Global supply chains: food for thought

Competing within global supply chains can be quite complex, highly competitive and often risky. However, for those organisations that have positioned themselves correctly, the rewards are significant. One of the most important (but fickle) industries is the international food chain. It is a massive industry that involves multiple supply chain participants in each step of the process, from "farm to fork".

Big business: IGD estimates the global food retail market to be worth $3,496 billion, and values the total global retail market at US$8,842 billion. The industry spans farming, processing, transport, export cargo handling, airlines and shipping, importers, retailers and food-service organisations. In addition to reviewing current market size, IGD forecasts the size of the major global food retail markets to 2020. The future size and structure of the global food retail industry will be determined by three key trends:

• Global economic developments like population and GDP growth;
• The growth of food retail markets and consumer demand;
• Retailer growth and merger & acquisition activity.

Based on these factors, IGD forecasts that the global food retail market will grow at a compound annual growth rate of 4.8% worth $6,353 billion in 2020.

Market growth: According to IGD, Asia Pacific and Central Asia will grow to comprise 41% of the global food retail market in 2020, up from 33% in 2003. Europe will comprise 30% and Nafta 21% in 2020. China will become the world's second-largest food retail market by 2020 behind the US. In 2003, the Chinese food market was 35% of the size of the US market; in 2020 this will increase to 82%. The top-five food retail markets in 2020 are predicted to be the United States, China, Japan, India and Russia.

Compliance: To complicate matters, the agri-food industry is dominated by compliance requirements and regulations, including Good Agricultural Practices, minimum chemical residue level control, HACCP, food safety laws, supermarket industry regulations, article numbering, air cargo handling regulations, environmental requirements, packaging restrictions, phytosanitary inspections and food safety issues, trace ability requirements, controls on genetic engineering, cold chain handling and consumer laws.

Trends: Emerging trends and credence factors influencing the costs of major food supply chains are animal welfare, poverty alleviation, contractual fairness, sustainability and corporate social responsibility.

Globalisation: With globalisation, the industry is now dominated by major supermarket and food service organisations that make the decisions regarding how to optimise and synchronise the overall supply chain process. This in turn results in supermarkets taking greater responsibility for establishing contract farming and operational synergies to control costs and maintain a regular supply of produce.

Retail decision-making: Of all the complexity involved in the global food trade, supermarkets often make their buying decisions based on only four factors: price, quality, regularity and diversity.

This places a significant burden on upstream suppliers and logistics service providers to assemble supply chain activities and relationships to deal with the complexities and incongruities of ensuring profitable trade.

Thaifex: Thailand is hosting a major international food exhibition from today until Sunday where readers can witness these trends first hand. Thaifex (http://www.thaitradefair.com/fairin/thaifex07) is a complete exhibition dedicated to the international business of food production, transport and consumption. All major food supply chain participants will be represented, including producers, shippers, caterers, importers and food technology and service organisations.More than 1,200 companies will be exhibiting this year, up 30% since 2004. The exhibitors comprise producers of food and beverages, Halal food, organic and specialty foods, ready-to-eat foods, fruit and vegetable products, meat and poultry, seafood, rice, grocery and dairy products.

Necessary improvements: While Thaifex World of Food Asia brings together an extraordinarily large group of participants in the international food industry, ample room remains to improve international supply chain efficiencies. These improvements involve major supply chain issues, such as improved post-harvest care, certification of farming groups (MRL and EuroGAP), compliance with minimum residue levels, the development and expansion of certified packing facilities compliant with International Food laws, and handling requirements such as HACCP, optimised packaging, and improved cold chain and shipment handling.

In summary: Growers and exporters should synergise and collaborate to reduce costs. The industry should improve handling and transport standards, and find smarter ways of introducing cost efficiencies and new technologies for the entire supply chain.

Source: bangkokpost.com

Publication date: 5/24/2007

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