Food companies that have maintained good relationships with their suppliers are reaping the benefits during the coronavirus pandemic, a senior procurement executive has said.
During a CIPS MENA webinar on the food supply chain, Khalid Abdulwahab, executive director, strategic sourcing and supply at Savola Foods in Saudi Arabia, said the current situation is highlighting the “good and bad” work of procurement teams in regards to supplier relationship management (SRM).
“If you have done well and you have a good relationship with your suppliers, this is a time when you’re going to reap the benefits,” he said.
Savola Foods owns operations in seven countries across the MENA region and specialises in household staples such as edible oil, sugar and pasta.
Abdulwahab said he had only come across one instance of a supplier trying to renegotiate payment terms since the outbreak started.
“I’ve heard people say some suppliers are renegotiating payment terms but I think that depends on the relationship you have with them. Take care of your suppliers when times are good so when times are bad they can take care of you,” he said.
Abdulwahab added the current challenges faced by the food supply chain are around logistics and labour, rather than the supply of goods.
He said he did not expect to see a disruption to the food supply chain unless the interruption caused by the pandemic lasts for more than six months.
Elizabeth Jackson, senior lecturer at Curtin Business School, told the webinar Australian businesses had been quick to adopt digital agriculture techniques to keep supply chains moving during the country’s lockdown.
“We can’t send livestock to markets anymore because people cannot attend livestock markets, so we’ve been seeing online trading,” she said.
“This has been absolutely great from a policy point of view because [the animals] are not actually travelling through an extra part in the supply chain.”
At the beginning of the outbreak in Australia, fertilisers and chemical costs suddenly rose, leading to accusations of price-gouging from farmers.
In actual fact, it was a combination of rising import costs of these products and a fall in the value of the Australian dollar that led to the rises, Jackson said.
“We need to look at whether price hikes are opportunistic or whether they occur because of macroeconomic conditions. It’s sometimes very easy for farmers to write suppliers off as opportunistic,” she said.
Asked about possible border closures to trade, Liam Fassam, associate professor food supply chain management at University of Northampton, warned the phenomenon could cause black markets to arise if it became common.
Fassam cited India’s decision to halt rice exports as an example, adding the move would have an enormous impact in around six months' time.
He said experience in areas like Africa had shown when governments close borders to trade, farmers “always find a route to market under the wire”. This, in turn, created concerns over food safety and traceability.
Mohammed Al Khotani, managing director, SAP Saudi Arabia added it was noticeable businesses were currently focusing on very specific needs within the supply chain “rather than putting big procurement plans into place”.