Summary of food supply chain shock protections
- Companies reduce risk by diversifying sourcing across multiple safer global markets
- Businesses strengthen resilience by building broader supplier networks for key ingredients
- Additional inventories provide backup options during conflicts or climate disruptions
- Policy advocacy supports free‑trade agreements that enhance long‑term supply stability
- Firms avoid rushing decisions by carefully balancing geopolitical and operational risks
We live in an increasingly volatile world.
Trade barriers can still be erected and taken down almost without warning – the recent tariff threats over Greenland brought this home to European countries who may have thought the storm had passed.
Much of the world is in conflict. Wars in Ukraine, Sudan and Gaza, not to mention numerous other less-publicised conflicts around the world, put supplies at risk and make it harder for manufacturers to predict the future.
And climate change is an ever-present threat, making itself known both through dramatic climatic events and the slow encroachment of changing weather patterns.
In such a unpredictable world, food and beverage cannot rest on its laurels. It must prepare its supply chain for the future. What could be the solutions to these problems?
1. Don’t over-rely on trade with single countries
In many ways, companies cannot truly protect their supply chains from abrupt, unscheduled tariffs, says Cyrille Filott, global strategist for consumer foods, packaging and logistics at Rabobank.
However, there are ways in which they can mitigate the impacts. One of these is to become less reliant on trade flows with single countries.
“What we see is companies changing sourcing to ‘friendlier’ countries, changing ingredients and also changing or increasing the number of countries they are originating from.”
In other words, don’t put all your eggs in one basket. Companies must diversify the markets that they do business with as the geopolitical situation changes.
2. Diversify suppliers
Other supply chain shocks, such as armed conflict and climate disaster, are also posing a risk to food supply chains.
In this instance, companies should ensure they have a diverse range of suppliers, to prepare for the case of one supplier experiencing dramatic or violent supply chain disruption.
One particular recent example is the supply of acacia gum, which is used extensively in soft drinks and chewing gum, being disrupted by the current Sudanese civil war. Companies in this case have already started diversifying away from Sudan to other producers countries.
The key is “making sure you have a few reliable suppliers for important ingredients, and to try and find other markets that may be somewhat less risky‚" says Rabobank’s Filott.
Simon Geale, executive vice president at supply chain consultant Proxima, agrees.
“The key to protecting supply chains against unexpected tariffs is to be ‘option rich’. From a buyers’ perspective this means deeply understanding where exposure sits and developing options for where there is cost or risk pressure, now or next. As a start point, they will be looking at how to limit exposure to any single political decision.”
3. Create additional inventories
Alongside securing different suppliers, companies should also create additional inventories, so they have something to fall back on.
Diversification of supply is a textbook answer to guard against supply chain shocks, says Proxima’s Geale, although this can be difficult since in many cases geographies have developed food staple specialisations.
Staple foods operate in “specialist geographic concentrations of certain commodities or foodstuffs, often aligned to climate and cost advantages.”
Diversifying supply can come at a cost, says Thijs Geijer, sector economist for food and agriculture at ING Bank. “You could see it as an insurance premium, I gives you peace of mind but in many cases you pay without needing it.”
Nevertheless, it is arguably necessary in today’s more volatile world. “The occurrence of supply shocks increases due to larger geopolitical uncertainty and accelerating climate change.”
4. Step up policy advocacy
A longer-term solution, suggests ING’s Geijer, is policy advocacy.
Companies can advocate for free-trade deals that will help smaller countries access new markets more easily, reduce their reliance on global hegemons and increase food sovereignty.
Trade agreements with Mercosur and India are supported by key sectors such as wine and spirits, Geijer explains.
“These agreements are not an instant solution, but eventually they will help to reduce dependence on end markets like the US and China.”
5. Do not rush into action
All of these methods can be useful long-term protection against potential supply chain shocks. But in the short term, companies should be patient, not rushing to action to try to protect against every risk out there.
“Companies must be careful not to trade one set of risks for another. There are a lot of risks that lie beneath the surface, be they geopolitical, climate, cyber, or labour-related. So, whilst you need to make progress, don’t rush into it without considering the variables‚” says Proxima’s Geale.
Mitigating all risks, in all locations, is not possible. More to the point, it would be commercial suicide. A company must choose which risks to guard against, and guard against them well.
“Risk management is, to some extent, a gamblers’ market. Don’t act without considered intent.”
