Building resilience in the face of crisis

The conflict that began between the United States and Iran isn’t contained to their own borders, and the disruptions they set in motion are not theirs alone. While the devastation in the Middle East has left the world deeply shaken, the war is also pulling other regions into struggles of their own.

Within only three weeks, energy prices have risen to filter into the cost of basic staples and commodities, particularly in countries highly dependent on the Middle East for oil and gas. Meanwhile apart from energy, fertilizer shortages caused by the closure of the Strait of Hormuz will impact the food and agriculture industries.

When the food industry is disrupted, we all feel a different kind of threat – one where survival is at stake. A fractured food supply spares no one, whether through escalating food prices or product scarcity due to broken supply chains.

This isn’t the first global situation to impact industries in recent years. Manufacturers should have learned from the war between Russia and the Ukraine, and to an extent, the world’s battle with COVID-19.  According to reports from Bloomberg and the Asia-Pacific Agri-Food Innovation Summit, resilience strategies are in place for the food industry – even partial practice. But this particular war is demonstrating the fragility of the system, they said, because scale, speed, and collaboration are still missing.

Companies have learned that to maintain continuous supply, they must diversify sourcing, to strengthen logistics resilience, and to invest in local production and energy efficiency.

Strategies for continuous supply

Companies build a multi-supplier network across regions to reduce dependency on single geographies vulnerable to conflict or climate risks. This approach is increasingly recommended to mitigate raw material price volatility and ensure continuity of operations, says McKinsey & Company.

In its report, Fertilizer markets and regional production strategies, the World Bank recommends establishing collaborations with local producers or regional cooperatives to reduce reliance on imports, to stabilize costs, as well as align with sustainability goals.

To strengthen logistics resilience, companies are recommended to secure long-term freight contracts with logistics providers in order to stabilize shipping costs and guarantee capacity especially during peak demands and in times of crisis, reminds The Food Institute.

Additionally, more advanced supply chain visibility tools such as AI-driven monitoring and predictive analytics are able to provide manufacturers with real-time rerouting and proactive disruption management.

To increase energy efficiency, companies can invest in heat recovery systems, smart sensors, high-efficiency motors, and technologies to cut operational costs and environmental impact. Meanwhile, by establishing regional processing centers, manufacturers can further reduce their transport cost, shorten lead times, and shield their operations from instability.

As of this writing, an end to the US–Iran war seems remote. What is certain, however, is that its repercussions will continue to impact lives. For the food industry, this is an opportunity to work further alongside policymakers and communities, from farmers to consumers, and to safeguard stability and food security in the face of crisis.

Sources:

McKinsey & Company – Resilient supply chains in food and agriculture

World Bank – Fertilizer markets and regional production strategies

Food Institute – Freight contracts and logistics resilience in food supply chains

Food Industry Executive Digital supply chain monitoring and predictive analytics

International Energy Agency Energy efficiency in food processing

FAO Localized food production and supply chain resilience

Blooomberg Fuel shortages from war begin to threaten global food supply