Fresh food: 6 major supply chain challenges

Regulations, new consumer expectations, cost control and environmental challenges all have an impact on the routing, processing and distribution of fresh food.

So what are the major supply chain challenges facing the industry?

Fresh food: a particularly demanding supply chain

These products are delicate

The supply chain in the agri-food sector is highly strategic. This is because the quality of all goods must be preserved throughout the supply chain, from packaging and transport to storage. But some of these goods are particularly delicate, and represent a real supply chain challenge: fresh food.

Fresh food is perishable and fragile, and requires rapid, highly controlled transport. The microbiological sensitivity of animal products, for example, requires strict adherence to the cold chain, while ripe fruit and vegetables need to be handled with the utmost care.

A highly fragmented supply chain

The fresh food sector has another distinctive feature that makes logistics management extremely complex: it involves a multitude of players.

Central purchasing offices generally order from a multitude of suppliers, including wholesalers, who in turn order from small and medium-sized producers. But in reality, the ecosystem is highly heterogeneous: while national or international central purchasing offices generally order from the biggest producers or wholesalers, regional central purchasing offices are increasingly focusing on small producers to meet the growing need for short distribution channels, while some stores are even choosing to buy directly from local farmers or producers.

In short, the fresh food sector covers a vast ecosystem, with diverse and varied supply flows, managed in very different ways. This fragmentation undeniably accentuates the complexity of the supply chain.

Fresh food supply: today's major challenges

#1 Pressure on costs

In addition to highly volatile raw material prices, the fresh food sector is facing a staggering rise in logistics costs. According to a survey by the French food industry association (Association nationale des industries alimentaires - Ania), by the end of 2022, increases had reached +26% for cardboard and plastic packaging, and +57% for energy costs. And these increases have obviously largely continued into 2023, putting a strain on fresh food margins, which are already very tight to meet consumer expectations in a context of high inflation.

#2 Risks of supply chain disruption

Following the Covid crisis and the war in Ukraine, shortages have multiplied in the agri-food sector, and it is no longer rare to see products such as oil or mustard absent from retailers' shelves. But the problem also affects fresh food: according to the NielsenIQ barometer for LSA, the out-of-stock rate for fresh food, for example, was 5.4% at the end of 2022. Shortages of fruit and vegetables and eggs also hit the headlines in the UK in early 2023.

#3 Increasingly demanding traceability requirements

Traceability, which consists in being able to reconstruct the path taken by a food product, and the various stages it went through from production to consumption, is an increasingly central issue in the fresh food sector. And with good reason: it helps to combat fraud, ensure that health risks are properly managed, and meet consumers' growing demands for transparency. EC regulation 178/2002 already imposes a Europe-wide framework for traceability. Unfortunately, however, there are still many loopholes in food labeling, and there is still a great deal of progress to be made in keeping data on goods.

#4 New expectations in food transition

As explained in an analysis by the French Ministry of Agriculture on the logistics geography of the French agri-food system, "more and more players are concerned about the impact of the food system on the environment". According to VoxLog, logistics are responsible for 10 to 11% of global CO2 emissions. Fruit and vegetables alone account for 0.5 Mt CO2. The new expectations of sustainability, which come not only from consumers but from society as a whole, are thus playing a pivotal role in the evolution of the fresh food supply chain. Reducing the environmental impact of transport and packaging, animal welfare and the fight against food waste are now top priorities. In 2020, an inter ministerial working group was tasked with analyzing the challenges facing the supply chain for agricultural and agri-food products, with a view to combining decarbonization and competitive advantage.

#5 The growing need for relocation

Inflation in transport costs, the risk of supply chain disruption and the need for traceability are prompting players in the fresh produce sector to question complex and costly supply chains. On the other hand, growing expectations in terms of sustainability are blaming long distances between producer and consumer, and tipping the balance in favor of short distribution channels. The fresh food sector is thus marked by numerous relocalization initiatives, which in France are supported by a stimulus plan launched in 2020. Alongside these initiatives, we can expect a potential return to the massification of logistics flows to reduce costs and emissions and improve operational efficiency.

#6 The need to improve operational efficiency

With cost-cutting and logistics-intensification trends profoundly shaping the fresh food industry, the need to simplify operations and gain greater visibility across the entire supply chain is becoming ever more pressing. For the various players in the sector, this means better structuring their processes, automating repetitive tasks, and taking advantage of data analysis to optimize their supply operations.

Harnessing the power of digitization for the fresh food supply chain

Faced with these major challenges, the fresh food supply chain is more than ever in need of innovation and flexibility. Distributors (supermarkets and stores), wholesalers, processors and suppliers need to be able to connect with each other more easily, and rely on high-performance management tools, based on the exploitation of structured data from end to end of the supply chain.

To achieve this, there's only one solution: effectively digitize the end-to-end fresh food supply chain.

This is a real challenge, firstly because small producers are still poorly digitized or equipped with aging IT systems, and secondly because the lack of interoperability of systems and data flows can create operational failures in the supply chain.

But that's the mission we've set ourselves at Klarys: to equip every player in the supply chain with simple, high-performance, interoperable tools to digitize and simplify their purchasing-sales processes, and ensure that reliable, usable data flows from one end of the chain to the other. Our ultimate goal? Transform the fresh food industry to meet current and future economic, environmental and food safety challenges.