Even though the seasonal peak in shipping demand has passed, this nation’s supply chain issues are expected to continue into the coming year. Shipping a container through major U.S. ports is now more costly and takes much more time than in the past. And, even items moving domestically are facing various bottlenecks due to trucking shortages and other inefficiencies in the supply chain.
There’s a misconception that these ongoing troubles only impact customers waiting on items like microchips, car parts, apparel, and toys from overseas. But, what about the foodservice industry? The fact is that consumer products companies and service businesses of every type have been affected by these events.
A recent study by the North American Association of Food Equipment Manufacturers (NAFEM) reveals that supply shortages and the rising costs of shipping are the most prevalent concerns among members. Here is how the shipping backup is impacting the foodservice supply chain.
The Foodservice Industry - A Substantial Market
The global foodservice supply chain accounts for over $1 trillion in annual sales. The foodservice equipment market is worth roughly $37 billion, and the technology sector is valued at about $500 million.
As tech solutions from other industries get adopted by the foodservice space, this sector will continue to allocate more capital to tech-enabled improvements, some of which will involve the supply chain. Currently, however, the foodservice supply chain and distribution model remains antiquated where suppliers and business owners are struggling in the midst of the most disruptive event ever to hit the industry.
COVID-19 Surging Consumer Demand
When the coronavirus pandemic hit two years ago, the consumer demand for packaged goods soared while the demand for many foodservice products plummeted. People sheltering in place found it safer to get products at the grocery store, and many restaurants closed, at least temporarily.
Consumers quickly tired of being confined at home or not being able to eat at their favorite restaurants. Soon, fast-casual restaurants and others that were able to pivot to meet the growing demand for pickup and delivery orders experienced new levels of success. Unfortunately, supply chain issues have interfered with giving everyone what they want.
COVID-19 Foodservice Supply Chain Impacts
The COVID-19 pandemic has ushered in a unique set of challenges that affect the U.S. food supply chain. Some of the major stakeholders impacted by the pandemic include:
Since the start of the pandemic, farmers have been dealing with a long list of challenges, such as plummeting grain prices and serious labor issues. At the same time, farmers are facing troubles managing excess produce because of low demand or bottlenecks in the supply chain.
The foodservice industry relies on a massive network of distributors for a reliable and steady supply of products. Because of the pandemic, these distributors have been impacted by shifting demand from restaurants and other supply chain issues.
Even if farmers continue to make regular deliveries to distributors, these businesses have found it challenging to adjust to the drastic change in market dynamics. Foodservice distributors are finding it difficult to meet delivery deadlines and store excess inventory of items.
Similar to foodservice distributors, producers have had difficulty pivoting in the wake of significant changes in this industry. In many cases, this is labor-intensive work that became dangerous as the COVID-19 infection rates spread among meatpacking and agricultural production workers.
Most producers also have equipment and packaging configured for goods in certain sectors of the foodservice industry. Recalibrating or reconfiguring that equipment or changing the business model on the fly can be challenging and inefficient.
Foodservice Equipment Providers
No one thinks that a chip shortage will impact their experience at a restaurant. But, this isn’t necessarily the case. Computer chips, not tortilla chips, are used in various foodservice applications, including point-of-sale (POS) machines, which are supposed to make contactless payment easier during a pandemic.
According to the Washington Post, the chip shortage has impacted both existing and startup foodservice providers nationwide. In addition to POS machines, Restaurant Business reports that locations looking to build new locations or replace old equipment are having trouble sourcing equipment thanks to a backlog of imports, rail station bottlenecks, and trucking backups, which could persist for another year or more.
Shipping and Foodservice Supply Chain Disruptions
Even if farmers and factories can meet production goals, the foodservice supply chain faces ongoing challenges related to getting the products where they need to be.
According to Business Insider, U.S. foodservice operators and retailers continue to struggle with getting key ingredients and even takeout packaging. Last summer, Starbucks stopped ordering about 25 items from suppliers due to ongoing problems. Fast-food chains like Wendy’s, Chipotle, and Subway have all faced trouble getting items like lettuce and even ketchup.
Domestically, this country has continued to struggle with a lack of qualified truck drivers, which impacts every industry, including foodservice. There is incredibly high turnover in the trucking industry, sometimes 90% or higher, at the same time that the demands from eCommerce businesses are soaring.
When there is a lack of visibility throughout the supply chain, there’s a greater chance of shipping delays and lost or damaged goods. Investing in technology throughout the process is the best way for stakeholders to secure a competitive advantage and mitigate various shipping risks.
The shipping delays, in some cases, can be traced back to the issues at U.S. ports. But this isn’t the only problem facing the supply chain that is impacting the foodservice industry. With international goods, shipping routes have been choked by extreme weather, rising costs, and several untimely canal blockages.
Opportunities to Improve the Foodservice Supply Chain
Pain is a great motivator. And many foodservice businesses and vendors have been suffering from supply chain troubles over the past year. It’s been enough of a disruption that more and more businesses will be making investments in new equipment, process, and technology solutions to improve the supply chain and the customer experience.
Even though some shipping costs are abating, the just-in-time manufacturing model has proven unsustainable in the face of even the slightest disruptions. This model, advocates claim, requires that manufacturers be closer to suppliers, meaning long-distance shipping isn’t the best way to build resilience in a supply chain. Instead, the entire transport chain and the technology that supports it needs to be redesigned to favor on-shoring production and more visibility for stakeholders.