Lack of Collaborative Data, the real issue of the food supply chain
January 20, 2021, 9 min to read
Food is our most basic need - pure, simple and shared across cultures and geographies. Feeding the world is a herculean undertaking - we are able to produce enough food to feed 7.7 billion people daily and in the last 40 years we have cut malnutrition / hunger by more than half all the while driving down significantly the overall price of food (1).
These results are made possible in large part due to ‘Supply Chain Management’ a method maybe even an art - optimized, streamlined, enhanced and leveraged since the 80’s. The global supply chain consists of various actors: from farmers to producers, distributors, supermarkets, clients and many more intermediaries. A large interwoven system of various players to deliver food to consumers.
Although one might suspect that this global supply chain system is all (inter-)connected and serves the same objective, nothing is less true, individual supply chains are highly siloed as each of them is developed for particular producers, transformers and supermarkets and each is optimised to their practical needs, products and specificities. Each supply chain is owned by a particular (agro)conglomerate and integrates various suppliers based on their confidential relationships and their shared target optimizing production and costs.
This continuous drive for efficiency and optimization has led to a global movement of export / import along with very complex production networks: grain being harvested in Ukraine, milled into flour in Turkey might be turned into noodles somewhere in Asia (2). This example may seem far-fetched but these production chains are extremely effective under ‘normal circumstances'.
Covid has made it painfully clear that these supply chains, although highly efficient, are not sufficiently adaptive and flexible in unforeseen situations. From changing consumer demand (i.e. Cheetos sales rose 23% in North America (3), and flour sales increased 125% in France (4)), to held-up cargo and consequently (temporarily) unavailable ingredients like Vanilla (5). During the pandemic, ingredients and products could not move downstream due to border closures, disrupted transportation or unavailable shipping containers and the closing of many production /transformation plants due to Covid outbreaks and labor shortages. (6),(7) The linear streams created to be efficient had the opposite result and created a domino effect.
Why did the food supply chain have such difficulty to absorb shocks in production and delivery? In our opinion the answer lies in part in the origin and purpose of supply chain management and its speculative nature.
While the pandemic could not have been foreseen, the problem was that these large rigorous supply and value chains could not pivot and find alternatives, when facing the above mentioned problems. The lack of visibility on the other elements within the food supply system hindered to find potential alternatives. In a study done by MIT, 81% of companies do not have visibility in their supply chain and 54% have no visibility at all (8).
Factors driving the lack of visibility
Supply chain visibility, traceability and transparency are about collecting and sharing information throughout the supply chain. Lack of visibility and so called “blind spots'' are partly deliberate because companies do not want to share their information with others. On the other hand they are not able to access the right information due to isolated ‘data silos’, lack of shared data standards, and technical challenges due to legacy systems.
Starting with the unwillingness to share; supply chains were never designed to be transparent. Companies and suppliers have feared that divulging too much information would undermine their negotiation power, competitive advantage or expose them to criticism (9),(10).
Although investments in data and digital transformation have been accelerating - they have not contributed to more visibility. Investments have been mostly focussed within companies and the synchronization of internal systems (12),(13). These investments are of no benefit across supply chains, where fragmented and siloed organizations and intermediaries only provide limited data access, spread across multiple unconnected enterprise information, point of sale and logistics systems. To give an example of the scale of disconnect; most agricultural producers have very little visibility into whom, when, where or how their raw materials are marketed and sold (14).
So the first step in creating visibility, traceability and transparency is to identify and collect data from all links in the supply chain. Mapping the various suppliers and understand the stream of goods (15).
Furthermore with data in silos, when trying to bring together these various data points and sources there is a significant disconnect and chance of error. Everyone uses their own standards and systems. Data across the supply chain uses a variety of labels and formats, each with its distinct product numbers and degrees of granularity (9), (13), (14).
In order to create visibility and adaptability across the food supply chain there is an urgent need for collaboration and interoperability standards. Specifically, what data is needed to collect (as data needed by transformer or retailer X might not exist upstream) and how to share and standardize this so it serves multiple usages and users along the supply chain.
