How to Improve the Supply Chain in the Grain and Oilseeds Industry to Secure Supplies for Livelihoods
By Cargill Inc. & Louis Dreyfus Company
COVID-19 became a worldwide pandemic two months after its first outbreak. The virus is highly contagious，catching people off guard and causing a large number of cases in a short time. The Chinese government has taken swift and effective measures to contain the spread of the epidemic within the country. At the early stage of the outbreak，especially when the virus is unknown and Wuhan city has been sealed off，the supply of people’s livelihood，including the supply of grains & oilseeds products and feed products，met with challenges in the affected areas. As the old saying ‘never waste a good crisis’，the grains and oilseeds supply chain needs to be continuously improved through a joint effort from government and industry，especially to put in place emergency response plan and mechanism to ensure sustenance supply during outbreak. This will also enable grains and oilseeds production supply chain，from raw material production and purchase，production，logistics，to sales，remains functioning to ensure sufficient food supplies subsequently.
1 Basic information on the grain and oilseeds industry during the COVID-19 outbreak
China is not only the world’s most populous country，but also the world’s largest producer，consumer and importer of grain. There is no doubt that the grains and oilseeds industry plays a vital role in ensuring China’s food safety，people’s livelihoods and the normal operation of the national economy. Grains and oilseeds companies manage products，which are the basis of the entire food supply chain. For example，the feedstuff needed by the animal breeding industry and the raw materials needed by the food processing industry all come from the grains and oilseeds processing industry. If the grains and oilseeds industry was to break down，it would have a huge impact on China，the global economy and society at large.
Like all manufacturing companies，grains and oilseeds processing companies are inseparable from the flow of goods，i.e. logistics. Both the supply of raw materials and the transport of products are carried out through logistics. To control costs，most modern manufacturing companies employ the concepts of lean production and Just-In-Time production，and pursue zero or minimum inventories. The operation of all manufacturing companies is thus inseparable from logistics support.
As part of the food supply chain，grains and oilseeds are upstream，with products supplied to feed，breeding，food and even industrial enterprises. However，as producers，grains and oilseeds processing companies are often also end users. Except for raw materials and auxiliary materials，production equipment，consumables and even workers’ protective articles depend on external supply. The modern supply chain is so interlinked that no company can operate without its suppliers.
As the world’s population grows and people travel and gather，widespread epidemics may increasingly threaten health and human life. In the case of a sudden epidemic，ensuring the stable supply of materials for people’s livelihood in affected areas and across the country is essential to support assistance during the outbreak，to maintain a cohesive social sentiment and to rebuild social order once the epidemic is over. The grains and oilseeds supply chain is the artery of society. In the event of an epidemic or a similar disaster，how can we ensure the normal operation of the grains and oilseeds supply chain？We need to ensure Business Continuity Plans for the supply chain，and to use modern technology to upgrade and ensure the smooth operation of the supply chain，even in difficult times.
During the coronavirus outbreak，we find that the following aspects affect the normal operation of the grains and oilseeds supply chain：
（1）Inland logistics
① Blocked roads. Since the outbreak of COVID-19，many villages/towns have taken measures to block the roads in or out of the villages by setting up roadblocks and forbidding external vehicles to enter the villages，most of which were taken voluntarily by villagers. Although such measures were conducive to preventing the spread of the epidemic，the “one-size-fits-all” practice blocked access for the traffic needed for livelihoods and production，with a serious impact on upstream and downstream industries. This included a short supply of feed for animals，the inability to import materials or export products，and for employees to return to work.
② Isolated drivers. During the early stages of the fight against the epidemic，inter-provincial and inter-city transportation faced many challenges，one of which was the dilemma of “trucks with no drivers”. Due to anti-epidemic restrictions，fewer drivers returned to work and drivers had to be isolated for 14 days both at the destination of trans-regional transportation and after return. As a result，the logistics industry faced a worsening situation. In practice，many drivers chose not to work as normally scheduled，even if they were able to return to work，for fear of being restricted by isolation，in order to reduce costs.
③ Restricted logistic access. During the early stages of the fight against the epidemic，traffic permits for vehicles in different areas were subject to different application requirements，and limits were set to the number of permits issued，resulting in difficulties for companies to get traffic permits or the inability to meet their normal production needs，even if they did get some. Furthermore，companies usually outsource the transportation of their products（such as finished feedstuffs and raw materials）to logistics companies，who were suffering from shortages in the number of returned employees and the number of trucks，as well as difficulties to find replacement cars. Meanwhile，a traffic permit required a designated fleet，a designated driver and a designated number plate，but companies could not achieve that.
