P#230586679Global Supply Chain Management 1 The Impact of the COVID 2022
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Global Supply Chain Management 1 The Impact of COVID-19 on the Global Agricultural/Food
Supply chains
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Institution
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Introduction
The ongoing COVID-19 pandemic has tested the global supply chains across industries. However, supply chains in some industries are more affected the others. Undoubtedly, the food and agriculture industries are among the worst hit by the pandemic (Wunderlich, 2021, p.101; Kumar et al., 2022, p.4
). Since 2020, the confounding factors, including pandemic-led lockdowns and pandemic-related oil price shocks, have jeopardized the global agri-food supply chains. As a result, this has led to a sharp spike in food shortages, threatening global food security. Consumers across nations are the biggest losers of the current crisis (Wunderlich, 2021,
p.101; Kumar et al., 2022, p.4
). During the pre-crisis, the global food supply chains were stable, and the commodity prices for significant food prices were affordable. In addition, the COVID-19
crisis has pushed hundreds of millions of people worldwide into extreme poverty because of the soaring food prices and shortages (
Kumar et al., 2022, p.4)
. The central objective of this discussion is to empathize with the interconnected supply chains in the food and agricultural industries. Undoubtedly, the ongoing COVID-19 has proven that global supply chains are interlinked, especially on basic commodities such as food and agricultural inputs. Therefore, agri-food supply actors, including producers (farmers), food processors, retailers, and the government, should build resiliency by leveraging big data, IoT (Internet of Things), and other digital technologies.
i) The Impact of COVID-19 on the Global Agricultural/Food Supply Chains
The agricultural and food supply refers to all activities, including producing, distributing, processing, and marketing farm outputs and foods to the consumers, as revealed in the image below (
Abideen et al., 2021, p.2)
. Importantly, these actions seek to build consumer value and
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sustained competitive advantage. Therefore, any market disruptions could bring enormous suffering to the world population. That means that a sustainable agricultural and food supply is critical for a promising future.
(Wunderlich, 2021, p.103)
Various factors disrupt food supply chains, including wars, climate change, and pandemics.
Such disruptions affect all supply chain stages, from production to consumption (Wunderlich, 2021, p.103). For example, the lockdowns led to a standstill in the production and distribution systems, eroding productivity and creating shortages in the market. Mainly, this arose from the lockdowns implemented to contain the virus spread. In addition, the personnel shortages caused by the physical sickness (COVID-19 infections) and quarantine measures implemented during the pandemic also slowed productivity. Hence, this weakened efficiency in the production facilities (Wunderlich, 2021, p.103). In 2020, many food processing companies such as Tyson Foods and Cargill Meat Corporation, halted operations to protect employees from infections (Wunderlich, 2021, p.103). As a result, this eroded global harvest, creating shortages for the food
processing industries.
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Disruptions in the food and agricultural industry were highest in the less automated companies. For example, automated grain processing and handling companies that depend less on manual experienced lower disruptions during the COVID-19 pandemic. Likewise, productivity in highly mechanized countries such as Japan and Denmark was also minimal compared to less advanced countries (Aday & Aday, 2020, p.169; Wunderlich, 2021, p.103). Therefore, this reflected the importance of technology for the agricultural and food industries to withstand the pressures.
The pandemic also created logistical challenges for the food and agricultural industry. As argued before, many companies in the agricultural and food sector had to halt operations to limit the widespread of COVID-19 infections (Aday & Aday, 2020, p.169). Because of the logistical challenges, many agricultural producers, including dairy and grocery farmers, had to discard their output and could not transport items in real time. The halt of travel activities with a surge in
the infections also cost horticultural producers such as flower farmers to incur huge losses (Wunderlich, 2021, p.103; Aday & Aday, 2020, p.169). Most affected producers were those dealing with perishable items such as flowers, meat, and milk. Hence, this fueled both a demand-
side and supply-side crisis, including consumer shortages.
The financial pressures on the economies, companies and consumers also constitute a major challenge created by the pandemic. Because of the job losses and economic shutdown during the pandemic, many people are struggling to feed themselves (Aday & Aday, 2020, p.170). In addition, the pandemic has also accelerated the harsh economic times around the world (Aday & Aday, 2020, p.170). As a result, this has hiked the food prices and eroded the consumers' affordability and purchasing power.
