Building an Agile Food Supply Chain Amidst COVID-19

The food industry in China has led a rapid response to changing market conditions and manufacturing and supply chain challenges

Not since World War II has a crisis on the scale of the COVID-19 pandemic completely transformed the way the food industry does business. In China, the first place impacted by COVID-19, all sectors, including manufacturing, retail and food service, have had to rethink their core products, operations and value systems in order to survive and stay relevant.

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These ideas weren’t theoretical. Because many operations along the food supply chain were deemed essential during COVID-19, they remained active and reactive while many other businesses were shut down.

The whole industry has had to respond in real time to market shifts and new challenges in order to create a more agile supply chain and resilient business. While recovery in China is cautious, and Kerry and Mintel both predict it will take at least another four months for consumer confidence to recover to pre-outbreak level,s food remains the most resilient sector in the country, thanks to quick thinking and nimble adapting.

We take a look at how companies in China have responded with action plans that have not only evolved their business but elevated it to more robust levels. As necessity continues to prove itself as the mother of invention, these innovations can serve as an example to other regions making rapid shifts right now.

Look for fresh opportunities in in-demand areas

A study in the Harvard Business Review on “How Chinese Companies have Responded to Coronavirus” makes an urgent case for the supply chain to be nimble and ready to forge new partnerships and collaboration between governments, suppliers and retailers, while keeping a keen eye on how the lockdown evolves. On the tail of supply disruption come short- and long-term losses, not to mention the probability of competitors moving in to pick up the slack to fill the gap.

Now is the time to keep a close eye on demand in key categories and be agile in structuring production around these developments early.woman adding sprinkles to cake

Now is the time to keep a close eye on demand in key categories and be agile in structuring production around these developments. Greater interest in bulk purchases? Think about producing more larger packs. Rise in online delivery? Develop durable packaging (e.g. vacuum sealed) that doesn’t damage easily and can withstand the rigors of shipment and delivery.

Also, explore producing products that are in high demand even if it’s not your core capability. HFS Research findings show that many manufacturers have shifted their capabilities towards producing essential items that, while unrelated to their industry, are needed in today’s pandemic landscape. We see that shift bearing out in beverage companies producing hand sanitisers, automakers manufacturing ventilators and apparel brands developing face shields or masks for medical care workers. Expanding your range of capabilities will enable your factories to remain open and operational.

Team up for quicker industry recovery and growth

The old tried and tested game plan is no longer tenable. Spot key areas of risk and modify operations. Collaborate widely, even with competitors, to safeguard supply continuity and keep it flexible. Work with local and potentially new suppliers and stay in regular contact.

We need to collaborate to ensure an agile supply chain. There are many moving parts involved: constant daily communication, being transparent with our needs and vendors’ capability and capacity, how best to ease the bottleneck, right down to improving cash flow management. No one can function alone in today’s highly complex global supply chain web. Understanding this domino effect by partnering and working with one another is the step towards a win-win solution for all and survival of the industry.

If staffing is an issue, consider teaming up with other companies that are currently in operation. IGD reports that in February, Alibaba’s Freshippo launched a “Sharing Staff Plan” to recruit from various industries hard hit by the outbreak, particularly restaurants and catering. In another example of collaborating to shore up sales and operations, Chinese online retailer worked with brands and merchants to deliver promotional coupons valued at CNY1.5 bn (US$212m) to consumers in China with the intention of reigniting demand that may have been sidelined by the epidemic.

Identify and innovate for current and emerging preferences

According to the IGD report, “Coronavirus (COVID-19): latest updates from China”, the need for contactless transactions and the critical importance of food safety and hygiene to avoid infections has spurred a slew of creative food delivery options.

One company, Shixing Fresh, set up smart lockers in residential catchments. Each locker functions as a refrigerator with various temperature settings to ensure stored food remains fresh. An SMS notifies customers when their fresh food is delivered to the locker.

Meanwhile, Chinese oil giant Sinopec is linking supply and demand. With farmers hard pressed to sell their products and consumers shunning crowded supermarkets and grocery stores, Sinopec has taken to selling fresh food at its petrol stations through its Easy Joy convenience store brand. Customers simply download the Easy Joy app, register, place their order, and drive to their petrol station pick-up point of choice. There is no need to get out of the car nor roll down the window; staff loads the food directly into one’s car boot.

With product innovation, manufacturers can take their cue from the focus on immune health and develop foods with functional ingredients that support wellbeing and immunity, even incorporating them in non-traditional formats such as refreshing drinks or snacks. A 2019 Kerry consumer study of 14 global markets revealed that across Asia, 38% of consumers would consider buying immunity-boosting fruit and vegetable juices and 32% would consider purchasing immune-enhancing snacks.

The survey also found that 40% would be compelled to buy a healthy lifestyle product if they were able to view claims based on research or scientific data. With 1.3 billion Asians projected to be aged 60 and above by 2050, according to the 2017 United Nations’ “World Population Ageing” report, the evidence is indisputable: people are looking to stay healthier and active for longer.

