In the past two years, we’ve seen countless headlines advertising what we already knew. Supplies at grocery stores and other consumer markets are dwindling. Before we knew it, we fell into one of the worst supply chain crises of our lifetime, made worse by bulk buyers and those wanting to resell at even higher prices later on. This ongoing period has left many with the question: What causes such disruption? And how can supply chain disruptions affect your bottom line in the food and beverage industry?
Below, we explore what the supply chain is, different possible reasons for the disruption, and suggestions on what companies can do to alleviate the strain that this can cause on your bottom line.
What is the supply chain?
The supply chain is the flow of tangible goods from larger organizations and businesses to consumers. The supply chain affects every area of the world as countries trade their unique goods and services. Management of the supply chain can lead to a greater return on investment (ROI) for businesses, bringing with it lower overall operating costs. Managing and adapting your business in alignment with the state of the global supply chain allows businesses to lead their respective industries with greater efficiency and innovation, and can foster new opportunities and experiences for growth.
Why is the supply chain currently being disrupted?
The supply chain is dynamic, and can be affected by a variety of factors. Our large-scale disruptions began at the start of the pandemic at the beginning of 2020, and continued into 2021 as policies changed and demand grew higher. Below are just a few of the possible reasons that may have contributed to the overall decline and disruption of the supply chain.
COVID causing a loss of manpower that impacted every level of the food industry.
As businesses struggled to adjust to the new environment that the pandemic era ushered in, employees were falling sick, falling behind, or simply leaving their jobs. This was especially true in the United States, and this period of time was dubbed by historians as the Great Resignation. This occurred between April of 2021 and October 2021, as record numbers of individuals left their jobs.
The trickle-down effect was amplified as companies struggled under the now-staggering weight. The food industry was shaken as many companies scrambled to address and remain flexible under increasingly heightened demand, and lingering dockworkers struggled under severely understaffed conditions.
COVID restrictions strained fiscal and personnel-centric resources, forcing companies to pivot
In the early days of the pandemic, many businesses scrambled to allocate work from home capabilities for employees. This type of work is not feasible for dockworkers and supply chain teams, in most cases. Because of this, before protective policies were in place, many workers either quit or were asked to wait until policies were enacted to protect them from the then-unknown risk that COVID brought.
This couldn’t have come at a more impactful time, as demand surged higher than ever before for personal protective equipment and other hygienic items. The strain didn’t just stop there — delayed shipments meant food shortages and quality issues as manufacturers and producers shifted their focus from quality control to sustainability and survival.
Global shipment of outsourced products caused additional strain
Globally outsourced products experienced additional strain and confusion as supply chain disruptions soared throughout 2020 and 2021. Scarcity drove the prices higher than ever for consumers. According to EconoFact, food costs skyrocketed to an additional 3.6% higher cost in April of 2020 alone, with subsequent rises in price that would be soon to follow due to inflation and scarcity. The price surge occurred also in an attempt to naturally calm the demand, but even still international outsourcing remained strained and difficult to manage.
Other elements that contributed to the surge were numerous and largely logistical, due to the import and shipping issues that international entities encountered. This was especially true before the pandemic restrictions were understood and mutually agreed upon by leading health experts. This was especially true for outsourced food items and consumer goods.
Poor planning and ramp-up caused additional shortages
While industries that relied on tourism and travel may have experienced a decline, there was growth found in other areas as the pandemic waged on. Citizens didn’t halt their spending, which caused new demands in other areas. Some of these areas included:
- Home office spending
- Home improvement spending
- Tech spending
- Food spending
- Personal entertainment spending
While factories struggled to meet the demand of newfound orders, weaknesses were quickly identified in our national infrastructure and ability to produce. While the companies were able to address the needs on a design and assembly scale, many realized that additional components for final products were sourced overseas — where importing had nearly ground to a halt.
How can businesses prepare for supply chain disruptions?
Preparing for the next era of disruption looks different for every business. While no solution can completely alleviate the weight that these issues cause, there are steps that your business can take to minimize the risks and harm caused. Working proactively from now may help your business to adopt a more pandemic-resistant approach for the next time a global disruption occurs. Below are just a few ways that you can make your business more variability resistant.
Adopt strategic hiring practices for your food production and manufacturing company
The market is the most dynamic that it has ever been. Because of this, companies are having difficulty finding patterns in the hiring/resignation process for critical team members throughout the supply chain. Businesses can collaborate with HR teams to ensure that there are flexible hiring practices in place to protect the interests of the business as much as possible.
Plan ahead for shipment delays or quality concerns
While this point may seem simple, the importance cannot be overstated. Planning ahead is critical for the success of your business, and will help your team to be as flexible as possible should the need arise. You can work with a safety and compliance officer, as well as a risk management team on a consultant basis to establish your next operations plan if this were to happen again.
Diversify your sourcing strategy for your production needs
As we navigate the nuances of the current crisis, you may take this time to re-evaluate your sourcing strategy. Many businesses have certain vendors they work with on a rolling basis to ensure that they have enough raw materials to create their own unique products. While this is helpful, you can strategically diversify your sourcing plan and work with several suppliers domestically and internationally. Doing this helps you to have resources and a plan in place to address any global emergency and mitigate the damage and disruption that it may cause to your supply chain.