ASCAL Institute

Improving the GCC Food Supply Chain

A growing population base; increasing affluence, the growing awareness and sophistication in the average consumer; and rising tourist inflow is driving up food demand across the GCC region. How we experience the availability, quality, price, consistency, and diversity of choices in this most important and even indulgent part of our lives is a direct consequence of the food and beverage (F&B) supply chain.

To illustrate the scale of this sector in the GCC, a recent research report revealed that food consumption in this region alone will likely reach 52 million metric tons by 2019, rising 3.5 per cent annually. In a region where country members import 85% of their F&B consumption, the supply chain becomes even more critical here than other regions that produce locally much of what they consume. Added to this pressure is the additional characteristics of the F&B supply chain as being typically high-volume, transaction-intensive, and demanding high-levels of flexibility, agility, speed and Quality Assurance (QA). Further to those pressures, there is an additional dimension of managing raw materials, ingredients, and manufactured products through a chain of production, processing, distribution, and even disposal (For the old term “farm to fork” now adds further stages of waste management, reverse logistics, and disposal). And then the challenges of shelf life management, batch control, awareness, understanding of and the ability to demonstrate compliance with the myriad of changing regulations which differ from country to country.

The sum of these characteristics adds up to produce one of the most complex and challenging supply chain systems imaginable. The GCC Food Industry Report, recently produced by Alpen Capital, asserted that “the supply chain infrastructure, in its current state, presents a significant scope for improvement in the GCC”. This is a diplomatic way of saying that there are numerous breaches of our food supply chain that need to be addressed. Despite the challenges, we are seeing an increasing amount of new developments, optimisation initiatives, and best practices being introduced in the region by organisations, large and small.

Some of the common initiatives and opportunities are presented below;

  1. Use of 3PL’s; Specialist 3PL’s such as RSA Logistics and GSL Logistics are emerging as service providers to the F&B industry. They understand and are capable of ensuring a sealed and quality assured supply chain along its entire length for sensitive food and pharma goods.   
  2. Government Regulation; The UAE Government and its municipalities continue to improve upon their already comprehensive Food Safety Regulations, such as the Food Code (http://www.dm.gov.ae/wps/wcm/connect/3f7706a6-9271-40dd-a3df-0eb99c14fe4b/Food+Code.pdf?MOD=AJPERES) issued by the Dubai Municipality, and they operate a strict monitoring regime along the end-to-end supply chain.
  3. Halal Certification; The Halal food industry is growing at a remarkable 7.5%pa, and is tipped to reach an annual turnover of US$53 billion in the GCC alone by 2020. Challenged by additional strict qualifications, and by varying definitions depending on the jurisdiction, organisations are seizing capability and certification in the Halal food chain as an excellent investment opportunity for growth.
  4. Lean Quality Management; Whilst the food production supply chain is typically complex and lengthy, one of its characteristics is that many of its processes are repeated. Organisations are realising this repetitive nature as an opportunity for introducing Lean practices, automation and disruptive technologies for reducing cost, time and effort, while increasing consistency and QA.
  5. Collaboration; Like all supply chains, F&B can benefit by collaborating upstream and downstream in the chain, and by conducting and addressing gap analyses. We are seeing an increasing practice of collaboration between different departments and/or different organisations and even cultures, in working towards better cooperation, transparency and a more synergistic flow. In some cases, we even see competitors working together for the greater good of improving the overall supply chain in their respective sectors.
  6. Demand Forecasting; The dynamics of F&B choices are constantly changing, with ranges, seasonality, availability, promotions and many other factors impacting the supply chain. Errors in forecasting and satisfying demand have historically been a significant needless expense for organisations, and we are now seeing organisations investing heavily in sophisticated systems to capture data, build accurate forecasts, and disseminate crucial information to relevant production and supply chain stakeholders. This not only increases service levels, but also reduces waste.
  7. Customer Experience; F&B operators are realising that the quality of their food is not the only thing that is important. “Customer experience” is becoming a significant competitive advantage in the fight for marketshare. We are seeing organisations large and small investing heavily in final mile capabilities, integrating communication technologies with innovative delivery practices.
  8. Food Bank; Sheikh Mohammed in Dubai, UAE has commenced the 2017 “Year of Giving” with the launch of an official food bank to reduce food waste and deploy excess food where it is needed most. This is a great sustainability initiative, considering that the GCC ranks as the greatest food wasters in the world, wasting around 38% of all food prepared. Whilst accurate forecasting and good control of expiry are some ways to reduce food waste, this is a great initiative to effectively use the inevitable forecast “errors”, successfully “turning a negative into a positive”.
  9. “Great things are done by a series of small things brought together”; There are countless opportunities to seize the small “low hanging fruit” to improve any cold food chain. Even the smallest of organisations have access to simple low-cost and easy-to-implement initiatives such as installing air curtains, keeping loading dock doorways closed when not in use, monitoring vehicle thermostats, informing and training employees, improving preventative maintenance on equipment, self-audits, and formation of Process Improvement Committees.

These are just a few of the many opportunities and improvements that we are witnessing across the GCC Food Supply Chain. There are many more being recognised and seized by individuals and organisations. It is important that we all share these, both the successes and failures, in order to improve our collective condition.