Covid-19 as a global pandemic has triggered a completely new situation of unexpected risks and operational costs in the food supply chain, one amongst the very important risks that occurred and that we are still facing until today as millers are the delays in freight and their increased costs in addition to the increased wheat prices. Other impacts include slowing of the manufacturing of essential goods, key materials & ingredients and final products, losses in national and international business, poor cash flow in the market, and significant slow in revenues growth.
Al-Hazaa Investment Group
The Covid-19 pandemic has greatly disturbed food supply chains in the world and raised concerns regarding food security, lack of supplies, and the balance in the food market. Due to the importance of flour in our everyday diet and because it is one of the most important staple foods in the world, countries, and governments began storing enormous amounts of wheat which increased the demand dramatically and as a result caused a spike in prices.
As a manufacturer, you aim to create the most optimum supply chain for your company and ensure its continuation along all times of operation, while keeping your costs as low as possible and trying to manage potential risks while at the same time maintaining customer satisfaction. But today’s supply chains of organizations have become quite complex and very interconnected. Therefore, any change happening in one area of operation can directly result in a cost hike or cost variation in another.
In fact, the impacts of Covid-19 are quite extensive and have far reaching consequences in our everyday life and of course on the economy in the first place. Covid-19 as a global pandemic has triggered a completely new situation of unexpected risks and operational costs in the food supply chain, one amongst the very important risks that occurred and that we are still facing until today as millers are the delays in freight and their increased costs in addition to the increased wheat prices. Other impacts include slowing of the manufacturing of essential goods, key materials & ingredients and final products, losses in national and international business, poor cash flow in the market, and significant slow in revenues growth.
This new ambiguous situation arising as repercussions of the pandemic raised serious concerns upon food security, we saw how countries reacted to it, China for instance increased its wheat imports and stored very huge amounts of wheat, China’s wheat imports reached the highest level in more than two decades, Russia on the other hand, imposed a quota on exported wheat to limit farmers from exporting their crop due to their concerns of not having enough wheat supplies in the country which could cause price inflation. As a result, we witnessed an increased demand for grains globally, which caused high pressure on logistics and freight networks, causing higher shipping costs.
But if we look back to the stem of the problem, we find that when the pandemic first occurred in Wuhan, many companies in China had to temporarily shut down their business, so companies which were sourcing from Chinese suppliers were badly affected. And after the spreading of the virus worldwide, these interruptions were extended and affected the flow of productions due to lack of raw material, spare parts, or even lack of technical and operations team coming from abroad, which caused serious work delays or in some severe situations, the suspension of work. Moreover, at the beginning of the pandemic, the rail, air and ocean shipment stopped moving through affected regions which caused delays and errors in shipping lines worldwide. And what escalated the problem more was the fact that ocean carriers began to do “blank-sailing” as a result of the decreased demand or canceled orders. This disruption of global movement of trade exchange caused having many empty containers scattered at different ports of Europe, America and other countries, so the sudden proceed of business and economic activity, while at the same time having lack of empty containers at the port of destination, which couldn’t be controlled, resulted in freight delays, causing delayed lead-time and delivery of goods and as a result the noticeable price increase in logistics and shipping costs, and of course to the noticeable delay in maritime traffic.
Unfortunately, the pandemic was accompanied by other difficult situations such as the extreme weather conditions in major wheat producing countries like the USA, Canada and Russia which caused a bad harvesting season for the year 2021. In addition to that, there was a sharp price increase in oil and energy, and also the incident at the Suez Canal when the EverGiven mega-ship blocked traffic for almost a week in March 2021 causing further delays and increases in freight rates.
All these disruptions influenced the work of the entire supply chain including the supplier, manufacturer, distributor, retailer and the consumer as well, we witnessed a noticeable change in consumer behavior and preferences. It was a real challenge to identify the most suitable solution at this stage and how should one react, especially with a global pandemic limiting the movement and traveling of individuals, besides the infection of workers, lockdown in countries, etc. But despite the fact that those risks and unfortunate situations are uncontrollable, they can be however, with good management and comprehensive planning, confronted in order to reduce their negative impact on business. Here comes the role of insightful management and the importance of process improvements that should be taken at the right time.
As an active member in the milling and food production industry, Al-Hazaa Investment group had a significant role in this field and faced these risks with good management and adopted to this new situation quickly, the Group followed many procedures to ensure the safety of its workers, the fine production and operation of its facilities of course while maintaining highest safety standards.
Al-Hazaa Investment Group, so as other suppliers and governments, increased its stock inventory of wheat and used its silos to their fullest capacity, at the beginning of 2020 Al-Hazaa Group expanded its storage capacity across the Middle East, it also acquired storage silos at Al-Fujairah port in UAE and took access of ship unloading terminal. Not only did the Group increased its storage capacity but also utilized its production capacity to their fullest in all their food production facilities, especially at flour mills, as a response to the dramatic increase in demand for wheat flour and consumer goods like pasta and noodles during the pandemic, in order to maximize production and cover the huge demand for their products. The Group has also diversified its origins of raw materials, it purchased wheat from worldwide suppliers from different origins such as Russia, the USA, Australia, Canada, and the European Union.
A step that we at Al-Hazaa Investment Group are very proud of is our solar power plant that started operation in 2017 in Jordan, it helped us not only in reducing our carbon emissions but also to reduce our production cost and to be efficient, as it supplies all Al-Hazaa Group’s factories in Jordan with their full needs of electricity, this important step was very useful during the pandemic especially that energy is the main operational cost for flour milling facilities. Also, the modernity of Al-Hazaa Group’s mills that operate using automated 90% less workforce, who followed up with their work remotely.
Thanks to Al-Hazaa Investment Group’s long experience and wise management, we were able to face and overcome this challenge. We also deeply believe that what helped us through these tough times are the efforts of every member of Al-Hazaa Group, our employees had shown great efforts and full commitment toward their responsibilities, which helped us to overcome and adapt to this new situation quickly. Our valued partners and reliable suppliers have also helped us a lot in responding to any market changes.