The missing link in the Australian food industry’s value chains

Early last year, we were discussing the tactical and practical issues facing global supply chains and how megatrends have influenced them. We discovered that certain ad hoc approaches force limitations upon today’s supply chains. But it’s not all bad. There are many maturing elements of value chains in the Australian food industry that simply need time to surface. Technology (Industry 4.0, digital supply chains) is one example. However, a recent industry report published by the Australasian Supply Chain Institute indicates that Australian supply chain maturity has gone backwards by six percentage points from 2018 to 2019 despite major advancements in technological applications. Why is this? Are we trying to implement technology merely to keep up with the traditional way of growth (cost- and technology-focused)? Are we chasing technology but missing the point of overall progress?How did we lose the plot?We’ve had a lucky growth streak since the end of World War II. Yes, there were some disruptions with the oil crash in the 1970s, the dot.com crash in the 1990s, 9/11 and the GFC, but nothing that appears to have had a significant impact on our food value chains. Many shrugged their shoulders, took it on the chin and continued in the race to deliver more, grow more and be more. A recent Deloitte report identified the following emerging trends: ●        Technology is disrupting the food system.●        Shifting consumption trends.●        Population progression (into food consciousness).Furthermore, a global McKinsey study has revealed some daunting statistics regarding global disruptions:●       Disruptions that last more than one month will occur every 3.7 years.●       A single severe event that causes a 100-day disruption will occur every 5–7 years.●      Businesses that don’t improve their ability to respond to these should expect to lose 42 per cent of one year’s EBITDA, every decade.From this perspective, the current Covid-19 disruption is another statistical event that food value chains need to navigate, and soon they’ll be solving the next global disruption. It has been increasingly challenging to maintain the growth trajectory over the last two decades. Here are some common challenges:Diminishing returnsSocial media accountabilityLimitations of supply chains exposed.Have we hit a growth ceiling?We need a new, enhanced approach that focuses more on value than on cost. To date, the approach has been growth and efficiency. The current models are blinding us from seeing different perspectives. Below are some examples:●        Looking after our people. The focus on equality for the sake of fairness is not enough; we all know that this can lead to overcompensation towards or against demographics. In some cases, this can create a bottleneck of skills or even disengagement. Metcash, Kellogg (Aust), Diageo Australia, Lion and Smith’s Snackfood were among the award winners for the 2019–20 WGEA Employers of Choice (Workplace Gender Equality Agency–Australian Government). Can we learn from these companies or do we need to keep searching for new ways?●        Value chain progression. Although technology has progressed overall, it is lacking when compared to other sectors of the Australian food industry. Based on a recent UBS report, these sectors include agriculture, retail and rail. If we follow this trend, other industry sectors will continue to fall behind. We saw this pre-Covid-19 with volumes of imported food rather than locally sourced goods.●        Economics and transformations. Innosight’s description of transformation is “adapting a core business to disruptive change while also creating new growth”. This description aligns with our observations within the Australian food industry; however, when we review Innosight’s top 20 companies assessed as leaders in strategic transformations, not a single food or food ecosystem company makes the list – globally.●        Environmental perspective. Prior to last year, people cared about the environment for the sake of future generations. Having experienced Australia’s most dangerous bushfires closely followed by a global pandemic, we must now see a greater urgency and a bigger need.So what’s next? We see an opportunity for value chains to deliver beyond the convergence of technologies that are often spoken about. Ultimately, value chains of the future will need to consider a range of perspectives from a state of diverging (chasing functional goals of silos) to a state of converging where priorities intertwine to unlock, leverage, regenerate and co-create further synergies of efficiency and value.We analysed the progression of four major value chain elements over the last century that we believe make up a holistic value chain: people, effort, economics and planet. We believe these four elements provide a broader context to evaluate our future food value ecosystems.Sadly, some managers today still operate in level one maturity either by conscious choice or lack of progressive development. The cocoa trade, for example, is often monitored closely for operating at this level. On the other hand, there are many supply chains already at level three and some that have made it to level four across some or most of these elements.  The convergence zoneMoving forward, we believe that the long-term game is to manage the convergence of all level five drivers into a value ecosystem.We believe that true level five maturity can only be unlocked by progressing our thinking in unison across all four elements to the ‘convergence zone’. In this zone, we leverage the right economic conditions to unlock the true potential of technologies by using minds from around the globe that focus on good rather than limiting damage. Innovation may occur here as a result of this shift but that’s not the main focus. Again, this isn’t about technology, it’s about new methods from the convergence of these four elements.We’ve heard concepts such as high-performing teams of yesteryear and narrow technology-centric thinking with Industry 4.0. Yet we’ve never been able to leverage and unlock the power within the nucleus of a fusion reaction by combining all these elements. The results would mean:Gaining diversity of leadership teams for equality purposes and leveraging diverse thinking.Using methods of regenerating the planet with economic benefits for your business.Reversing the damage and allowing your business to be recognised as an industry leader.A convergence model and mindset could be the missing link needed to provide a safe place for the continuation of humankind and the progression of value chains.How long can you afford to wait before operating in the convergence zone?About the authors: Anna Lindsay, end-to-end value chain leader, innovator, influencerBernie Kelly, transformation partner, authorIshan Galapathy, productivity expert, speaker and author.