Lettuce and Supply Chain Risk – Some Mitigation Strategies (not just for lettuce …)

We wrote here about the recent lack of iceberg lettuce and courgettes in supermarkets because of poor weather in the Spanish Mediterranean growing area, where much of our supermarket produce comes from this time of the year. The crisis seems to have largely passed as far as we can tell, but it was an interesting example of our supply chain world coming into the real world spotlight for a moment at least!

It was not the end of the world for domestic buyers; we can just eat cabbage instead of courgettes with our spag bol tonight. But if you are in a corporate role, it is of course more critical that you assure supply if at all possible, and have some plans in place if there is a chance that you absolutely cannot get hold of what you need. So here are four tips in terms of managing spend categories that might be susceptible to this type of issue:

  1. Understand your supply chain. That sounds obvious but it is surprising how many buyers don’t really know the origins (or “provenance”, which is an increasingly used term) of what is being bought. If goods are coming via a middleman, agent or distributor of some sort, the buyer may not be aware of where the original production comes from, and issues can also emerge from the second tier of the supply chain (and beyond) …
  1. Consider services and tools that help with risk warnings and early notice of problems. Understanding risks is one issue, but continuously monitoring is at least as important. And even if your situation is not perfect, it might be better than your competitors if you manage it well. Remember, as Heiko Schwarz of solution providers riskmethods says, “the rule of thumb in a supply crisis is: the first one to mitigate risk is the one with the opportunity to turn risk into a competitive advantage.”
  1. Think about stockholding and optimum “safety stock” - although that is not much help for perishable commodities! But generally, firms have perhaps gone too much towards “just in time” theories, reducing stockholding to a bare minimum, which is fine until something unexpected comes along. For example, consider the recent VW disruption, all caused because of a dispute with their supplier, and a lack of stock of key components.
  1. Be aware of alternative products and substitution (our cabbage instead of courgettes example perhaps). It is sometimes possible to apply this in a corporate environment as well as in the kitchen, so a bit of creative thinking here can certainly pay off.

Procurement can’t eliminate this sort of risk, or always avoid the consequences, but there may be things procurement can do to mitigate the situation. And the lessons from that apply well beyond our “fresh vegetable” spend category.

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