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Another COVID-19 impact on the supply chains was the disruption of the consumption behavior within the food and agricultural industry (Wunderlich, 2021, p.101; Millar, 2022). Undoubtedly, the pandemic altered the daily routine and social lives, creating boredom and stress. As a result, this pushed people to consume carbohydrate-rich foods. The decline in purchasing parity also contributed to unhealthy eating habits within the population (Aday & Aday, 2020, p.171). Chronic inflammation caused by COVID-19 complications also encouraged unhealthy feeding habits.
Pandemic also affected trade in agricultural and food commodities. For example, governments during the pandemic restricted the export of essential commodities, including grain and milk, to meet the local needs. Restricting agricultural exports and promoting imports lead to uneven demand and supply across global food markets (Aday & Aday, 2020, p.173). As a result, this evoked the global fuel crisis in the market.
The pandemic has also affected inventory management across food processing companies and suppliers such as Cargill, Nestle, and Sysco Corporation. During this pandemic, many companies in the food and agricultural industry are desperate to conceal low inventory or food stockouts on their shelves (Wunderlich, 2021, p.101; Millar, 2022). In addition, the ongoing crisis has highlighted weaknesses in JIT (just-in-time) supply chain models (Sultan, 2022). For the last five decades, many companies such as Costco, Walmart, and Amazon have spent enormous energy and time perfecting JIT. But unfortunately, this pandemic has proven that JIT is not resilient to supply chain disruption. Therefore, this may call for reinventing the JIT model in the agriculture and food industries.
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The pandemic also limited economies from sustaining agricultural operations, eroding production, and creating food shortages. Furthermore, environmental pressures such as climate change and droughts limited the global market supply, escalating the global food insecurity crisis
across the global market. While this pandemic has spared no country on food insecurity crisis, the most affected nations on this matter are low-income nations in Africa, Southeast Asia, and Latin America (Aday & Aday, 2020, p.170). As a result, food insecurity has spiked food prices across the key global markets.
The rising energy prices have also affected the agricultural and food industry. Fuel prices have reached an all-time high since the 1973 oil crisis. Because energy is a primary resource, oil price shocks affect every industry, and agricultural or food sectors are not immune to oil-led inflation (
Kumar
et al., 2022
, p.4
)
. In addition, oil prices have grown drastically as the countries reopened their economies, creating market instabilities. Although there are other endogenous factors, such as geopolitical conflict, the pandemic is among the top catalysts that fueled rapid fuel price growth. During the pandemic-led economic shutdown, oil prices declined slightly but surged after the economic reopening (
Kumar
et al., 2022
, p.4
)
. Trends show that oil prices are unlikely to plummet in the foreseeable future.
(ii) How Agricultural/Food Sector Tackled Inventory Management Issues Related to
COVID-19 Outbreak
While COVID-19 has contributed to the remarkable stresses in the supply chain models, agri-food supply chain players, including governments, producers, and companies, have made remarkable progress in inventory management. In addition, policy actions implemented across the governments have reduced the painful mistakes made during the 2007/08 recessions (
Kumar
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et al., 2022
, p.4
)
. For example, despite implementing lockdown measures, governments allowed the flow of essential commodities, including food and drugs. As a result, this allowed governments to mitigate potential starvation among the global population.
Another action adopted by the supply chain players is leveraging technologies such as big
data to predict demand. Through demand forecasting, food processing companies, grocery stores,
and supermarkets reduced stockouts by replenishing stocks in real-time (
Abideen
et al., 2021
, p.2
)
. Accurate demand forecasting across the agri-food supply chain operators also allowed the players to maintain safe stock levels, which these operators drew to sustain new demand levels. Such actions on maintaining safe stock levels reflected a shift from the JIT models. As a result, the global stock levels of essential food commodities such as grains were better during the pandemic than during the 2007/08 recession (OECD, 2020). Perhaps this shows that global agri-
food operators had learned lessons in the 2007/08 recession-led food crisis to respond to the pandemic.
