Today’s interconnected supply chains have become increasingly complex and fragile, prone to complications from weather events, geopolitical concerns, skilled labor shortages, and increased theft that are contributing to increased costs and risk exposure.
Although supply chains have started to unclog, the fragility seen in the early 2020s remains, and the next disruptors will most likely impact the global movement of goods. Technology has allowed increased visibility into supply chains, but has also brought new challenges, including increased exposure to cybersecurity threats, from data breaches to ransomware, that can compromise sensitive customer information, disrupt operations, and damage reputations.
With higher costs and continued threats to both physical and digital supply chains, retailers, restaurants, and food and beverage companies like yours require an agile mindset to identify and quickly address ever-evolving challenges. This should enable you to pivot in order to build a resilient supply chain that is in line with shifting customer requirements and expectations.
Navigating key supply chain challenges in food and beverage retail
From shortages of key ingredients to transportation bottlenecks to delays in delivery, supply chains are prone to numerous challenges, which at times can lead to empty shelves, food spoilage, and an inability to fulfill contractual obligations. Three overarching challenges are top of mind for the industry as organizations seek to build resilience.
Managing increasing supply chain costs
The massive supply chain challenges experienced in the early 2020s have contributed to a rethink of the just-in-time concept. Instead, businesses are stocking up on critical supplies and storing them closer to their end customers. But the just-in-case approach brings increased carrying costs and accumulation risks, which typically contribute to higher insurance costs.
And at a time when social media channels are prevalent, influencers can play a critical role in a product’s popularity. However, their immediate marketing influence can create challenges in ordering and stocking sufficient amounts of popular products.
Further, a rise in cargo theft, which spiked by 57% in the second quarter, has increased operational costs and in some cases impacted insurance pricing. At the same time, the industry is still experiencing significant price increases due to inflation and higher labor costs.
Climate change and natural catastrophes disrupting supply chain
Climate impacts on key infrastructure are increasingly complicating transportation. For example, the Mississippi River — through which 60% of US grain exports and many other critical supplies pass — continues to run at historically low levels, sometimes requiring barges to lighten their loads.
Natural catastrophes, including hurricanes, floods, earthquakes, and fires, can destroy products, delay deliveries, or even block access to warehouses and distribution centers.
Case in point: A warehouse fire at a large retailer caused around US$200 million worth of product loss, with additional cleanup and rebuild costs. Resolving the claim required a joint effort by Marsh specialists, including forensic accountants, and insurers to accurately value the loss and obtain needed coverage for following years.
Cyber threats in supply chain
A cyber incident can disrupt operations, expose sensitive data, and cause significant financial losses. According to one study, more than 60% of organizations in the US were affected by software supply chain attacks in 2022, with even more indicating that they were not satisfied with their visibility into risks across their supplier base.
The digital nature of today’s supply chains, coupled with increased dependency, have introduced new vulnerabilities, including the risk of attackers gaining access to your data or systems through a third party. A software vulnerability, for example, can lead to attackers infiltrating systems, potentially installing malicious code on your network. Aside from the potential exposure of sensitive information — either about the company or clients — these breaches can lead to significant disruptions. For example, a network disruption can impact a business’ ability to order or receive products.
And as disruptive technologies, such as artificial intelligence, come online or their use grows, risks will continue to evolve. New threats will require novel approaches to identify, manage, and mitigate risks.
How to improve your supply chain’s resiliency
Interconnected supply chains remain vulnerable to events — whether a natural disaster, geopolitical pressures, or other risks — anywhere in the world. It is therefore important for senior leaders to take both short- and long-term approaches and take action now to identify potential disruptors and build a supply chain that can withstand new pressures. As you take steps to make the supply chain more resilient, consider the following actions.
Increase visibility throughout supply chain
Each entity needs to understand its individual supply chain, who contributes to it, and where the weaknesses are. Having a clear line of sight into a product’s entire journey can help you identify potential points of failure, for example, an overreliance on a particular supplier or an accumulation of suppliers in a region prone to natural disasters. Go beyond the first tier to understand risks that suppliers and their suppliers may face that could impact the timely and cost-effective delivery of your products.
Take action to improve visibility into your distribution methods, especially considering today’s omnichannel customer journey. A clear view into the products in your stores, restaurants, warehouses, or distribution centers helps to identify shortages or excesses and can also inform your insurance purchasing.
