Home > Rabobank Report: Transforming the Food & Agri Supply Chain

Rabobank Report: Transforming the Food & Agri Supply Chain

Supplier News

Agribusiness banking specialist Rabobank , in a new report addresses the flaws in the current F&A supply chain structure that leave the sector ill-equipped to respond to the increasing complexity of the operating environment caused by new external influences compounding traditional pressures.

Calling for industry to transform the way supply chains are organised by adopting longer-term supply agreements and cooperative relationships with upstream and downstream partners, the new Rabobank report identifies the dedicated supply chain model as the best next step for F&A companies.

Limitations of the current structure

Traditional pressures on the F&A industry such as supply and demand dynamics, a burgeoning population and rising agri commodity prices are being compounded by a new set of external influences including the direct use of agri commodities for biofuel production and increased awareness of the energy intensity of food production in addition to speculation in agri commodity markets and the regulatory responses triggered from governments worldwide.

The new pressures also highlight the limitations of the existing supply chain model, which is very linear, and consists of suppliers, processors and retailers forming short-term partnerships independent of the influence and interests of other members of the chain. Inefficiencies come from F&A companies being restricted in responding to changes in supply and demand dynamics, fleeting partnerships limiting productivity and restrict innovation as well as wasteful processes causing environmental degradation.

Adding value through closer cooperation

Rabobank believes that switching to a new supply chain model has the potential to transform the F&A industry. Upstream suppliers and processors in a dedicated supply chain structure enter into long-term partnerships with each other and a downstream chain leader with information and insights being shared along the chain's length for the benefit of all members. 

Key advantages of dedicated supply chains:

  • Longer term, more stable agreements reduce exposure to price volatility, while shared insights will enable players to better react to market risks
  • Better insights into chain requirements improve process efficiency with partners also working together to finds ways to limit or reuse waste
  • Better insights into downstream needs and opportunities can better inform product innovation and help companies grow footprints in new markets
  • Enhanced brand and reputation for companies with ambitious CSR targets who can help their partners on product attributes such as sustainability
  • Better cash flows, stronger credit ratings, and increased access to new financing models that provide leverage from chain partners
Making the change

Rabobank believes that a model based on chasing price will restrict the ability of F&A companies to realise their growth objectives in a more complex and demanding environment. Calling for prominent F&A brands to show leadership by creating initiatives that will lead to closer cooperation between their upstream partners, the report cites several examples of leading F&A companies that are already active in this space.

Additionally, sector leaders undertaking such initiatives must become advocates for dedicated supply chains by sharing their experiences with the wider industry.

Gilles Boumeester, Rabobank Global Head Food & Agri Coverage explains that F&A financing institutions also have a role to play in creating an environment that is conducive to adopting this new model. To this end Rabobank is developing new financing solutions that support and encourage companies embracing dedicated supply chain thinking.

The complete report is available on the Rabobank website.

Newsletter sign-up

The latest products and news delivered to your inbox