Dedicated supply chains are best – Rabobank
THE food supply chain is in need of a shake-up according to a new report from Rabobank.
The bank says it detects flaws in the current structure which leave the food and agri-sectors ill-equipped to respond to new complex pressures.
The report calls for the industry to transform the way supply chains are organised, by adopting longer-term supply agreements and, co-operative relationships with upstream and downstream partners.
It identifies the dedicated supply chain model as the best next step for food and agri-supply companies saying this model has the potential to revolutionise the industry by making it more productive, innovative, safe and sustainable.
Explaining the complexity of pressures now facing the industry, Rabobank says traditional pressures like supply and demand dynamics, a burgeoning population and rising agri commodity prices, are being compounded by a new set of external influences.
The direct use of agri commodities for biofuel production and an increased awareness of the energy intensity of food production, for example, have embroiled ‘F&A’ companies it says in an ongoing food versus fuel debate.
Similarly, speculation in agri commodity markets and the regulatory responses this has triggered from governments worldwide, has added to the complexity.
Rabobank says in a dedicated supply chain structure, upstream suppliers and processors enter into long-term partnerships with each other and a downstream chain leader. Information and insights are shared along the chain’s length for the benefit of all members.
Rabobank global strategist Justin Sherrard said: “Closer co-operation of this sort will transform the nature of ‘F&A’ partnerships from transactional ones that are centered around chasing price, to a system focused on creating value”.
Dedicated supply chain advantages:
- Reduced risk from longer term, more stable agreements which reduce exposure to price volatility
- Improved productivity - better insights into chain requirements improve process efficiency
- Access to new markets - better insights into downstream needs and opportunities can better inform product innovation
- Enhanced brand and reputation - Companies can help their partners on other product attributes, such as sustainability
- Improved access to capital