale and structure of the food and drinks supply chain. This is followed by a discussion of the key trends affecting the industry, such as globalisation, price volatility, economic recession, product diversification, sustainability and corporate social responsibility. Six key challenges associated with managing food and drinks supply chains are introduced: managing relationships, aligning supply and demand, managing processes efficiently and effectively, maintaining quality and safety, leveraging technology and managing responsibly. Each of these challenges forms a section of the book and each section comprises three to five chapters. In this chapter we provide a roadmap for the book introducing the reader to the key challenges and discussing the contribution of each topic to supply chain performance.

Key words

challenges

food and drink supply chains

performance

trends

1.1 The changing nature of the food supply chain

The earliest human settlements were located in the region between Mesopotamia and lower Egypt known as the fertile crescent. This region had the right conditions to support a stable food supply, such as access to water for agriculture and opportunities for hunting and fishing. Compared to nomadic tribes, these first settlers faced a different set of challenges: trying to balance supply and demand and making decisions about how much food to produce, store, transport and trade. They could be called the first supply chain managers, although the term was not in vogue at the time!

The term ‘supply chain’, emerged in the 1980s to describe ‘a system whose constituent parts include material suppliers, production facilities, distribution services and customers linked together via a feed-forward flow of materials and a feedback flow of information’ (Stevens, 1989). Initially the study of supply chains focused on industries that involve complex assembled products, like automotive, electronics and aerospace. However, food supply chains are different to those in these industries and blindly importing their concepts and tools without recognising the differences would be risky. Some of the main differences are:

• Seasonality: many industries are subject to seasonality, but food chains have seasonality of both demand and supply, and organisations need to structure their supply chains around these cycles.

• Health, nutrition and safety: food has an impact on the health of the consumers. As a result, issues of quality, traceability, safety and risk management are critical success factors.

• Short shelf life and volatile demand: products often have short shelf life and demand is sensitive to many factors such as weather changes, promotions and special events. Since holding stock to cover against unexpected demand is not an option, responsiveness and speed are more important.

• Impact on the environment: all industries have an impact on the environment; however, food has a disproportionate effect because of the extensive use of resources like water, energy and land, and the unintended outputs such as carbon dioxide (CO₂) emissions, pollution and waste.

Food supply chains have evolved over the years, influenced by an array of economic, social, environmental and technological factors. Early supply chains were short, local and relatively simple in terms of the number of activities, inputs and outputs. Modern chains, on the other hand, are global and complex, offering a vast array of products to cater for the ever-changing needs of consumers.

Changes in the food system have brought many benefits for the consumer: economies of scale have helped to keep costs down; quality and hygiene standards ensure food is safe to eat; convenience foods have made cooking easier and quicker; food preservation methods have reduced the need for frequent purchases and allowed the consumption of out-of-season foods; and online shopping has allowed customers to buy food from the convenience of their home (or office). Furthermore, the range of products on offer has expanded greatly, catering for diverse tastes, trends and health requirements. However, these changes have also brought with them new challenges for the industry. Issues such as sustainability, health, nutrition and corporate social responsibly are high on the agenda of most food producers and retailers.

The evolution of food supply chains has taken place at different rates in different parts of the world, depending on factors such as income levels, degree of urbanisation, natural resources, infrastructure and trade policies. However, trends appear to show convergence in food consumption and delivery systems, with developing nations following a similar pattern to that of developed ones (Frazão et al., 2008). This book will take the perspective of food supply chains in developed countries, assuming that chains in other parts of the world are likely to follow a similar path.

In this initial chapter we will provide a top-level view of the global food supply chain, setting the context for the entire book. We will refer to the global food chain as being the complex network of individuals and organisations involved in producing, distributing and trading food and beverages across the world. First we will discuss the scale and structure of the food system, outlining the key players in the industry. We continue with a discussion of the trends and challenges that are shaping food supply chains and establish a structure for the book considering these challenges. Finally, we conclude with a section focusing on the key factors for delivering performance in food supply chains.

1.2 Scale and structure of the global food chain

The global food chain is extremely fragmented, with millions of participating organisations around the world, and this makes it difficult to assess its structure and scale. Figure 1.1 depicts the general structure of the food supply chain; at one end of the chain we have fishing and agriculture (including agricultural input such as seeds and fertilisers), in the middle there are processors, packaging suppliers, distributors, wholesalers, retailers and caterers, and finally there are the consumers. This is a supply chain in which everybody has a stake.

Fig. 1.1 Structure of the food supply chain.

Estimates for global food retail spending for 2008 range between US$ 3.6 and 4 trillion – up by almost 20% from 2004 figures (USDA, 2008a; Datamonitor, 2009). This trend is expected to continue over the next five years and it has been estimated that by 2013, global sales of food will reach US$ 4,602 billion (Fig. 1.2 presents the trend and forecast of food retail sales over the period 2004–2013). Furthermore, the World Bank estimates that by 2030, worldwide demand for food will increase by 50% from 2009 (Evans, 2009).

Fig. 1.2 Value of global food retail sales (Datamonitor, 2009).

The economic and social role that the food industry plays varies from country to country, but its impact is substantial even in the most developed countries. It has been estimated that the entire food industry is responsible for around 10% of the USA economy (USDA, 2008b) and around 7% in the case of the UK (McDiarmid et al., 2008). Similarly, estimates indicate that in the USA, the food industry employs around 16.5 million people (10.6% of total employment) (USDA, 2008b) and around 3.7 million people in the UK (14% of total) (McDiarmid et al., 2008). In developing countries, figures tend to be considerably higher and it is estimated that around 40% of the world’s labour force is employed in agriculture alone (CIA, 2009). These figures highlight the significance of the industry both economically and socially.

The value of global agricultural output has been growing at an average rate of 2.3% per year since 1961, outpacing the average population growth during the same period which was 1.7% per year (FA...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Contributor contact details
• Woodhead Publishing Series in Food Science, Technology and Nutrition
• Chapter 1: Delivering performance in food supply chains: an introduction
• Part I: Managing relationships in food supply chains
• Part II: Aligning supply and demand in food supply chains
• Part III: Managing processes efficiently and effectively in food supply chains
• Part IV: Maintaining quality and safety in food supply chains
• Part V: Using technology effectively in food supply chains
• Part VI: Delivering food sustainably and responsibly
• Index