**2. Literature Review**

The FSC is a complex system responsible for the circulation of food from the initial stage of production to the final stage of consumption [13]. The FSC should function as a single entity with full coordination and exchange of information between participants (producers, distributors, wholesalers, and retailers) [14]. The authors indicate that any deficiency in the unity of the FSC leads to the creation of a market gap and an inadequate response to consumer needs [11–14]. At the same time, the optimization of chain activities leads to greater profitability and business efficiency. Many studies advocate better control of business processes. A 2020 study by Patidar and Agrawal shows that 92% of total food marketing costs appear in the transportation of products from producers (agricultural processors) to retail outlets [15]. The authors complain that traditional FSCs are often disorganized [16] and show a lack of communication between agricultural farms and consumers [17]. They are subject to significant influence from middlemen who dictate the output prices of products [15]. In addition, there is an inadequate distribution of benefits, rewards, and risks among participants in the FSC [14], and there are increasing influences from external factors [10], food waste [18], etc. The importance of the good functioning of the FSC on the global market in the years to come is best illustrated by the data. Rezaei and Liu, in their 2017 study, state that by 2050, the world's population will reach 9.1 billion people, which will require a 70% increase in food availability [19]. As much as 30% of food produced for human consumption globally is lost or wasted within the FSC. The biggest problem of food delivery will occur in urban centers whose populations are continuously growing. This will lead to the creation of complex supply chains involving numerous participants, which will present challenges in the delivery of safe and quality food [19]. In addition, the conventional systems implemented in FSC are centralized, monopolistic, asymmetric, and nontransparent, and they may lead to a serious lack consumer confidence in food safety. That trust has been particularly damaged after a series of incidents over the last decades, such as mad cow disease, aflatoxin problems with milk, the horsemeat scandal, toxic milk powder, genetically modified food, etc. [13]. As the biggest problem of FSC, Lemma, Kitaw, and Gatew cite food losses of 20 to 60 percent of total production [20]. The same authors state that in the global market, approximately one-third of food produced for human consumption is lost or wasted, which amounts to approximately 1.3 billion tons per year. The reasons for food waste lie primarily in inconsistencies and inefficiencies in production, storage, handling, and transportation along the entire FSC [20].

Based on the presented subject of the paper, we conducted our research in two phases. In the first phase, it was necessary to define the indicators that affect the sustainability and functionality of FSC, primarily in the role of the supply chain in the segment of wholesale and retail activities. In the second phase, the impact of the digitalization process on the indicators underwent empirical examination. In the first phase, through a systematic

literature review based on the methodology set by Xiao and Watson [21], indicators that directly affect the sustainability, functioning, and traceability of the FSC were identified. According to this methodology, the literature review began with a search exclusively by the keywords and titles of publications, followed by a review of abstracts, and continues with the analysis of the entire texts; the final stage includes reporting on the obtained findings. All analyzed articles were retrieved from the Web of Science, Scopus, and SpringerLink databases. The search was performed using keywords relevant to the research subject: Food Supply Chain (FSC) AND Digitalization AND Sustainability; Food AND Supply Chain Management (SCM) AND Sustainability; Safety AND Food Supply Chain AND Security; Food Supply Chain AND Economic performance AND External elements; Traceability AND Food Supply Chain AND Functionality; Waste AND Food Supply Chain AND Costs. Only high-quality peer-reviewed papers were taken into consideration. The number of hits per database was 48 papers for WoS, 39 papers for Scopus, and 45 papers for SpringerLink. Based on their titles, abstracts, and keywords, a total of 58 papers that fit the research topic were selected for further analysis. Among them, 17 duplicates were observed and were excluded from further analysis. The remaining 41 papers were read in detail, out of which 10 papers were discarded because they could not contribute to the resolution of the set research subject. Out of all remaining papers, nine were general, meaning that they dealt with the issues of food placement, supply chain management, et cetera. The remaining 21 papers were entirely on the line of research; that is, they analyzed the importance of the digitalization process on the sustainability of FSC, especially in the segment of wholesale and retail activities [1–9,11,15–17,19,20,22–28]. As such, the last group served to identify the following indicators that directly affect the sustainability, functioning, and traceability of FSC.

Poor coordination and transfer of information among FSC participants–One of the biggest problems is the untimely exchange of information, both from upstream to downstream and vice versa, to FSC participants [1,2,4,5,7,8,11]. As a result of this, the chain reacts untimely and poorly to market demands, which results in the appearance of gaps, primarily on the demand side. We witnessed huge gaps on the demand side for durable food products and other essentials during the first months of the COVID-19 pandemic. Within this indicator, we should also point out the ubiquitous whiplash effect (amplification of demand from lower to higher channel members), which leads to significant inefficiencies along the FSC in the food distribution and retail segment, such as missed deliveries, poor customer service, excessive stocks, and wrong capacity plans. To adequately minimize the adverse effects of this problem, it is necessary to continuously monitor the performance of food distributors so that the flow of demand information, order delivery, transportation planning, and inventory management can be significantly improved [29].

