Sustainability has been on the top of people’s minds in recent years. In order for our world to be sustainable, we need to have a solid and fine-tuned food supply chain. So, what is the food supply chain? The food supply chain consists of different food distribution stages that food products pass through, starting with production and ending with consumption.
Today, companies transport food over longer distances and across continents, typically through bulk shipping methods. Having goods in transit makes the supply chain longer and more fragmented. As a result, consumers are increasingly disconnected from our food sources. It also results in food getting lost or wasted once it reaches the end of the supply chain.
In this article, we’ll cover the basics of the food and agricultural supply chain. By the end, you’ll have a better understanding of the stages of the supply chain, its importance, and any existing problems.
Food Supply Chain: What Is It?
The food supply chain definition refers to the stages of production that food items pass through before they reach the consumer. As the supply chain grows, it becomes more fragmented which creates a disconnect from the original source of food.
A supply chain starts off with raw materials inventory or their components in order to produce a tangible or intangible good, which is considered finished goods inventory. It finishes with the consumption of the produced goods. If any waste is generated during this process, it is then disposed of.
Every link in the supply chain is designed to meet the demand of the following link. This is where demand planning helps. Now that we’ve answered the question, “What is the food supply chain?”, we can move on to the different stages.
Stages of the Food Supply Chain
There are variations in the food supply chain that depend on if the food requires processing or if it’s ready for consumption. Other factors include whether the farmer is supplying the wholesale produce locally or will require it to be sent out for packaging and transportation.
The food supply chain consists of five stages. These stages take food from farm to fork. The stages of the food supply chain include:
- Handling and storage
- Processing and packaging, similar to eCommerce packaging and subscription box packaging
- Distribution, retail, and wholesale (see Wholesale Definition and Wholesale vs Retail Price)
During the production stage of the food and agricultural supply chain, food is grown, cultivated, and/or developed. Producers include animal farms, farmers, and food manufacturers.
There are local and international guidelines, laws, and legislation that restrict producers based on how the food should appear. Quality standards are also in place that the products have to live up to. This includes the color, shape, and size.
Handling and Storage
After harvesting the product, it has to be washed and prepared. Depending on the product, it might not be ready to eat. For instance, farmers harvest bananas while they’re still green. This is because they ripen during their journey to the grocery store and in environments that are strictly controlled.
Processing and Packaging
Food products have strict requirements that they have to meet. In most cases, these requirements are in place in order to make the packaging process easier. The requirements are set by local governments and retailers that have high demands for their suppliers.
When opening a grocery store, it’s likely that you want to sell fresh produce that looks the best that it can. That is the reasoning behind such requirements. Some consumers won’t buy products simply based on their looks, and this is what retailers want to avoid.
During the processing and packaging stage, meat processing plants are also involved. Animals are sent by farmers to meat processing plants to be slaughtered, butchered, and sometimes processed.
Food that has to go through a processing plant include:
- Meat and fish products (minced meat, sausage, bacon)
- Butter and cheese
- Drinks (soft drinks, dairy products)
- Convenience food (ready-to-eat meals, pies, soups)
- Snacks (chips, chocolate bars)
Processed food doesn’t necessarily mean that it’s bad. In fact, some food requires processing in order to make it edible and safe to consume. This includes milk that has harmful bacteria removed during the pasteurization process.
Distribution, Retail, and Wholesale
This is when the longest transportation journeys take place. Once the food leaves the packaging plant, it makes its way to the retail destination which is oftentimes grocery stores. Food is often transported by ship or air (see How to Ship Food).
A food mile refers to the distance that food items are transported during their journey from the producer to the consumer. Food miles measure environmental footprints when it comes to food production.
This is the final stage of the food and agricultural supply chain. Food consummation occurs during this stage, but it’s also the stage in which there is the most food waste.
Importance of the Food Supply Chain
Consumers demand high-quality food products. It’s possible to meet this demand with a solid food supply chain. Those that are involved in the food production process must ensure food safety and sustainable food production.
The goal of the food supply chain is to make quality food products available at competitive costs. This is what allows grocery stores, restaurants, and suppliers to maintain profits and ensure customer satisfaction.