Although this is true across all supply chains, the food supply system has an added complexity as it lacks a common standardized language and an ontological (computable language) and semantic infrastructure that everybody can build from. A vivid example; how does one name a tomato? Describe it, quantify it and locate it? How do you represent a container of tomatoes across all datasets from all parties in the supply chain? (16)
There is nothing new in what we have described herein above as the need for shared data access has been clearly defined well over a decade ago (17). The current pandemic has brought the fall out of this known issue to the forefront and into the public domain, through empty store shelves and media coverage.
2021 Resolutions - we need to value data
In a post Covid world, in order to be more adaptive to consumer demands and react quickly to changing events or geopolitical challenges; we need to gain insight across the broader supply chain and into the operation of suppliers and competitors as this article has been advocating.
As the barriers for data-sharing collaborations are primarily trust-related and technical (12). These ‘technical’ interoperability issues are, in our opinion, solvable with the help of a proper data strategy, reference architecture and data engineering. We should start 2021 by revisiting the terms of transparency and visibility with all suppliers. The lack of transparency as experienced during the pandemic was mainly a negative side-effect of the continuous drive for efficiency (primarily margins/ profit). “The negotiated delivery terms consistently prized price over openness. You get what you pay for” (9).
Data sharing should become a standard part of any service-level agreement and negotiations should better balance price, quality, and visibilbility (9). These requirements will come at an additional cost but investing in long-term supplier relationships and data sharing comes with high rewards as the below example by Gartner showcases.
“Over a number of years, Unilever partnered and built trust with a key retailer in the U.S. It then coupled these efforts with new analytics capabilities that enabled the forecasting of more accurate consumer demand for ice cream in response to near-term changes in weather patterns. Combined, these efforts led to Unilever’s ability to more accurately and effectively pre-position inventory within its partner’s supply chain to take advantage of short-term spikes in temperatures, leading to over $30 million in additional sales” (18).
These initiatives at the end point of the supply chain should be an incentive for others and are in our opinion only the beginning - we need to recognise that optimising existing supply chains and tracking products will only get us so far … We must collaborate, share data generously, and make use of integrated systems across the various supply chains to establish true visibility and transparency.
Transforming Supply Chains into Supply Platforms
Only when we have true visibility in the overall global food supply chain can we become efficient in the sense that we not only account for cost but also adaptability and availability. On a global scale $500 billion in annual food waste is occurring from food harvest to distribution and retail (19). In the United States alone 30 to 40% of food is wasted while at the same time 1 in 8 Americans experience food insecurity (20). Consider that by 2050, the world population will reach 9.1 billion, putting even more pressure on global food resources (7).
A telling example of the need to redefine the food supply system, was the reported widespread dumping of crops and milk during the pandemic. Food that was originally being produced for restaurants and food services, closed on government order, distributors were struggling to reroute before it spoiled. Pivoting from established channels, preferred supplier contracts and distribution partners’ logistical and data systems proved to be a challenge and often it was cheaper for farmers to have their crops rot on the land, instead of harvesting (21).
In our opinion food spoilage and food insecurity are not so much a distribution problem but something largely driven by lack of available data and visibility. Data should be shared more freely across the food ecosystem, so that the interplay between the various supply chains and changing demands can be more effectively responded to (13). A collaborative platform with accurate and near real-time data can inform distribution, logistics and production on a global scale allowing supply companies to better manage overproduction and underproduction, to forecast food shortages and reduce waste (14). Integrating all food supply chains (agro food companies and independent producers) and data into one intelligent platform including the data from legacy systems will allow better insight through modelling and the ability to pivot and respond to changing circumstances; so that the previously described domino and cumulative effects can be mitigated (13).
The current state of the world is calling for an intelligent, collaborative, inclusive and adaptive platform. Let us use the pandemic crisis as an opportunity for transformation by redefining our views of efficiency. Changing our main focus from cost optimization to flexibility and availability. A transparent food supply system built upon collaborative data with a shared taxonomy can more efficiently match and adapt supply and demand and make a meaningful difference in valuing food beyond cost and margins.