④ Closed docks or delayed loading/unloading. Many raw materials for feedstuffs（such as soybean meal，corn，imported feed additives）are handled at ports，docks or grain depots before transportation. Closed ports，docks and third-party warehouses were common during the early stages of the fight against the epidemic. Although the blockade was lifted and docks and warehouses were able to re-open，few handling staff returned to work，which resulted in delayed handling.
（2）On international trade
Some foreign companies were concerned about the outbreak and prevented exports of animal and plant products originating from China. During the worse of the COVID-19 outbreak，a lack of understanding of how the virus was transmitted，caused concern among companies and consumers in a number of countries，preventing goods and commodities exported from China from being delivered smoothly. For example，Pakistan and other countries required the issue of certificates for being free of COVID-9 contamination for goods originating from China and reinforced fumigation and disinfection measures at destination ports[1]，while Russia[2]，South Korea[3] and Turkey[4] suspended imports of animal and plant products from China. Although the WHO did not recommend restrictions on China’s travel and trade in its Statement on the second meeting of the International Health Regulations（2005）Emergency Committee regarding the outbreak of novel coronavirus（2019-nCoV）[5] on January 30，the concern did not go away.
Due to the introduction of control measures by destination countries of Chinese export goods，as well as China’s domestic logistics restrictions，Chinese export companies failed to deliver goods on time，resulting in passive default. Some domestic export companies failed to fulfill their contracts due to the COVID-19 outbreak，and faced the double blow of inventory overstock and claims from foreign customers，as well as severe difficulties in their operations. To their credit，business associations，including the China Council for the Promotion of International Trade and the China Chamber of Commerce of Import and Export of Foodstuffs，Native Produce & Animal By-Products offered timely support to companies by issuing proof of force majeure to help them overcome difficulties.
The delay in cross-border logistics of invoices and documents also affected customs clearance. Closed docks and delayed loading/unloading had a big impact on international trade. Many cargo ships could not unload，cold storage at docks was filled with goods that could not be shipped for a long period of time，causing ships to China to be transshipped to other regions.
Reasons for the above are as follows：
① Lack of emergency plans and unified coordination mechanisms. At the early stages of a virus outbreak，an emergency plan leads to timely actions to minimize its impact. A unified and coordinated plan ensures effective supply and reduces the impact of different policies in different regions. Damage to any link in a supply chain may cause the breakdown of the whole chain，as a slight move in one part affects the whole.
② Over-dependence of the supply chain on people and insufficient automation. As too many logistics and production personnel failed to return to work in a timely manner，companies failed to resume production even once work was supposed to have resumed. The lack of personnel in key positions meant entire plants were unable to operate.
③ Insufficient digitalization of supply chain operational information caused trade to be affected and lack of traceability，meaning the authorities did not have a full picture of the situation. Governments strongly encouraged companies to resume work and production，but they still relied on the self-declaration by companies in terms of information gathering and acknowledgment，which was inefficient.
2 Assumption on the contingency plan for the grains and oilseeds supply chain
A good contingency plan and implementation mechanism for the grains and oilseeds supply chain could ensure timely and effective supply to affected areas through simple procedures and smooth organization of logistics. This will also enable grains and oilseeds production supply chain，from raw material production and purchase，production，logistics，to sales，remains functioning to ensure sufficient food supplies subsequently.
Judging from the outbreak of COVID-19，the supply chain contingency plan mechanism may be further improved in the future，based on the special governmental managing workgroup mechanism currently adopted in China. The plan will define a trigger mechanism according to the nature of a disaster，as well as the responsibilities and coordination mechanism of leading departments and fellow departments of constituting authorities，and carry out dynamic impact evaluation and improvement. In terms of policy formulation，the plan will emphasize the concept of integration for the whole industry chain，and will：
① define the list of key guaranteed supplies，including grains，oils，feedstuff and other key guaranteed supplies for people’s livelihood；
② develop maps for supply reserves，dispatching and production，so as to arrange supplies according to the probability of disasters，production capacity of grains，oils and supplies，the location of the population and breeding in different regions，and with reference to national and commercial reserves；
③ streamline the maps for every link in the supply chain of specific industries，covering raw materials，logistics，warehousing，equipment parts and auxiliary packaging materials. Taking soybean meal production as an example，the whole contingency supply chain is required to coordinate customs clearance，handling at docks，production in plants，logistics and transportation，as well as sufficient labor force，equipment maintenance，warehousing and other derivative elements.
