Geopolitical unpredictability, climate-related disruptions and fast-changing cyber threats pose a significant challenge for food and beverage manufacturers. Ensuring operational continuity means traversing a complex web of interconnected and amplifying risks.
To support the resilience of your food and beverage supply chain in the face of ongoing interruptions, this insight offers practical steps you can take to better identify and manage complex risks and adapt to continuing volatility.
In particular, we look at:
Global geopolitics is increasingly recognised for its interconnectedness with and magnification of other risk categories, making the impacts more difficult to measure and mitigate. Conflicts, whether military or political, can lead to disruptive actions, including cyber-attacks, import quotas and industrial disputes. These disruptions can have a severe impact on food security and distribution, which are already at greater risk during times of conflict.
Houthi attacks in the Red Sea, for example, forced several shipping companies to divert their ships around the Cape of Good Hope, increasing delivery times by 10 days or more on average. This not only affected companies with limited inventories but also compromised the quality of fresh produce cargoes, which are highly sensitive to delays.
Maritime shipping carries about 70% of the value of all goods traded, with container ships carrying two-thirds of this volume. A recent survey by Maersk reported three out of four European shippers have experienced supply chain disruption in the past 12 months, with more than half reporting significant cost impacts. The primary causes of these disruptions were the rising number of geopolitical conflicts and severe weather events.
Reviewing and refining your current risk management strategy with a focus on identifying vulnerabilities is an important core step your food and beverage business can take to outsmart inter-related risks.
Understanding the details of key dependencies and designing procedures to support continuity can have a significant impact should a link in your chain break. These include:
Enhanced collaboration between your risk, supply chain and procurement teams can help strengthen your supply chain in challenging conditions. For example, collaboration between risk and procurement could lead to colleagues incorporating minimum risk management standards into supplier contracts, or advocating for more robust risk management in supplier contract negotiations.
Other moves that can be best executed when supply chain, risk and procurement functions work together include:
Maintaining an open dialogue with your suppliers is crucial for enhancing resilience and providing opportunities to discuss and mitigate risks, such as cyber threats and environmental concerns.
Creating and maintaining a risk register specifically for supply chain risks can promote best practices in both your business and your suppliers' operations. You can apply frequency and probability ratings similar to those in your corporate risk register to identify areas for risk management improvement and address specific vulnerabilities. You should also examine your own existing risk register to ensure you’re measuring and monitoring the universe of complex and interrelated risks, including climate risks.
Using climate scenario analysis can deepen your understanding of both vulnerabilities and opportunities, such as engaging with alternative suppliers in regions less affected by global temperature increases or sourcing from domestic suppliers to reduce potential climate-related disruptions.
An increasing number of food and beverage businesses are adopting digital systems to manage risk. Diagnostic software that creates 'digital twins' of supply chains can enable your organisation to visualise, measure and monitor each element of your supply chain. These systems use real-time intelligence to assess current risks and the connections between supply chain components, providing early warnings on impending hazards, such as natural disasters or geopolitical issues.
Supply chain planning software can also simulate and compare multiple scenarios efficiently. These simulated scenarios can include demand forecasting, resource and inventory optimisation, sales and operations planning, production scheduling, network design and other factors determining supply chain resilience. Continuity testing using this insight can also allow you to evaluate and test continuity options before you need to implement them, further enhancing your disruption planning and offering a competitive advantage over less adaptable peers.
To better understand and manage your supply chain risks, speak to our risk management specialists.