Within the food supply chain, problems arise once raw materials contribute to food waste. Even though most of the food processing meets consumer expectations, there are still incidents that are reported. This leads to recalls which negatively impact the food supply chain’s performance.
Proper food management practices, including restaurant inventory management practices, help to regulate food loss and waste. With this kind of food supply chain management, the quality and safety of food products are ensured.
4 Problems in the Food Supply Chain
When it comes to sustainability, the food supply chain and food distribution play a huge role. It’s one of the most important yet complex logistics programs. However, the food supply chain isn’t as finely-tuned as some might assume.
With an increase in technology trends (see Restaurant Technology Trends) and improvements, there is an increased demand for safe and fresh food. The only way to keep the food supply fresh and safe for consumption is to come up with effective solutions for the problems within the supply chain.
Here are four problems in the food supply chain:
1. Growing Regulations
The supply chain is continuously growing and evolving which results in the need for increased regulation. This regulation is what ensures that workers are protected and paid. It also ensures that the food is safe for consumption.
While most regulations are put in place to protect people from harm, they also cause harm. For instance, the Electronic Logging Device (ELD) mandate requires food and service delivery workers to log their driving hours. This caused an increase in prices, led to firings, and created inefficiencies.
Due to other regulations, it has grown increasingly difficult to hire new labor and import goods. Over time, this slows down the food supply chain due to delayed deliveries and consumer price increases. When regulations start to cause harm to the people, there’s an increased chance of a rise in contamination, shortages, and spoilage.
2. Inadequate Communication Between Supply Chain Participants
Improved technology, such as restaurant technology, makes it easier for people to communicate, especially for those that are involved in the supply chain. However, difficulties exist as there is still a lack of communication within the industry.
The food system and the supply chain are broken up into fragments. Unique logistics systems, such as 3PL companies, are used by each business along with information-sharing policies and individual government laws. Due to this, supply chain participants have a hard time communicating with one another. Poor supplier relationship management leads to delivery delays and an increase in spoilage and/or contamination.
3. Increased Demand
The increase in demand at grocery stores hasn’t stopped growing since the start of the COVID-19 pandemic. This demand increase is good for business profits; however, it brings a lot of challenges and concerns with it.
Grocery stores are required to streamline their workflows in order to protect their workers, ensure that items are stocked, keep safety stock, and work on reordering. This is when knowing the reorder point formula comes in handy. Even though there isn’t a true shortage on high demand products, panic buying has resulted in increased demand and artificial shortages.
Many supply chain participants are looking to get their materials quicker so that they can continue to manage the restocks that grocery stores are requiring. On the other hand, grocery stores are struggling to keep their workforce happy by offering them bonuses and other incentives.
eCommerce is what has helped bridge this gap since some online retailers have started selling big items that are found in grocery store chains. Decoupling inventory can also come in handy in these situations in case there are product shortages.
4. Inventory Management
Participant communication, lack of visibility, and the COVID-19 pandemic have caused many problems for restaurants. Not all restaurants and suppliers have technology that allows real-time insight into their inventory supply, demand, and inventory consumption.
This leads to poor inventory management and a disconnected relationship between suppliers and restaurant owners. Over time, this can result in spoilage, waste, over or under-ordering, and supply uncertainty. With optimized inventory management systems and restaurant inventory software, restaurants have full visibility when it comes to their stock. Blockchain can also help with supply chain visability, while SKU rationalization can cut inventory costs.
Frequently Asked Questions About the Food Supply Chain
Why Is the Food Supply Chain Important?
The food supply chain is important because it is what helps meet the consumer demand for high-quality food products. Those participants that are involved with food production ensure safe and sustainable food production. This is what consumers are looking for when it comes to their food items.
Where Does the Food Supply Chain Start?
The food supply chain starts on the farm. After the food items are produced on the farm, they move forward in the supply chain to handling and storage. From there, they make their way to processing and packaging, then distribution. Consumption is the final stage of the food supply chain.
What Is Food Chain Management or FCM?
Food Chain Management, otherwise known as FCM, refers to an integral process that manages food manufacturing from the start of production, through processing and trading, until it makes its way to the consumer. This management process ensures food safety and quality and allows for traceability.
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