Figure 1 Map of the Supply Chain of Soybean Pressing
The above contingency plan will ensure the timely initiation of the plan，smooth operation of the supply chain，accurate and effective guarantees，and orderly and sustainable production resumption，in case of a disaster.
3 Suggestions on improving the grains and oilseeds supply chain
To further improve the grains and oilseeds supply chain contingency mechanism，the following suggestions are made according to the specific situation of the industry.
（1）Suggestions on production and reserves
① Improve the automation and intelligence of grains and oilseeds production. At present，the grains and oilseeds industry is subject to insufficient automation and intelligence，failing to satisfy the requirements for flexibility of configuration and efficient dispatching in emergency situations. It is suggested that，on the one hand，the government issues policies to encourage the automation of the grains and oilseeds industry，supporting the industrial transformation through technologies upgrade，including 5G video monitoring，AGV scheduling，data backhaul and equipment data collection technologies. These will not only enable smart grains and oilseeds plants to reduce the dependence on labor in production，but will improve product quality and production effectiveness when combining with intellectual Industry Internet in the future. Furthermore，the government should encourage the building of a certain proportion of unmanned chemical plants and production lines to improve production efficiency and avoid forced production disruption.
On the other hand，the government should encourage the training of workers with all-around skills，so that in case of emergency，one person is able to work in multiple positions to cope with labor shortage，and to avoid production safety risks caused by temporarily-hired workers due to labor shortages.
② Increase the proportion of contract reserves and production reserves in emergency reserves. China enjoys a supply chain contingency system with complete construction of physical grains and oilseeds product reserves. During this epidemic，the sufficient physical reserves of corn and other food crops played an important role in meeting production demand and stabilizing prices. However，it is still suggested to increase contract reserves and production reserves of grains and oilseeds products，to further diversify state grain reserves. It is also suggested to include feedstuffs and agricultural resources in the emergency supplies guarantee system，as part of the effort to strengthen and improve the reserve system for important agricultural products.
The government should encourage contracts with leading enterprises to ensure the prior lease，dispatch or production of grains and oilseeds products，as agreed after emergencies to secure the supply. The government should，according to population densities and the location of the breeding industry，guide and optimize the grains and oilseeds reserves close to areas where feedstuffs are needed and there are high population concentrations，building a more complete and flexible emergency grains and oilseeds supplies guarantee platform.
Furthermore，the government should assign a single government department to schedule uniformly the purchase，storage，dispatch，transportation and use of emergency supplies to improve efficiency，while defining responsibilities. During the current epidemic，the way of guaranteeing medical supplies by requiring leading companies to produce and dispatch supplies directly to client organizations is worth reference and promotion，as it greatly improved the efficiency of supply under emergency conditions. Drawing on the lessons from Hurricane Katrina，the U.S. government adjusted its emergency management policies after the disaster and reformed the Federal Emergency Management Agency（FEMA），an important part of which was to upgrade the Logistic Management Group to the Logistics Management Directorate（LMD）to integrate and coordinate uniformly the government’s internal and external emergency supplies.
（2）Suggestions on trade and logistics
① Digitalize logistics documents with information technologies，such as blockchain. Blockchain is a new application pattern for distributed data storage，encryption and other computer technologies. The data or information stored in it are characterized by “unforgeable”，“whole-process marked”，“traceable”，“open and transparent” and “collectively maintained”. After the digital processing of traditional paper documents with blockchain technology，the real-time matching of data avoids heavy repetitive workloads，reducing the time for document processing by a fifth，and the time needed to complete the cross-border trade of agricultural products by half.
Currently，six large international agricultural companies，namely Louis Dreyfus Company，Cargill，ADM，Bunge，COFCO and Glencore Agriculture，have launched a joint venture called Covantis to enhance the standardization and digitization of international agricultural transportation transactions by adopting blockchain technology，and are developing a platform that will be available for post-trade operations worldwide. The blockchain program for parallel-import cars launched by Tianjin Customs，China，in 2019 made full use of the tamper-proof and traceability advantage of the technology，which addressed the problem with regard to mutual trust between different stakeholders，realized the visualization of process nodes，and made inspection and quarantine clearance more convenient and efficient. Prospects for the application of the technology has been verified in the industry.
