The COVID-19 pandemic exposed a host of vulnerabilities in the global food supply chain, leading to all sorts of disruptions across the country. Whether people are concerned about eating out at their favorite restaurant or getting ahold of their must-have snack food at the local grocer’s, fluctuating levels of supply and demand have created an unprecedented situation for food businesses. Here’s what you need to know about the current situation and six ways your food business can deal with supply chain disruptions.
What Has Happened With the Food Supply Chain?
The COVID-19 pandemic has dramatically affected the flow of food from farms and producers to businesses and consumers. Once the pandemic is over, there will be plenty of time to dissect the true impact of the crisis. But one of the key lessons learned so far is that there is something fundamentally broken in the supply chain. In short, there isn’t much resilience in the face of a crisis if people can’t get the food they want and need.
Over the past 18 months, we’ve experienced several missing links in the food supply chain that have led to increasing damage and disruption:
- Harvests - When the last two springs arrived, crops were left rotting in the fields. For example, asparagus growers throughout Europe and many farmers in the U.S. were short-staffed because closed borders prevented migrant farmworkers from traveling for work.
- Logistics - Transporting food from farms, processing plants, and warehouses have become an ongoing nightmare. Air and sea freight restrictions are making transportation challenges. Even short-haul transportation has become difficult to coordinate with workers and trucking shortages.
- Processing - Food processing plants began shutting down due to staffing shortages and issues with suppliers being unable to adjust the output. For example, in Canada, poultry farmers collectively agreed to reduce output by over 12%.
- Service - When states began reopening, people started flocking to restaurants again in record numbers. Many suppliers didn’t anticipate this rush to eat out, leading to additional shortages in materials and labor. Workers remain reluctant to return to low-paying service positions, and many don’t want to have to explain to diners why favorite menu items aren’t available.
- Sourcing - Even though consumers headed to supermarkets in greater numbers than ever thanks to COVID lockdowns, those outlets were also understaffed and understocked. Food manufacturers were unable to get key ingredients for products and packaging, and store shelves were soon empty of common items. Restaurants are facing similar issues, where some are having to remove items from the menu or stop advertising certain items due to supply chain issues.
6 Ways Your Food Business Can Address Supply Chain Disruptions
Whether your food business involves selling groceries or serving delicious meals to your local community, it’s never good news to hear that your supplies are not going to show up on time. Or worse, that they aren’t going to arrive at all due to shipping, labor, or other issues.
The current supply chain crisis has impacted just about every industry, and everything is interconnected. In fact, the computer chip shortage also affects the restaurant industry in some surprising ways. While some aspects of supply chain disruptions may be beyond your control, here are six ways your food business can address these shortfalls now and in the future.
1. Diversify Your Partners
If you relied on just one supplier for all of your raw ingredients and finished goods, that might have been your first error. While success is built on relationships, nothing says you can form strong relationships with several different suppliers. When one isn’t able to meet its obligations in the future, you can turn to another partner to fill in the gaps.
2. Prioritize Risk Management
Supply chain management involves more than just choosing who you will get your goods from. It also involves taking a close look at the entire process, from seed to store (or plate) to see where you can gain a competitive advantage and maximize value. Make sure you understand where any potential disruptions might occur so that you can monitor and mitigate those risks.
3. Use the Right Technology
If you haven’t invested in supply chain management technology, it’s probably time to consider this move. The right inventory control and warehouse management system can give you a complete view of the food supply chain. You’ll get early warnings of potential disruptions and have access to data that allows you to make more strategic business decisions.
4. Manage Your Safety Stock
What worked in the past as far as holding onto different levels of safety stock may not work in the new normal. To find the right balance, you’ll have to consider all the variables in the supply chain.
When you make use of the right technology, you can run “what-if” scenarios and plan your stock accordingly. In the case of perishable goods, you might have to take additional things into consideration and have suitable substitutes waiting in the wings.
5. Value Your Staff
The phrase “supply chain issues” has never gotten more attention than in the past several months. Some experts believe that the catchphrase, “it’s the supply chain,” is even a cop-out for a more fundamental labor issue.
If you think about it, all of the products aren’t being produced or getting to their final destination because there aren’t people to make or transport them. Pandemic or not, it’s vital that food businesses value their staff first. Business success generally flows once people issues are resolved.
6. Focus on Cash Flow
Don’t forget to consider how the food supply chain impacts your businesses’ cash flow. If you can’t move your products or fulfill existing orders, how does this affect your cash flow? Is “just in time” inventory a feasible strategy moving forward? A good cash management system can help your business stay in front of potential inventory issues.
Our global supply chains continue to face precedented conditions. Even if the situation returns to somewhat manageable conditions, there will always be uncertainty about what might happen in the future. Food businesses, warehouses, and logistics companies that make the right adjustments now will be in a much better position, not only in the coming months but also to face any similar risks in the future.