How To Create A Transparent, Sustainable Food Supply Chain

Dr. Volker Keiner

Today’s farmer is in a tight spot. On one hand, the farm needs to produce a profit and run efficiently. On the other, consumers are demanding transparency and sustainability in farming. Digital transformation may seem like something that happens in other industries, but industry giants such as Cargill and John Deere are proving digital business transformation can lead to success in agriculture as well.

As our population grows, farms that embrace precision agriculture can see excellent gains. What kind of gains? Our research has found that early adopters are seeing an average 9% increase in revenue, 26% increase in profitability, and a 12% increase in market value.

Building transparency in the food supply chain

As communication improves, we’re seeing more impact in our industry from consumer opinion from food recalls, demand for locally sourced foods, and increased supply chain transparency. From ice cream to salad dressing, recalls are causing serious concerns for consumers and problems for agricultural production. Today’s consumers want farm-to-fork transparency to ensure their food safety. They’re also more aware and concerned about agricultural practices and how their food was produced. Many consumers are happy to pay more for food that is proven to be sourced using fair trade practices, which require the farmer to follow sustainable farming practices. But how do you build food traceability to that level?

Smallholder farming has answered this question in one fashion with the growing trend of direct marketing by farmers to the end consumer. The farmer creates a deep, one-on-one relationship with the consumer, who they see at farmers’ markets, on CSA days, and in the local community. This trend has been driven by society’s demand for further transparency in the food supply chain.

But clearly, this approach isn’t the answer for global agricultural supply chains. Consumers cannot maintain one-on-one relationships with all the farmers that produce input for their food, which provides a level of transparency while automating most of the communication needed.

Hyperconnectivity helps provide information, captured by digital farming solutions and processing practices, from the farm to the end consumer. It offers consumers the information they need, from the seeds and inputs used to the processes performed. It also eases the effort of maintaining so many one-on-one relationships. This process also affects the commodity markets because traders are limited as mixing and blending products impacts traceability.

Creating a sustainable agribusiness supply chain

Side by side with transparency is sustainability. The world’s population is expected to approach 10 billion people by 2050, which will require a 70% increase in food production. It’s no surprise that scarce resources such as water and arable land are becoming more valuable.

Additional transparency and networking also provides opportunities to optimize and increase the efficiency of food supply chains by reducing waste. It exceeds government and NGO scrutiny, affecting increasing and constantly changing regulations on farm operations, processing,and traceability. Digital transformation decreases the investment cost of transparency in the food supply chain: As more businesses digitalize, they can provide more information at a lower cost to the end consumer through mobile apps and QR codes. This level of transparency helps protect agribusiness and improves efficiency in farm operations.

Sustainable farming provides opportunities to improve yields while also preserving the environment. Precision farming is one area where technology and sustainability intersect, because inputs are used only where they are needed, reducing water, fertilizer, and fuel use. In California’s ongoing drought, for example, precision agriculture is expected to reduce water usage on farms by 25%.

Fresh water supply is significant concern for sustainable agriculture. Today, 80% of the world’s arable land is watered exclusively by rainfall and produces 60% of the world’s plant-based food. The remaining 20% is irrigated and produces 40% of the world’s plant-based food. As aquifers sink to record lows, the use of irrigation falls into a bad light. Precision agriculture can better match appropriate crops to soil and climate conditions and help protect our limited clean water supply. Such opportunities provide exciting opportunities for creativity and digital entrepreneurship in farming.

Another area where sustainability can play a role is in helping maintain and preserve the family farm. Family farms are becoming rarer as younger generations realize the challenges of profitability and leave in search of better opportunities. Precision farming limits inputs, automates tasks, and helps slow or eliminate the loss of experienced operators. This in turn boosts profitability, making the business of farming more appealing to younger generations.

Digitalizing agriculture improves transparency and sustainability. Fully 90% of executives recognize the impact the digital economy has on their business. Only 15% are creating a plan of action to adapt to these changes. Where will your agribusiness supply chain fall in this range? Will you get ahead of the curve or be left behind?

To learn more about digital transformation for agribusiness, click here.

Dr. Volker Keiner

About Dr. Volker Keiner

Volker Keiner is a solution manager for commodities in general and for the agribusiness at SAP. As part of the Industry Solutions team for agribusiness and commodity management, he is driving, supporting, and positioning new SAP solutions for commodity trading, commodity logistics, farm to fork, and digital farming. He is working with various customers and partners in these areas.