It is suggested to further promote the application of blockchain technology in supply chains to speed up the promotion of a modern and intelligent supply chain.
② Manage water transport，land transport and other important transportation junctions hierarchically according to the degree of risk.
A hierarchical management mechanism is conducive to defining the risk management responsibilities of main bodies at all levels，and to improving the accountability mechanism of supply guarantee. First of all，a hierarchical management mechanism for companies should be developed according to the production maps mentioned earlier，with reference to local conditions. A ‘white list’ of grains and oilseeds companies should be put in place，based on scientific criteria and specific conditions，to ensure the companies get the support they need. Secondly，a hierarchical operation plan for the whole supply chain should be developed for the import of raw materials，production of products and logistics and delivery by companies on the list，in which special water transport and land transport channels need to open up and emergency traffic permits should be issued in advance，according to the levels of companies，to reserve access to permits in case of an emergency，so as to ensure the import of raw materials and supply of products. Thirdly，hierarchical management shall be applied to important transportation junctions such as docks，in order to streamline in advance and guarantee as a priority the continuous operation of important transportation infrastructure，including key docks and highways in production and affected areas. Workers should be isolated on the spot and operations should be mechanized to ensure that grains and oilseeds supplies are not blocked at key nodes and to break logistics bottlenecks in case of emergencies.
③ Realize shared logistics using big data and other modern information means. The logistics industry enjoys favorable conditions to develop a “shared economy”，and developing shared logistics is conducive to integrating the surplus of logistics capacity in the society，lowering logistics costs，and reducing carbon emissions，waste of resources，traffic congestion and environmental pollution from logistics. This would help realize the intensive，greening and efficient transformation of the logistics industry. During the outbreak of COVID-19，some logistics companies，such as EMS and SF Express，guaranteed their operation by sharing their transportation capacity，under the condition that the access of drivers and vehicles to affected areas was restricted. Such an initiative is worth exploring and promoting.
It is suggested，on the one hand，that the country should continue to promote the building and management of a vehicle-cargo platform to enhance the sharing and reasonable allocation of logistics transportation and delivery resources. Advanced technologies，such as the Internet，big data and blockchain，may be integrated to provide solutions for problems in information authenticity and effectiveness in the current vehicle-cargo platform. On the other hand，the country should speed up the planning and layout of logistics parks and other infrastructure，and advocate vigorously for smart warehousing and smart logistics management，in order to facilitate the development of shared logistics. In the future，information technology will further enhance the in-depth integration of the logistics industry，and expand greatly the emergency management of the supply chain，especially the big data tracking and analysis of the purchase，production and transportation of grains，oils and other supplies for people’s livelihood，the optimization of logistics routes，the forecasting of supply consumption and warehousing，and the prevention and control of risks.
（3）Strengthen information disclosure and consumption expectation management
During this epidemic，the public has paid more and more attention to the real-time disclosure of disaster information，which not only fulfills their right to know，but also helps the manufacturing industry to organize production plans reasonably. After the outbreak，China strengthened the timely disclosure of information on medical supplies，and allowed the joint prevention and control mechanism to undertake the task of guaranteeing production and supply by disclosing the product capacity and future production increase in medical supplies. This alleviated the public’s concern. A grains and oilseeds monitoring system has also been launched in the food system to report daily on the production of high-quality feedstuff companies，and livestock and poultry breeding companies. The vegetable responsibility system and daily inspection and reporting system were introduced in many cities and regions to disclose price information to the public online，via SMS and other channels，in order to manage the public’s expectations. Such practices should also be introduced for grain products，oil products and feedstuff raw materials，as they are conducive to better scheduling by production companies to avoid fluctuations，due to stress in the production and logistics parts of the supply chain，as well as helping to avoid large price fluctuations due to panic buying.
[1] Source from China Council for the Promotion of International Trade.
[2] Source：https：//www.fsvps.ru/fsvps/laws/7073.html.
[3] Source：https：//cn.yna.co.kr/view/ACK20200129005200881.
[4] Source：https：//www.hurriyetdailynews.com/turkey-limits-chinese-imports-amid-coronavirus-outbreak-151858.
[5] Source：https：//www.who.int/news-room/detail/30-01-2020-statement-on-the-second-meeting-of-the-international-health-regulations-（2005）-emergency-committee-regarding-the-outbreak-of-novel-coronavirus-（2019-ncov）.