Will sourcing patterns change and will it mean anything for agriculture?

Updated: Oct 9, 2020

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 view their sourcing strategies and supply chains. The global lockdown has meant that many supply chains have been disrupted, and sent many companies back to the drawing board rethinking how they source and how they manage their supply chains. It is still early days, but what are seeing so far is that Covid-19 has accelerated a number of trends rather than creating entirely new ones.

Sourcing may not change significantly in the near term, but do expect sensors and digitisation to play a big part in every step of the process

One thing that we can say for certain though, is that everyone expects continued turbulence. It will calm down, but there will be other events in the future, so everyone is looking for agility. Agility is in general in two ways: creating some redundancy in your supply chain and digitising it to greater transparency and visibility. Exactly how much redundancy we will see is up for debate, and especially in low margin businesses, having redundancy in your supply chain is rarely a good idea as no-one is willing to pay for it (with few exceptions such as PPE and other health care items). This would also mean that for agriculture we are unlikely to see any seismic shift in sourcing patterns. Buyers will be looking to have alternatives that cater for a part of their agility but it is unlikely to be of a significant size, and nobody is really looking to shift large scale production locally at this stage. From a short to medium term perspective it is simply too expensive.

This does open up opportunities for smaller farmers (or collectives) to participate in business that today is out reach - if they are “digitised". If you can’t deliver information to the buyer or logistics provider digitally, if you can’t participate.

What does this mean in practical terms? Well, for one, it doesn't mean that you need to know to code or have a large IT department. However, you do need to start using digital tools to a much greater extent, and ideally not just relating to the supply chain. It also means you know how to do the basics. You can receive orders digitally, you execute, you send the data to the next provider in the chain digitally. No more faxes and phone calls (OK, the latter is unrealistic…but still).

Being digital isn't actually as complicated as this image indicates
Being digital isn't actually as complicated as this image indicates...

Buyers need the data electronically to get an overview of where "things are" in order to better manage exceptions and make better short term decisions. In logistics, despite everyone's best efforts, things go wrong. The key is to address the issues quickly 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 exactly that the feed in silo 14 came from producer X, was delivered by truck Y, driven by driver Z. That allows you to limit any biosecurity risks to the extent possible as well as identify root causes much quicker.

Another long term aspect is the suppliers ability to forecast production volume and quality as it allows the buyer to plan ahead, right from production, logistics and sales towards their own customers. And becoming better at forecasting really only happens when you start going digital.

These may seem like small things, but all give a competitive advantage to those buyers that can utilise the data, and not least the suppliers that can provide it. So although, the majority of digitisation will be driven by cost efficiencies and the reduction of the carbon footprint there are actually also commercial reasons for looking at hot to digitise your business.