Summary of how to protect food supply chains in conflict zones
- Regional conflicts disrupt food supply chains by constraining logistics and commodity availability
- Energy chokepoints like the Strait of Hormuz increase costs for fertiliser and transport
- Companies strengthen resilience by diversifying sourcing regions and supplier networks
- Scenario planning and pre-qualified alternatives help mitigate sudden geopolitical shocks
- Local firms rely on agility while multinationals spread risk across multiple geographies
The US and Israeli strikes on Iran have quickly turned into a broader conflict throughout the region.
Almost immediately, food supply chains are under threat - with rice and meat sectors already feeling squeezed.
This is only the latest in a series of global conflicts to put pressure on food commodities. The war in Ukraine led to grain exports being severely curtailed by Russian blockade. Attacks on shipping in the red sea by Yemen’s Houthis have put pressure on the supply of a range of goods, including coffee. The civil war in Sudan has put pressure on acacia gum production.
As geopolitical risk grows, how can food companies protect their supply chains from war?
How war disrupts food supply chains
War is an all-encompassing threat to supply chains, creating a volatile and unpredictable environment in which to produce.
“Conflicts are one of the most severe shocks to food supply chains because they hit availability, cost, and logistics simultaneously”, says Jordan Kear-Nash, principal consultant at supply chain consultancy Proxima.
Conflict can drive up the price of certain food ingredients. “Conflict can block supply routes, which slows the flow of goods, temporarily drives price increases, and can reduce the shelf life and availability of certain ingredients. We saw this in the case of Ukraine, which made Black Sea ports unsafe and disrupted grain exports”, explains James Watson, partner at business management consultancy Argon & Co.
Even when fighting is not taking place in a food-producing region, explains Proxima’s Kear-Nash, conflict can still influence the availability of energy. For example, Iran recently closed the Strait of Hormuz, a vital choke-point in the world’s oil trade.
Such disruptions to energy can impact food supply chains, which are often highly energy-intensive.
The Middle East is also a key producer of fertiliser, so the closure of the strait is predicted to impact agricultural inputs.
How food companies can protect their supply chains
“Resilience must be designed in, not improved,” says Kear-Nash.
Diversifying origins, having clear plans for substitution and reallocation, and understanding supply chains beyond direct suppliers are all ways to build this resilience in.
Businesses should even plan for volatility in prices of inputs such as fertilisers and energy.
In short, long-term planning tends to be rewarded in such scenarios.
“Preparation needs to happen before disruption. The most effective companies run scenario planning, pre-qualify alternative suppliers and routes and gradually rebalance exposure away from single country dependencies.”
Food companies have learned from the war in Ukraine how to diversify their supply chains, explains Argon & Co’s Watson.
“Since the onset of the war in Ukraine, there have been multiple examples across the food industry in which companies have diversified their supplier bases to reduce risk or established backup plans for critical ingredients. Some have also built strategic buffers – for instance, re-routing logistics, or redesigning transport networks – to mitigate the impacts of conflict on the food supply chain."
Learning from this crisis, many companies have become faster and more effective at addressing these problems.
Supply chain resilience: Local vs global
War does not discriminate, and both local food companies and global ones will be impacted by conflict. But the relationship these two types of companies have to their supply chain is fundamentally different.
Local businesses will be well served by the ability to be agile, Proxima’s Kear-Nash suggests.
They should have more than one local or regional supplier for key ingredients, and maintain strong relationships with these suppliers so they remain priority customers. Furthermore, they should have substitutions agreed in advance.
“For smaller businesses, resilience is about knowing the vulnerabilities and having two or three viable alternatives ready.”
smaller companies should also understand how they are placed in the local market, explains Argon & Co’s Watson. This can help them use their leverage to secure supply or manage pricing pressures.
Meanwhile, multinationals have more ability to disperse risk across different geographies, giving them the ability to protect themselves from risk in a different way.
They should source from multiple countries to avoid overexposure to one place. They should also plan alternative logistics routes, in case one route becomes constrained (as clearly seen in the closing of the Strait of Hormuz).
Companies should know what resources their most important products depend on, and where supply can be restricted.
As well as diversifying regions, they should keep a diverse range of suppliers.
“Strong operators build flexibility into their supply base by qualifying more than one supplier and agreeing terms that allow volumes or routes to shift when conditions change. These steps give organisations practical options when markets move, which is ultimately what protects continuity at scale.”