The loss and/or waste of food is a problem that is frequently caused by the malfunctioning of food production processes and the inefficiency of the supply system [19,20]. The most common reasons are some managerial and technical limitations, such as the lack of suitable storage facilities, poor food storage and preservation conditions, cold chain, improper food handling practices, insufficiently developed infrastructure, inadequate packing and packaging, ineffective marketing systems, etc. The fact that the annual estimate of food loss on the global market is around 1 trillion US\$ is worrying [19].

Economic performance (inflation and price of energy)—The global factor of inflation and the sharp increase in the price of energy significantly complicate the functioning of the FSC [15,22]. The decline in energy imports from Russia and economic sanctions against the Russian market caused an increase in the inflation rate in the EU and a sharp increase in the price of energy (about a 16% increase in the price of electricity in Germany, 8% increase in the price of gas in the EU, etc.). There is a direct correlation between the growth rate of these economic indicators and the growth of food prices.

Transaction costs–A problem for FSC is also the growth of transaction costs. These costs arise in the process of moving products from farmers to final consumers [15]. These are transport costs, trade costs (commission), profit margin, information costs, etc. It is estimated that their growth rate rose 30% compared to 2019. It is precisely such an inefficient movement of food that leads to low profitability in the FSC [15].

External elements–The global instability and crisis caused by the COVID-19 pandemic and the Ukrainian conflict caused unfathomable consequences and uncertainty in the global food market [3,4,9,23]. The pandemic occurred suddenly and caused an enormous demand for essential products during the quarantine (lockdown) period. On the other hand, the Russian–Ukrainian conflict caused a halt in the supply of agricultural products and raw materials (cereals), fertilizers, energy, food, etc. While the economy is recovering from the consequences of the COVID-19 pandemic, new market instability and instability in the supply of resources seriously threaten the functioning of the FSC, threatening to cause hunger in rural regions with poorly developed supply chains (e.g., African countries).

Chemical and microbial contamination—Accidentally or intentionally, during the transfer of food and raw materials from the farm to the place of final consumption, various sources of contamination appear [6,24–26]. Such contaminations lead to food quality and safety incidents and attract increasing public attention [25]. First, easily perishable food and products, such as milk and dairy products, meat and meat products, fresh fruits and vegetables, fish, etc., are exposed to contamination. The biggest problems are microbial contamination (pathogenic microorganisms), problems related to chemical and physical contamination, as well as issues caused by inadequate control (e.g., allergens, industrial pollutants, microtoxins, small objects, chemical residues, false documentation, etc.). Although many companies have recently integrated food safety early warning systems in the FSC, and the number of incidents has decreased significantly, contaminants can still pose a significant risk to human health depending on their toxicity and exposure time.

Control of raw material, food, and waste flows in FSC—A frequent criticism of the traditional FSC is the lack of control at critical points in the FSC. This primarily refers to problems related to supply chain management (SCM), the coordination of activities of participants related to raw materials and final product flow, cooperation among members, chain flexibility, logistics operations, packaging, and waste management [15–17,26–28]. Without continuous control of critical points, it is not possible to achieve full functionality, efficiency, and sustainability in the FSC, especially in the segment of timely placement of food products in the market [28]. Potential solutions appear in the form of Vendor-Managed Inventory (VMI) implementation in FSC. VMI is a concept in which the producers manage the vendors' inventory. In this way, they take full responsibility for making decisions regarding the timing and extent of restocking. The essential prerequisites for VMI implementation in FSC are trust, long-term cooperation, integration, transparency, and information-sharing [30].

From the given presentation of critical indicators, we understand that insufficient control and records [28], external factors [23], economic challenges [22], lack of digitalization and standardization of processes [28], as well as the non-transparent exchange of data and information [11,31] are some of the most critical challenges facing the FSC, its segment in wholesale and retail activities first and foremost. The key research question that arises is whether these challenges can be eliminated and FSC made more flexible through the implementation of digitalization processes and the application of modern technologies based on IoT, BT, DLT (distributed ledger technology), TTI, RFID, etc. The originality of the paper is reflected in the precise definition of the impact of the above indicators on the sustainability and functioning of the FSC as well as the impact of modern technologies on minimizing their importance and improving the efficiency of the entire FSC. The given paper and the obtained results fill the gap of previous research conducted in the western Balkans region, as almost no academic study has dealt with the concrete consequences of FSC digitalization. Defining the influence of critical indicators is significant for taking adequate measures in order to minimize their negative effects through the implementation of modern technologies in the FSC as well as for improving working conditions and achieving the sustainability of food placed on the market.
