Managing your supply chain for business continuity

Vulnerable

Many value chains are based on outsourcing and just-in-time logistics. Under the current crisis – with borders closed and emerging resource scarcity due to a reduced labour force, stockpiling by organisations and even countries – we see that our value chains are struggling to produce and transport the products consumers and pets need.

Exposing risks

But even before this COVID-19 crisis, resource scarcity and price fluctuations of vital resources have been exposing the risks to our value chains and how we source our ingredients.

At the same time, consumer demands increasingly focus on sustainable products and sustainable origin.

Sustainable sourcing

As pet ownership grows, the need for ingredients will further increase. According to grandviewresearch.com, the pet food ingredients market is projected to grow 46% to $54 billion (€48 billion) by 2025, from

$37 billion (€33 billion) in 2019. For ingredients from the agro-sector, this will ultimately lead to a situation in which the available farmland for production of pet food ingredients increasingly competes with production of food and bio-based materials. This, in turn, will lead to rising market prices. The effects of climate change will also impact the availability of ingredients, and market prices will fluctuate more than in the past.

High standard

So, to ensure that companies can continue producing their pet food, it is necessary to understand where ingredients are sourced from and what the risks are related to availability and price.

This is also important in view of the ‘humanisation’ of pet food, which demands that brands inform consumers better about the quality, healthiness and sustainability of the ingredients. To do that, companies need to look beyond traders and bulk sales, to understand where products are sourced and whether production meets the high standards of consumers.

Preventing recalls

The same applies to preventing recalls. We all know that recalls of pet products can harm a brand or a company’s image, quite apart from the damage inflicted on animals and their owners. Some of these recalls might have been prevented if the relations between producer, manufacturer, pre-packers, traders and other value chain actors were more transparent, in terms of production, processing and storage of products. This demands a more pre-competitive way of looking at the value chain, working on shared value, for the actors and the consumer.

Four best practices

A common theme emerging from all of this is that a transparent value chain contributes to greater consumer trust and resource security, ultimately leading to business continuity. To achieve this, we can learn from the human food sector and adopt four best practices:

1. Work with the same type of certifications and apply them on package. For example, UTZ Certified – now Rainforest Alliance – investigated entire value chains and trained farmers to become more sustainable while demanding a fair wage from brands. Brands use these certifications on the one hand to transparently and credibly communicate about their sustainable sourcing, and on the other hand these certification bodies help them with a transparent value chain and thus their supply security.
2. Develop preferred supply relations, not only through financial transactions, but by intensified relations with mutual information exchange. For instance, remuneration in the form of training in sustainable production.
3. Use digital tools that help us to trace products back to their origin, such as RFID tags or near field communication (NFC). All the best practices that we apply automatically for human food, we can also use to develop transparent and interlinked pet food ingredient value chains.
4. Define and pursue sustainable sourcing broadly: that is, social, financial and environmental sustainability. This relates to the circumstances in which farmers operate and their methods, but also the environmental issues that are involved in processing of ingredients, fair wages for workers and a healthy working environment.

Back to now

The current pandemic proves even more that we need to rethink how we organise our supply chains. Reorganising our value chains to develop shared value, based on a common understanding of what sustainable sourcing of ingredients entails, will help to develop the sustainable ingredients of the future. This requires a transparent and flexible value chain that will strengthen your brand towards an increasingly more conscious consumer. It is a win-win-win in many ways.

To invest in a more transparent and interlinked value chain, is to invest in business continuity.