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Jun 03, 2020

Dairy Supply Chain Challenges

The dairy industry has finally stabilized to profitable levels after several years of trial-and-error, just in time for Covid-19. Dairy supply chains have seen a mixed bag of results when it comes to how the coronavirus is impacting the industry. While milk and yogurt are flying off the shelves domestically, commercial and international sales have come to a near halt. When these supply channels do re-open, it will be with an entirely new landscape and a unique set of challenges for dairy supply chain managers.

 

Transportation Challenges

While shipping lanes are slowly and cautiously opening back up, increased measures are still being taken at ports and other points of import and export that might slow down the supply chain.

 

Smaller workforces, increased health checks, product inspections, and temporary restrictions on imports from certain regions when virus flare-ups arise could cause additional barriers and a larger buffer time that suppliers and buyers need to take into account. Some of these precautions may be here to stay as the world incorporates lessons learned in a post-pandemic world.

 

This slowdown is happening in the midst of a global dairy production increase, according to a Q1 2020 report by Rabobank. The combination of a surplus supply and disrupted supply chain could result in lower dairy prices for the near future. With the extra supply and a potential increase in transportation protocols and procedures, dairy supply chain and forecasting professionals will need to find innovative ways to move their excess product quickly and make up for the additional shipping time.

 

Big Trouble in Bigger China

 

When it comes to dairy imports, China is king. In fact, the country makes up for 25% of the International dairy import trade. Among all the dairy exporting countries in the world, China is their number one customer. Needless to say, the spring lockdowns in the country severely hurt dairy exporters. However, even while the markets are slowly picking back up as the world normalizes, there is a second, more long term Chinese factor to consider: they’re buying the farm. In a national effort to be more self-sufficient, China is investing in foreign dairy producers around the world in order to have more control over the supply chain.

This could mean a decrease in demand among the industry’s largest international import market in the years to come and, perhaps on a longer timeline, a new competitor in the dairy export industry as well after they meet their internal demand.

 

This investment is definitely something that the dairy industry needs to take into account for their long term planning. Their number one international customer may be changing their buying habits sooner rather than later.

 

Worker Health in Production Facilities

 

Shifting from China to more domestic challenges, the US demand for dairy is skyrocketing with families spending more time at home with a greater than normal need for grocery staples to keep themselves fed. This could be a boon for the dairy industry—if they can get the milk to the shelves.

 

There is growing concern over whether milk production will be hurt in the same way that meat production in the US was just a month ago. That is, production among meat processing plants slowed down as workers fell ill and products could not make the transition from farm to checkout line.

 

Some dairy farmers are already suffering from a surplus of supply with nowhere to send it. It isn’t due to illnesses in production facilities yet, but rather a result of commercial closures such as restaurants and school lunch programs. However, if coronavirus cases continue to rise among the agricultural production and processing populations—to include dairy plants—it could make for a continued shortage even as urban centers start re-opening.

 

Dairy Alternatives

 

It isn’t just milk and yogurt that’s being bought up in stores, but milk alternatives as well. According to a brief by FOODDIVE, oat milk sales were up nearly 350% during the first week of March. These competing brands may continue to cut into the already competitive consumer packaged goods industry in an effort to win over dairy customers.

 

Better Supply Chain Forecasting

 

What do the executives of Uber, Amazon, and Google all have in common? They have all invested significant funding in supply chain analytics platforms with a clear understanding that the world is moving towards a data-driven future. This includes the dairy supply chain.

 

In the midst of the post-pandemic challenges, better forecasting and improved supply chain efficiency will be vital to succeed in the years to come. Dairy professionals need proper data analysis to understand the impact of increased procedures at import/export nodes, Chinese investment, potential factory closures due to health risks, and competing brands.

 

The good news is these tools already exist and are available for any organization—no matter how big or small. Robust demand forecasting can anticipate the market changes that may come about from increased Chinese production on the market or the rise of competing alternative brands. Cloud-based analytics platforms such as Crisp have the computing power and know-how necessary to understand the impacts of increased import/export procedures in minute detail, analyzing which shipping channels are the most time-efficient and cost-effective.

To learn more about how cloud-based demand forecasting platforms can help your organization navigate supply chains with confidence, contact us and get set up with a demo. With Crisp, you can forecast fearlessly, cut down on waste, and improve the food supply chain for the world one milk carton at a time. Get started today. 

 

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