The change in the business model was also part of the efforts adopted by major food suppliers, including fast-food restaurants such as Pizza Hut and grocery stores. Through contactless deliveries, food-based companies sustained their continuity amid the lockdowns. In addition, this allowed major food suppliers to sustain the market demand amid a recession (Aday
& Aday, 2020, p.170). Hence, this allowed agri-food operators to match the demand and supply.
Contactless delivery comes in different forms. For example, some operators use click-
and-collect formats to sell their items online. Farmers also began selling their items directly to the consumers, bypassing the role of intermediaries such as retailers and distributors. Likewise, farmers began offering takeaways to customers during lockdowns (Wunderlich, 2021, p.101;
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Kumar et al., 2022, p.4
). Another example is that online technology linked producers, farmers, and restaurants to food banks.
Moreover, the global agri-food producers and retailers adopted several steps to maintain safe demand levels. For example, some of these operators improved operating hours across the factors and hired more people to sustain the rising demand requirements. Another option is for food processors and retailers to reduce the slower-moving food items and increase the stock of the faster-moving items (Wunderlich, 2021, p.101; Millar, 2022; Kumar
et al., 2022
, p.4
). Furthermore, amid the pandemic, affordability was a key factor influencing purchasing choices (
Kumar
et al., 2022
, p.4
)
. Therefore, stocking fast-moving and cheaper alternatives served the suppliers’ and consumers’ best interests by allowing business continuity and fostering product affordability.
Reducing slow-moving items was also essential in preventing time-consuming and costly
changeovers for agri-food operators. In addition, this simplified inventory management for many
agri-food retailers. Through sustainable inventory management, companies improved their resilience amidst the pandemic. For instance, Walmart, Whole Foods, and Costco stocked their shelves with cheaper and fast-moving alternatives.
Another action is that agri-food suppliers such as P&G, Unilever, and Nestle embraced alternative actions amid the pandemic. Importantly, agri-food operators found alternative sources
of the food supply during disruptions. For instance, Carrefour, a French food retailer, found alternative food suppliers from Pakistan when rice from India became unavailable. According to research, retailers that adopted suppliers in the agri-food industry with greater visibility fared better than those without visibility (
Ali
et al., 2021
, p.102
)
. Similarly, companies that had
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prepared better after learning lessons from past crises such as hurricanes and recessions performed better.
Logistics operations within the agri-food industry also adapted to the emerging COVID-
19 shocks. The collapse in other sectors, such as travel, opened new opportunities for agri-food logistics (Wunderlich, 2021, p.101; Millar, 2022; Kumar
et al., 2022
, p.4
). For example, many passenger aircraft shifted to air cargo transport. In addition, transport of agricultural products via trucks also increased during the period. Mainly, the policies adopted by the government, such as the adoption of green lanes and faster processing of border crossings, also enhance resiliency in the food and supply chain market. Furthermore, governments suspended the bans on the night shipment of essential commodities (Wunderlich, 2021, p.101; Millar, 2022; Kumar
et al., 2022
, p.4
). Moreover, governments also provided exceptional support for safety and hygiene practices (
Ali
et al., 2021
, p.102
)
. Another action adopted by the government is that governments exempt the shipment of essential commodities such as food and drugs from the lockdown measures. In addition, in some countries such as Australia and the USA, the governments loosened the work permit policies or the VISAs to attract seasonal workers to meet the labor market demands in the food and agricultural industries. Such government support promotes the effective functioning of the global
agri-food supply chains.
(iii) The Impact of Advanced Technologies to Help in the Economic Recovery and
Improving Supply Chain Performance
Severe supply chain disruption caused by COVID-19 has driven enterprises to improve their resilience in supply chain management (Wunderlich, 2021, p.103). The recent events such
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as lockdowns have led to a dramatic shift towards integrated and linear supply chains connecting
many players. Enabling this drastic shift are the industry 4.0 technologies such as IoT sensors or devices that provide critical data on maintaining supply chains (Wunderlich, 2021, p.103). For example, smartphones with apps and sensors to monitor environmental conditions are critical. Therefore, this will improve integration and networking in information technology.
