Is the Food Supply Chain Really Breaking?

In April 2020, Tyson Foods took out full-page ads in The New York Times and The Washington Post warning that the food supply chain was breaking in the era of COVID-19. Experts pointed out that the ads were focused on COVID-19–related closures of meat processing plants, that Tyson was being alarmist, and that Americans were not going to run out of food anytime soon.

While the panic buying seen early on during the pandemic and concerns that the food supply chain was “breaking” have largely subsided, they did spark overdue conversations about the topic: The food chain is fragile—and it’s a problem we need to tackle.

Here are some of the weak links in our food supply chain and suggestions for how we can fix them to optimize the food industry—during COVID-19 and beyond.

Too Many Data Silos

Let’s take a look at our food supply chain. We have more than 200,000 companies trading with one another, 3.7 million farms, and 45,000 grocery stores. If you’ve ever managed a handful of employees, or even tried to get a few friends to agree on a restaurant, you can imagine how difficult it is to get all of these moving parts to work together.

No matter how they order and receive products, supply chain managers must juggle multiple supply chains, third-party vendors, and more to ensure that the end customer gets what they want, when they want it. Storage, inventory control, and transportation also need to be perfectly orchestrated to make this happen. Crises, industry shifts, shifting weather patterns, changes in the environment, and store promos only add to the confusion.

Right now, all of this is precariously balanced on top of outdated or clunky communication systems such as email, phone, and paper purchase orders, all of which keep businesses from accessing valuable data about sales and consumer trends, among other information.

High complexity and low data are a mix that can hurt any business. In his book The Complexity Crisis (Platinum Press, 2008), John Mariotti says that more data is often accompanied by a “better granularity regarding the consequences of the amount and nature of the complexity, and its relative impact on profitability.”

Right now, [the supply chain] is precariously balanced on top of outdated or clunky communication systems [that] keep businesses from accessing valuable data about sales and consumer trends.

Increasing Costs Disrupt the Food Supply Chain

Higher costs amount to lower profits, and these costs disrupt entire food supply chains as they are passed to the next partner in the chain.

Higher fuel prices and labor costs are big cost drivers as well, but here are some of the more controllable expenses that can cut into profit margins for food manufacturers:

• Poor planning and inefficient routing, which lead to wasted fuel and product loss;
• Stocking or stockpiling inventory, which ties up capital and can lead to food waste when the goods are not sold;
• Choosing the wrong suppliers due to lack of good data around supplier prices and reliability; and
• Overproduction due to the lack of visibility around consumer demand.

The complexity referenced earlier is a major culprit in each of these expenses. The less we know about what is happening with our partners, customers, and the market at large, the more we are reduced to making educated guesses about routing, stocking, and production.

Slow Shipping, Unsafe Storage

Getting food where it needs to be in a timely manner, keeping it fresh during transportation and storage, and handling it efficiently are a challenging set of tasks, especially for smaller businesses. One misstep along this chain, and the end result can be ruined product and/or fines.