After years of focusing on speed and hyper-optimization, supply chains are rethinking their business models to offer the agility and flexibility of today's market demands.
By Peter Howard.
Changes in food buying behavior have disrupted the supply chain. As products find new ways into the pantry, companies must find new ways to meet demand.
When Covid-19 reached Australia in 2020, localized panic buying left shelves empty for weeks and gave early indications of problems in the supply chain.
While supermarkets worked willingly to move inventory across the country, with Woolworths at one point sharing inventory with Coles to meet the needs of a remote community, the supply chain was out of the bag.
Efficiency, speed, just-in-time manufacturing, and minimal inventory may have been optimal in a perfect world, but they weren't what it takes to support a nation facing a pandemic.
What went wrong
After the early bouts of panic buying, buyer behavior began to change.
Thousands turned to online grocery shopping with unprecedented growth in home delivery. In 2020, online grocery ordering worldwide increased $ 60 billion year over year.
Other consumers began to limit their exposure in supermarkets by ordering online and collecting on-site. They still do that today. Many people also started shopping for their durable goods online, buying fresh produce from local independent supermarkets or convenience stores that they had not used before.
All of these different buyer behavior has placed new and unprecedented demands on a supply chain that is already under immense pressure.
New social distancing requirements had forced factories to reconfigure production lines and work with fewer staff in hastily introduced shift systems. Imported ingredients and packaging materials were running low, resulting in substitutions and even the temporary withdrawal of the product.
At the same time, the producers had to rethink their delivery routes because restaurants were closed, online orders had grown and houses had become the new end point, which was also painful due to the significantly higher transport costs.
With so much change, supply chains couldn't possibly keep up. Because they were optimized for efficiency and speed, they had little chance of success in conditions that required agility and flexibility. It was clear that they had to change their approach.
Read the article on supply chain and logistics in the June issue of Retail World magazine.