Resilient agricultural supply chains key to business as usual no matter the disruption

10.08.21

COVID-19 has focused our attention on a serious underlying fragility that goes well beyond health. This fragility stems from the fact that our health, energy, finance, and food systems are all connected. There are clear lessons to be learned for Australia’s agriculture, fisheries and forestry sector about how supply chains that cross multiple borders are vulnerable to a host of intersecting economic, social and environmental risks associated with Australia’s participation in global systems, markets and supply chains.

Covid is just one of many possible or even plausible scenarios that could detrimentally disrupt agricultural supply chains in the future. The pandemic has served to reinforce potential vulnerabilities in our supply chains when it comes to accessing chemicals from China, bringing in shearers from New Zealand, or trucking produce across state borders, for example.

A new AgriFutures Australia initiative is set to look broadly at agricultural supply-chain resilience by understanding the types of shocks that are possible, what the potential impacts could be and identify practical strategies and actions to future-proof our supply-chains against domestic or international shocks.

The research project will develop recommendations to help build and accelerate sector resilience.

The scope of the project includes agriculture, fisheries, and forestry sectors, with a focus on supply-chain transport and logistics vulnerabilities which impact on the import, export, and domestic movement of goods across agricultural supply chains.

Strategy consultant and partner at firm Strategic Project Partners (SPP), Noel Leung, said a forensic investigation of how the identified sectors can better prepare for supply chain and logistic disruptions is a critical move for industry, and the Australian economy.

“It’s been such a perfect storm insofar as the devastating impact COVID conditions have had on the physical movements of goods locally and globally, as well as the labour shortages, and significant disruptions to rural operations due the supply chain stalling in the midst of multiple, rapidly changing situations,” Ms Leung said.

“Combine that with demand for agricultural products spiking like never before, also as a direct result of the pandemic, and you’ve got an industry that already operates on thin margins pushed to the edge.”

Ms Leung said collaboration must be at the core of all considerations when assessing what types of strategies could be adopted by the agriculture, forestry, and fishery sectors – from producers, industry, agribusiness to government – to build greater supply-chain resilience.

“There’s a real theme I’ve seen across sectors that do this well and that’s working together – not against each other – as well as being able to work across silos and take an end-to-end approach to solving problems,” she said.

“To overcome major challenges like this one and prepare for future issues, you’ve got to change the competition mindset and pull together.  For many agricultural industries this is a fundamental cultural shift and not easy, particularly during a pandemic.

Ms Leung said one example of where this is often a sticking point, is around people not wanting to share data.

“This is often the case, even though they’re pulling the same data from the same primary sources. Ultimately the commercial value of AgTech and data solutions is how one person – or a group of people – uses the data, not the data itself. It’s important to apply that logic across the board,” she said.

“Taking a long-term perspective is also key, and we’ve seen that companies who embraced digital infrastructure and online opportunities before the pandemic have been able to overcome hurdles in a different way. Of course, digital tech reliance can also make an organisation vulnerable, so there’s plenty to consider.”

This AgriFutures Australia research project seeks to deliver a better understanding of the likely system shocks which will have a cross sector impact on supply chain infrastructure, and to identify strategies that players across the agriculture value chain can adopt to build supply-chain resilience to both respond to and pre-empt future system shocks.

It’s something the Chairman of the Australian Manuka Honey Association and CEO of company Manuka Life, Paul Callander spends a lot of time focusing on.

“The bite from COVID is multi-faceted, from being limited in our ability to transport around Australia, to battling the freight costs now associated with shipping products to Europe, and the major impact felt in the bricks and mortar stores and supermarkets we sell in to,” Mr Callander said.

“Up until recently, ManukaLife sold into a large chain of coffee shops in Japan, but they’ve closed down. The loss of that one client equals 750 stores that no longer stock our product.

“We’re also seeing clients who have been affected by lockdowns or a shortage of staff that’s impacting them to the point where they can’t afford the increased pricing in freight rates to simply get our product on their shelves – so those things are making the market very, very tight.”

Mr Callander agrees that digital infrastructure and a focus on e-commerce is an important element for the industry to survive, but it too is not without its issues.

“You don’t need everything in a bricks and mortar store, and it can be lucrative to sell online in different countries, but it is a big investment in terms of making that work successfully,” he said.

“Third-party logistics come in to play there that require a different capital structure and skill set, and a lot of honey producers can do that and will do that; but the industry is by and large made up of small to medium, private, family-owned enterprises that don’t have the capital or expertise.”

Mr Callander said there has also been a renewed industry focus on diversifying into value-add products.

“We’re working to use science to produce products for the medical, pharmaceutical and cosmetic industries and this needs to continue in today’s markets to enable other products to be made in Australia and delivered through e-commerce strategies globally,” he said.

“This takes time and capital especially around promoting and educating consumers and diversifying channel strategies, but the opportunities are there for collaboration within industries and for competitors to work together on this.”