Food: cut out the middleman

7 May 2008
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08 May 2008 | Jake Kanter

Buyers should work directly with vendors of raw materials to help secure supplies and combat high food prices, experts have advised.

Peter Jackson, director of risk services at consultancy Aon, said buyers will have to reach deeper into their supply chains. "Working with raw material suppliers will be critical. They can no longer plan within their own four walls. For smaller companies it could mean looking beyond their wholesale suppliers. It will be difficult if suppliers are in Indonesia or Canada, but purchasers could club together and buy direct," he told SM.

Last month Josette Sheeran, executive director of the World Food Programme, said rising food prices were a "silent tsunami" and the biggest challenge the agency had faced in 45 years.

Jackson believes procurement will play a key strategic role in securing supplies and fighting costs. He urged buyers to recognise the situation, take tactical action and plan for the long term.

"By focusing on different products, you can identify where changes can be made. This could involve looking for alternative ingredients or switching production," he said.

Alex González, fair and ethical trade policy adviser at TraidCraft, welcomed the idea of buyers working directly with raw material suppliers: "Having fewer mediators would mean problems could be addressed quickly." She said this would give suppliers more power during negotiations, but "with good communication through the supply chain, the right results can be achieved for both buyers and suppliers."

Jackson added that falling grain prices over the past two to three years had led some buyers to become complacent. Helen Peck, senior lecturer - commercial and supply chain risk at Cranfield University, agreed and added buyers were in a "fool's paradise" if they thought food prices would continue to fall.

SMmay2008

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