However, limited knowledge and skills in digital technologies present a big challenge to integration across the supply chain actors. Research has revealed that training and reskilling the workforce on digital technologies and adapting to changing marketing trends are critical to improving virtual collaboration and helping people operate digital equipment (
Ali
et al., 2021
, p.102
)
. In addition, training and reskilling should focus on helping people deal with digital technologies effectively.
The current COVID-19 pandemic is a leading factor that has accelerated the race for digital automation and enablement to develop an autonomous supply (Millar, 2022). For example, supply chain players across various industries, including automobile and airline sectors,
are increasingly integrating robotic, driverless trucks, delivery drone systems, and autonomous forklifts to improve supply chain effectiveness. Therefore, agricultural and food industries must develop autonomous and digitalized supply chains across all their supply chain activities, from production to consumption.
Agricultural and food industries should also develop connected supply chain infrastructure across procurement, logistics, and marketing. Importantly, agricultural and food companies can use VR (virtual reality), AR (augmented reality), AI (artificial intelligence), and other technologies to develop end-to-end supply chains. Such technologies can inform
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prescriptive and predictive decisions across companies. In addition, these technologies can ease job performance and increase efficiency in food and agricultural supply chain management (Anbumozhi, 2021). As a result, this will increase optimization in the supply chain. From research, it is clear that business leaders have realized that the ongoing pandemic has improved strategic importance in the supply chain (Harapko, 2021). Therefore, food companies, agricultural producers, or suppliers should redesign their supply chain organization to fit the autonomous and digital-focused arena. In addition, supply chain actors in the food and agricultural industry should improve agility in the production, marketing, distribution, and procurement activities (Harapko, 2021). Thus, this strengthens resiliency in supply chain management.
Moreover, the COVID-19 pandemic has also provided a lesson on improving innovative technologies for tracing, isolating, and treating spoilage. Research has shown that contamination during logistics is a significant problem that causes contamination, undermining the safety and health of the food and agricultural supply chains (Clarke, 2021; Harapko, 2021). Therefore, using technologies such as predictive analytics is essential to monitor the movement of the food supplies from production to final delivery. Besides predictive analytics, food and agricultural supply chain actors can leverage blockchain technology to facilitate the supply chain process. As a result, this will ensure effective tracing of contaminated or unsafe foods back to a specific farmer or processing food company. In addition, such technological capability will allow supply chain actors, including food manufacturers or processors, to implement accurate product recalls, reducing wastage and enhancing transparency.
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Technologies such as big data analytics can also allow players across the agricultural and food supply chains to link the fragility and efficiency of the JIT inventory management. For example, according to the recent COVID-19 crisis, JIT inventory management is unsustainable amidst the crisis (Anbumozhi, 2021). For example, meat and milk processing plants such as Nestle and Lactalis closed, costing farmers millions. In addition, animal feed producers and grain
farmers incurred losses from waste or excess inventories (Anbumozhi, 2021). Hence, leveraging big data analytics could monitor, analyze, and predict events with high precision levels. A technological breakthrough can also transform the agricultural landscape by helping suppliers and farmers mitigate nature's impacts. For example, the IoT, drones, data analytics, and
sensors are effective in real-time weather forecasting decisions. As a result, this can inform the farmers to make effective decisions on planting, irrigation, fertilizing, dressing, and applying pesticides or insecticides to the crops. AI and robotics support controlled-environment crop farming, reducing negative environmental impacts (Anbumozhi, 2021). For example, farmers can adopt completed connected and automated smart greenhouse facilities. In smart agriculture, farmers use advanced algorithms to create artificially optimal conditions such as adjusting heating, ventilation, and roof ventilation.
Moreover, technology such as drones has abetted production and logistics systems. For example, drones can help in various supply chain practices, including spraying pesticides, applying fertilizers, and watering plants (Lim, 2022). Hence, this promotes smart agriculture and eliminates the guesswork in farming activities. Drones can also address logistical challenges by allowing real-time delivery of supply chain items (Lim, 2022). Therefore, this can allow food producers or consumers to overcome infections and logistical difficulties created by the pandemics.
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Finally, technology can also help to tackle food waste concerns. COVID-19 pandemic has exposed food waste as a major concern in the agriculture and food industry (Lim, 2022). However, raising the ability to produce food with limited resources has become possible. Technology can tackle food waste from harvesting, warehousing, and distribution at every supply chain stage. Therefore, this can improve efficiency in the agri-food ecosystem. An online marketer can also connect with farmers directly, eliminating the role of an intermediary in the food ecosystem.
