Supply chains are delicate ecosystems, that flex, extend and contract depending on a wide range of factors both within and outside of your control. In this blog post, we examine five of the biggest supply chain risks you should consider if you operate within agriculture.
1 – Food security fraud
In January 2013, a horse meat scandal swept Europe, with many supermarkets and catering companies across the continent affected. Random testing by food standard bodies found that undeclared hose meat was identified in beef burgers, along with other beef-related products.
This situation isn’t just isolated to horsemeat in beef products. Olive oil, a staple in Mediterranean diets, is also a target for fraudulent activities. It can be diluted, decreasing its quality, but without changing its outward appearance. It’s the same with Manuka honey, which is often substituted with inferior goods.
The impact of food security fraud can have a devastating impact on businesses resulting in significant losses, as fines from regulatory bodies and loss of consumer confidence take its toll. To counter the challenges faced by food security fraud, organisations should take steps to simplify their supply chains, as well as increase its visibility with supply chain mapping.
We’ve blogged about food fraud extensively and you can find out more here.
2 – Political risks
Political risks can cause serious supply chain disruption for those operating in agriculture. Many products, such as coffee, soya beans and cocoa are sourced from countries that don’t have stable governments in place. This can cause supply chain challenges, should the political situation destabilise in these nations.
But even in countries with stable governments, there are significant political challenges. For instance, Brexit is set to change the way the UK sources its food, as its new relationship with the EU becomes clearer. This could mean more tariffs, deregulation in some areas, or adhering to the existing framework.
In addition, the UK is negotiating a comprehensive free trade agreement with the US, with food at the top of the agenda. It’s not clear what is exactly happening with this quite yet, but much has been made about the UK government planning to relax certain measures around food quality in order to secure a free trade agreement.
3 – Non-damage business interruption
Non-damage business interruption presents a significant risk to agriculture supply chains, with COVID-19 demonstrating this. The pandemic has caused significant short-term disruption for commodities, with key products becoming scarce.
But away from COVID-19, other viruses have the scope to cause significant business disruption, with the swine flu, avian flu and foot and mouth epidemics resulting in significant culling of livestock as well as falling consumer confidence.
Mitigating this risk involves, investigating insurance options is a prudent course of action, but is worth ensuring that whatever policy you might take covers infectious diseases.
A comprehensive way to mitigate non-damage business interruption, certainly when considering your supply chains, involves actually mitigating your supply chain risk. This guide, titled ‘How to manage supply chain risk’ is packed full of useful tips to help you manage situations outside of your control. It contains a four-step process:
- Identify and document unknown risks
- Build your supply chain risk management framework
- Keep an eye on risks
- Make people accountable and regularly review
4 – Extreme weather
Climate change continues to impact weather conditions across the world. From drought to flooding, unpredictable weather patterns have made it more difficult for those seeking to manage supply chain risk in the food industry.
A paper commissioned by DEFRA, and compiled by Cranfield University, discusses the resilience of in the food chain. In an analysis of the yield of potato and wheat in the UK it concludes:
- Production yields – direct weather impacts may affect various stages of crop production, may damage soil structure and may impact seed stores.
- Resource concerns – water levels, soil conditions, temperature and availability of light.
- Operational factors – specific to the potato market whose structure (e.g. production contracts, land ownership) make the sector susceptible to consecutive years of reduced productivity.
Other examples include logistical challenges caused by extreme weather. For instance, landslides are becoming more prevalent, like those experienced on the Yungas Road in Bolivia in 2019. Not only did the disaster claim 14 lives, but it also disrupted that vital supply chain route.
Once again, mitigating extreme weather issues within your supply chain requires a robust risk management strategy, and we’d recommend using our guide to help you plan.
If you’re interested in finding more about the Yungas Road, and other extreme supply chain routes, read our blog post here.
5 – Firms only monitoring tier one and tier two suppliers
Many organisations are putting their food supply chains at risk by only monitoring tier one and tier two suppliers, according to a report by SAI Global. It’s imperative that firms spend time mapping out their entire supply chain to analyse weak points.
Failure to do so could have serious consequences. For instance:
- You don’t know how much your supply chain can flex, or be able to identify weak points
- Possibly be blindsided by vendors further down your supply chain that engage in illicit activities such as DJ Haughton, the chicken catchers who subjected Lithuanian workers abhorrent conditions
- Your procurement team won’t be able to create a supply chain risk management strategy because it won’t fully understand the intricacies of your supply chain
eProcurement software can help you scrutinise and gain an understanding of your suppliers. Tools like web3 empower procurement teams with the technology to carefully scrutinise and understand their supply chains and help them plan for any eventualities.
There is a myriad of other risks. Is there any you think we should add?
As supply chains continue to be more and more complicated, the risks grow creating a layer of complexity to sourcing food that didn’t exist 20 years ago. We believe the tips in this article should help you and your team think of what risks you should try and prepare yourself for.
Is there anything we’ve missed off or think should be on there? Let us know on our Twitter and LinkedIn channels.