The advantages of dedicated supply chains over the current system are manifold. Companies embracing this thinking will benefit in the following ways:

Reduced risk

  • Longer term, more stable agreements reduce exposure to price volatility, whilst shared insights will enable players to better react to market risks

Improved productivity

  • Better insights into chain requirements improve process efficiency and partners can also work together to finds ways to limit or reuse waste

Access to new markets

  • Better insights into downstream needs and opportunities can better inform product innovation and help companies to grow footprints in new markets

Enhanced brand and reputation

  • Companies with ambitious CSR targets can help their partners on other product attributes, such as sustainability

Improved access to capital

  • In addition to better cash flows and stronger credit ratings, members can access new financing models that provide leverage from chain partners

Rabobank says that adopting the dedicated supply chain model positions F&A companies for longer-term growth, as the sector rises to meet the over-arching challenge to feed the world in coming decades.

Making the change

Rabobank’s report encourages the industry to abandon its preoccupation with short-term price spikes. Rabobank believes that a model based on chasing price is a narrow approach that will restrict the ability of F&A companies to realize their growth objectives in this more complex and demanding environment.

The report calls for prominent F&A brands to show leadership, through 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, such as Mars' decision to release the cocoa genome sequence into the public domain as part of its broader commitment to sustainably sourcing all cocoa purchases by 2020.

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

Barry Parkin, Mars Global Chocolate Procurement and Sustainability Head, says, "Mars believes that closer cooperation, both up the supply chain with suppliers, origin governments and NGO’s, and across the supply chain with other manufacturers, is critical to achieving the cocoa industry’s growth and sustainability goals. Through Mars’ Sustainable Cocoa Initiative, we are actively engaging with all parties in an effort to drive a step change in farmers’ cocoa yield, which is the key to driving economic, social and environmental sustainability. We have already demonstrated with our partners up the supply chain that a 3-fold increase in yield is realistic and the challenge now is to roll this out to hundreds of thousands if not millions of small-holder cocoa farmers by the whole industry getting behind the same initiatives in multiple origins."

Gilles Boumeester, Rabobank’s Global Head of Food & Agri Coverage, comments, "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".