Stay one step ahead and be ready to reframe efforts

Change is the new constant. If you are quick and adaptable, you will emerge stronger. Some brands will need to consider downsizing and closing physical stores in order to remain viable. With consumers relying on ecommerce, it might make sense to transform brick and mortar stores to warehouses or retail distribution centres that cater exclusively to online purchasing. Staff from the closed brick and mortar locations could be trained to support ecommerce operations and platforms.

There’s also a case to be made for connecting retail directly to wholesale, such as with direct-to-store deliveries. Depending on cost, labour availability and more, it could be more viable to bypass a retailer’s distribution centre and deliver products from a supplier directly to a store.

Reevaluating pricing and promotions may also be necessary. For instance, if you are a supplier selling goods to a supermarket that used to enjoy 5% off a 50-carton purchase, new conditions may make the case for resetting that to 3%.

woman at computerEngage regularly with customers and vendors around relevant topics on future demand

As you and your partners evolve, it is key to keep communication channels open. Engage regularly with customers and vendors around relevant topics on future demand, contingency issues across their business, cost or value optimisation and trending consumer insights. More importantly, show empathy and understanding of emerging operational issues, let customers know you are there to support them and you are open for business and willing to adapt.

Digitise operations to stay competitive and relevant

The pandemic has fast-tracked digital transformation across all sectors, as a consequence of travel restrictions, social distancing and work from home mandates spread. From telehealth, telecommuting and virtual events to online grocery shopping and food delivery, the way we live, work and play has changed dramatically, and it may not go back.

According to the World Economic Forum, the outbreak has seen a boom in three areas: online services, internet services for industries and connectivity among diverse industries as businesses collaborate for the greater good.

More than ever, online and digital marketing present a critical lifeline for businesses looking to remain sustainable and competitive. Amid the COVID-19 crisis, Chinese mobile payment platform Alipay introduced a campaign to get third party developers to create mini programs to address customers’ needs. Within a week of launching, 181 mini programs were made available on Alipay’s app, covering contactless grocery deliveries, public health, logistics, legal and medical advice. More recently in March, Alipay announced a three-year plan to support the digital transformation of 40 million service providers in China.

Interestingly, livestreaming is playing a front and centre role today. According to Alibaba, orders generated using Taobao Live jumped by 20% week-on-week in February and, via the recently launched Rural Support Program, the channel has sold thousands of tons of farm grown produce. Chefs are also livestreaming cooking demos in response to the trend of more consumers cooking at home. As cited in the new Mintel survey “Impact of COVID-19 on Food and Drink in China”, the interactive Chinese community Douguo, for example, has teamed up with well-known restaurants and chefs to livestream cooking tutorials and sell semi-prepared food items.

Look after your employees and customers

Never forget that people are your biggest assets. Take care of them and they will take care of the recovery and success of your business.

In this fast-changing landscape, it is vital to be proactive in communicating clearly and regularly to reassure staff and build confidence and security. These unprecedented times are an opportune period for employers to equip staff with new skills and upgrade training that will not only help them navigate new territory, but also protect their health and safety. In response to safety needs, Kerry recently announced that a stipend will be allotted to its more than 100 locations to support additional safety improvements.

Across China, companies have stepped up outreach to employees and customers. The IGD report showcased how Walmart China launched employee incentive plans that include supporting them on transportation and accommodation. One of China’s largest online retailers,, set up an aid channel to transport donated goods to Wuhan and introduced digital initiatives to increase access to the latest COVID-19 updates using its query function and free online health consultants. Meanwhile, in Wuhan, eight Carrefour grocery stores prepped thousands of daily sets of fresh foods and necessities in-store and delivered them to local residential areas and hospitals. The company tapped on WeChat community groups to manage the orders, with volunteers handling delivery.

Prepare for varying recovery rates for different sectors

Modify your recovery plans by location. Make sure you manage production and can supply in full and on time. According to insights from Innovate 360, “COVID-19 Accelerating Food Tech”, one simple way to manage cashflow is by cutting costs, putting investments on hold and working closely with banks.

food-supply-china-quotes3woman sampling soup

But be ready for when customer demand rebounds. In a GlobalData analysis, the SARS outbreak in Q2 2003 saw food service growth slowing more than GDP growth, but in Q3, the industry rebounded faster than other sectors. That outcome was driven in no small measure by food service players ramping up in areas of differentiation, high-quality foods and providing a better overall experience.

Across the world, food supply is being prioritised and our operations are seen as key to feeding consumers globally. To keep our business running smoothly now and into the future, Kerry is working with government bodies on new local requirements for both our operations and research and development centres, engaging with customers to understand their needs and meet their demands, working with suppliers to expedite or manage supply chain changes and holding virtual innovation sessions with customers to be ready for the next wave of new products. It is imperative that we, as individual companies and a united industry, prepare ourselves for any outcome.

As COVID-19 continues to change the industry,
 we’re monitoring growing categories and the changing food and beverage landscape. For more resources on the pandemic, visit the Kerry COVID-19 hub.

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