Will sourcing patterns change and will it affect agriculture?
Covid-19 needs no introduction, and its impact has unquestionably been profound. Not just on health care, tourism and general consumption, but also on how companies think about their sourcing strategies and supply chains. The global lockdown has meant that many supply chains have been disrupted, and this has sent many companies back to the drawing board to rethink how they source and how they manage their supply chains. It's still early days, but what we are seeing so far is that Covid-19 has accelerated a number of trends rather than creating entirely new ones.
One thing we can say for certain though, is that everyone expects continued turbulence. It will calm down, of course, but there will be other events in the future, so everyone is looking for agility. There are two ways that you can ensure this, building some redundancy into your supply chain and digitising it for greater transparency and visibility. It is uncertain exactly how much redundancy we will see, redundancy in your supply chain is rarely a good idea, especially in low margin businesses, as no-one is willing to pay for it (with some exceptions such as PPE and other health care items). This means that we are unlikely to see a seismic shift in sourcing patterns for agriculture. Buyers will be looking for alternatives that gives them some agility, but nobody is really looking to make large-scale production local at this stage. It's simply too expensive in the short and medium term.
This does open up opportunities for smaller farmers (or collectives) to participate in areas that are currently out of reach - as long as they are “digitised". If you can’t deliver information to the buyer or logistics provider digitally, you can’t participate.
What does this mean in practical terms? Well, for one, it doesn't mean that you need to know how to code or that you need to have a large IT department. However, you will need to start using digital tools to a much greater extent, and ideally not just relating to the supply chain. It also means that you must know how to do the basics: receive orders, execute them and send the data to the next provider in the chain - digitally. No more faxes or phone calls (OK, the latter is unrealistic…but still!).
Buyers need data electronically to gain an overview of where "things are" so that they can manage expectations and make better short-term decisions. Things go wrong in logistics, despite everyone's best efforts. The key is to address issues and find alternatives quickly. Knowing what is going on at any point in time allows you to do that.
However, there is perhaps even greater value in becoming more digital in the long term. Imagine being able to tell that the feed in silo 14 came from producer X and was delivered by truck Y, driven by driver Z. That would allow you to limit any biosecurity risks as far as possible, as well as identify the root causes much faster.
Another long-term aspect is the supplier's ability to forecast production volume and quality, as this allows the buyer to plan ahead in terms of production, logistics and sales to their own customers. Becoming better at forecasting is really only possible when you start going digital.
These may seem like small things, but they all give a competitive advantage to buyers who can utilise the data, and not least the suppliers that can provide it. So although most of digitisation will be driven by cost efficiency and reducing our carbon footprint, there are actually also commercial reasons for looking at how to digitise your business.