The E-Commerce Supply Chain and Food Production

E-commerce will play a growing role in how consumers obtain food and beverage products.

The COVID-19 pandemic has impacted every aspect of life for people all over the world and we now have the task of creating a new way of life oriented toward public health and safety. Nowhere is this truer than the food production industry: the upset suffered by the food production supply chain has forced companies industry-wide to re-evaluate business operations and product offerings.

These re-evaluations are contending with fundamental aspects of the business of food production. Companies need to adjust product lines to rapidly changing consumer habits, re-consider the portion of product dedicated to food service, reflect consumer values, and find ways to innovate outside of product lines. Increasingly, companies are turning to e-commerce to tap new consumer markets. While many large companies have found e-commerce and direct-to-consumer service unnecessary to a healthy bottom line, major food producers are waking to this channel’s potential.

Direct-to-Consumer

One of the greatest areas of potential in the e-commerce realm is in its low overhead and maintenance costing. By cutting out salespeople and skipping distribution centres, successfully harnessing e-commerce to reach consumers could see revenue increase at a rapid rate; for a relatively low up front investment, a brand new market can be tapped. 

Take Perdue Farms, for example, who recently launched an e-commerce platform on their website. This allows consumers to place orders for specific products which are then shipped out by UPS or FedEx.

“As both online shopping and the demand for convenience show no signs of slowing down, we felt it was important to be in this space,” said David Zucker, Perdue Farms senior vice president of e-commerce and new ventures. “We’re excited that this is the first time we’ve been able to offer so many of our brands in one place, nationally. Now, consumers all over the country will be able to enjoy expanded offerings from our portfolio regardless of where they live.”1

The COVID-19 Shake-Up

Coordinating the logistics for such an enterprise sounds difficult, but it doesn’t need to be. Transportation is more flexible than ever, with ample capacity idle in the market following the economic downturn prompted by COVID-19. This market shake-up creates opportunities to try new business models. By shipping direct-to-consumer rather than shipping to a retailer, the carbon footprint and time delays associated with receiving, processing, then re-shipping foods out to retailers can be minimized. 

This resonates with consumers, many of whom find themselves unable to grocery shop safely though often increasingly cooking at home. While public sentiment reflects the dangers of transmission in the simple act of travelling to a grocery store, e-commerce circumvents this fear entirely.

Logistics Combating Food Insecurity and Food Deserts

The difficulties of obtaining certain foods during the pandemic magnified consumers’ fears and many people found themselves stocking pantries to the brim, unsure of the stability of the food supply chain. “Appetite for processed food has risen in the crisis, reversing a multiyear trend in which consumers shunned old brands in favour of fresher and healthier alternatives. At the same time, shoppers have encountered bare shelves in supermarkets and struggled to secure online delivery slots,” writes Alistair Gray for the Financial Post.2

For consumers living in food deserts, the difficulties of obtaining groceries on a regular basis were intensified. “Food desert” refers to regions with limited access to fresh and nutritious foods; both Canada and the United States are home to several of these regions.

For years, the only companies taking part in e-commerce occupied niche or luxury food markets. But in recent years, companies like Perdue Farms, PepsiCo and Kraft Heinz have joined the market; these companies occupy a much broader expanse  of the food industry and, therefore, in tandem with fresh produce delivery, can contribute to well rounded and nutritious consumer lifestyles.2 All of this can be achieved with flexible, decentralized transportation.

Scalable Shipments and Cross-Docking

“Our strategy has been the same all along,” says Canadian Alliance President William McKinnon. “We want to strategize with our customers so they can see speed to market.”

For McKinnon, this involves an increasing amount of cross-docking rather than inventory storage within the Canadian Alliance facilities. This sees inventory only pause momentarily at the facilities before shipping off to its final destination. In tandem, short term storage and ambient food and beverage products involved in direct-to-consumer services can create scalable shipments which eliminate excess product held in storage. Instead of shipping larger amounts of product and struggling to place it with retailers, companies are able to ship fewer pallets, or more specific inventory levels to meet consumer orders. Removing excess product from the supply chain and streamlining cross-docking can keep direct-to-consumer e-commerce flexible, profitable and fast. 

Cited Sources
1 Farms, Perdue. “Perdue Farms Launches New Direct-to-Consumer E-Commerce Website in Centennial Year.” Accessed June 14, 2020. https://www.prnewswire.com/news-releases/perdue-farms-launches-new-direct-to-consumer-e-commerce-website-in-centennial-year-300982699.html.
2 Times, Financial. “It’s All about the Data: Big Food Brands Sidestep Retailers in Pandemic | Financial Post,” May 30, 2020. https://business.financialpost.com/financial-times/its-all-about-the-data-big-food-brands-sidestep-retailers-in-pandemic.

 

2020-06-15T15:20:43-07:00June 15th, 2020|