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Food supply chain must stop ‘chasing price’: Rabobank

By Anne Bruce , 18-Feb-2013

The food supply chain must stop “chasing price” to avoid crises such as the horsemeat scandal and to make it fit for purpose as the global population booms, according to a new report.

Rabobank said closer co-operation would increase trust within the supply chain

Rabobank said closer co-operation would increase trust within the supply chain

The report, Transforming the Food & Agri Supply Chain, from sustainable banking group Rabobank, argued that the food supply chain typically involved fleeting relationships.

Closer co-operation and dedicated supply chains all the way through from farmer to retailer would help avert scandals such as the current horsemeat scandal, Justin Sherrard, Rabobank global strategist told FoodManufacture.co.uk.

Supply chain partnerships needed to move from being “transactional ones that are centred around chasing price”, to “a system focused on creating value", he said.

He commented: "Whilst Rabobank isn't privy to the ongoing horsemeat investigation, on the surface it does look like a problem which would be less likely to occur in a dedicated supply chain.

“The long-term nature of the partnerships in a dedicated supply chain means that companies have a better oversight of upstream partners and their practices.”

Compromise integrity  

Closer co-operation would increase trust between steps in the chain, he said. “The sharing of risk and reward that follows would make suppliers less likely to compromise the integrity of their product.”

In the report Rabobank argues that food and agricultural supply chains are being asked to do more than ever before, producing more from fewer resources and responding to new consumers.

Factors including biofuel production, speculation in commodity markets, health, food safety and corporate social responsibility agendas have brought new pressures to bear.

It said a dedicated supply chain structure had the potential to revolutionise the food and agriculture industry by making it more productive, innovative, safe and sustainable; all of which were vital to deliver food security to a future global population of nine billion.

The dominant supply chain model was currently structured in a linear fashion, in which suppliers, processors and retailers formed short-term partnerships independent from the influence and interests of other members of the chain.

Fleeting Partnerships

This model was highly inefficient as it restricted companies’ ability to respond to changes in supply and demand dynamics, while fleeting partnerships limited productivity and restricted innovation, said the Rabobank report.

Better insights into downstream needs and opportunities through long-term relationships could better inform product innovation and help companies to grow footprints in new markets.

A shorter-term perspective also resulted in wasteful processes that caused more environmental degradation than was necessary, with longer-term relationships partners would be able to work together to finds ways to limit or reuse waste.

The report called for prominent brands to show leadership, through creating initiatives that would lead to closer cooperation between their upstream partners.

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