Conclusion
The COVID-19 crisis has poked the loopholes and wreaked havoc in the global supply chains across various sectors, especially food and agricultural industries, reflecting the need to improve resiliency in supply chain practices above. Doubtlessly, the ongoing crises have spared no industry. However, the agricultural and food industries are among the hardest hit. Protecting agricultural and food industries is essential because food is a basic commodity needed for human
survival. Therefore, reimaging the global food and agricultural supply chains is necessary to sustain human survival.
The pandemic has created many challenges across all supply chain activities, including production, logistics, procurement, and delivery operations in the agri-food ecosystem. Mainly, this arose from the disruptive effects such as lockdowns and rising oil prices. Because of these disruptions, the global population has seen unprecedented food inflation and commodity shortages. As a result, food supplies, especially the farmers dealing with perishable items such as
milk, meat, and flour, have also experienced food insecurity dramatically.
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Despite the global food supply chain's procurement, logistics, production, and warehousing challenges, agri-food operators and governments adopted robust resiliency measures. With the help of e-commerce, contactless deliveries and takeaway foods gained traction to keep agri-food operators such as fast-food outlets such as KFC in business while sustaining customer demands. In addition, logistics saw a boost with the reconfiguration of passenger aircraft to carry cargo, especially agricultural and food commodities. The governments
also exempted the transportation of agri-food items from the lockdowns. Besides these measures,
other robust strategies are adopted to improve supply chain resiliency across the food markets.
Currently, actors such as the government and agri-food operators should implement significant changes to develop greater supply chain excellence and efficiency are necessary to reduce human suffering caused by food insecurity. In addition, greater visibility is a critical factor in improving the global supply chain in the food and agricultural industries. Importantly, the food industry's actors (suppliers and food processors) can realize greater efficiency and visibility by leveraging technology such as drones, AI, VR, AR, big data, and IAT. The above technologies will revolutionize supply chain systems, allowing agri-food actors to sustain the global population needs.
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References
Abideen, A. Z., Sundram, V. P. K., Pyeman, J., Othman, A. K., & Sorooshian, S. (2021). Food Supply Chain Transformation through Technology and Future Research Directions—A Systematic Review.
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Aday, S., & Aday, M. S. (2020). Impact of COVID-19 on the food supply chain.
Food Quality and Safety
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(4), 167-180. https://doi.org/10.1093/fqsafe/fyaa024
Ali, M. H., Suleiman, N., Khalid, N., Tan, K. H., Tseng, M. L., & Kumar, M. (2021). Supply chain resilience reactive strategies for food SMEs in coping to COVID-19 crisis.
Trends in food science & technology
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10.1016/j.tifs.2021.01.021
Anbumozhi, V. (2021). Enhancing food supply chain resilience through the utilisation of digital and sequence information technologies. https://www.g20-insights.org/policy_briefs/enhancing-food-supply-chain-resilience-
through-the-utilisation-of-digital-and-sequence-information-technologies/
Clarke, L. (2021). 3 Lessons Agricultural Industry Can Take From the Pandemic. https://www.foodlogistics.com/sustainability/agriculture/article/21496965/nanoguard-
technologies-3-lessons-agricultural-industry-can-take-from-the-pandemic
Harapko, S. (2021). How COVID-19 impacted supply chains and what comes next. https://www.ey.com/en_gl/supply-chain/how-covid-19-impacted-supply-chains-and-what-
comes-next
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Kumar, M., Raut, R. D., Sharma, M., Choubey, V. K., & Paul, S. K. (2022). Enablers for resilience and pandemic preparedness in food supply chain.
Operations Management Research
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Lezoche, M., Hernandez, J. E., Díaz, M. D. M. E. A., Panetto, H., & Kacprzyk, J. (2020). Agri-
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Sultan, T. (2022). 5 ways the COVID-19 pandemic has changed the supply chain. https://www.weforum.org/agenda/2022/01/5-ways-the-covid-19-pandemic-has-changed-
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