Uncovering the effects of COVID-19 in the food supply chain sector
Due to the exponential spread of COVID-19, the U.S. food supply chain has been impacted by significant changes in consumer demand alongside disruptions within the farming, production, and transportation industries. While there’s no shortage of food availability, one of the challenges is mitigating the risks of stock-outs to provide consumers with the products they desire. As consumers enjoy having options, this heavily impacts the foodservice industry. Failures to provide options can result in unhappy customers, ruined reputations, and monetary loss.
Much of the impact on the food economy is related to public health and safety enforcements. This includes social distancing, lockdowns, work-from-home policies, and travel restrictions. Although necessary for bending the curve of the virus and saving lives, restrictions have undone years of profitable company strategies.
Essential food retailers such as grocery chains are heavily depended on during global events, making them exempt from lockdowns and less susceptible to food supply disruptions. However, the downstream supply chain sector, which encompasses distribution, wholesaling, and retail, is facing the greatest negative impacts and changes.
Vulnerable Food Industries that Will Require Planning
Items that require labor-intensive harvesting or processing, such as meat and many seasonal fruits and vegetables, face limitations as fewer workers remain available. These industries are vulnerable to COVID-19 due to close (and sometimes overcrowded) work conditions that demand social distancing policies, to protect employees and prevent mass virus spread in the workforce.
Multiple meat processing plants throughout the country have temporarily shut down or followed requirements to open at a lower capacity.
As a response to the accompanying low demand, producers now have mature animals, and financial calculations prompt distressing mass euthanization actions to reduce overcrowding.
The effect of disconnects in supply and demand are being felt in the meat industry because processing is concentrated and confined to a small number of plants; exemplified by how 60% of American-sourced pork is produced by only 15 plants.
There is also a risk for shortages in sectors that are globalized and require air transportation, such as crop seeds along with many other raw input ingredients. Seeds needed for the spring sowing cycle arrived prior to COVID-19 related travel restrictions but companies will need to plan accordingly for future crops.
Catering to Food Purchasing Trends
Foodservice operators need to be prepared for changes in consumer behavior and preference. According to the Mckinsey & Company 2020 annual survey, consumers have stopped visiting public venues and have stocked up on groceries and supplies, boosting sales for the month by 29% over the prior year. Meanwhile, sales declined at restaurants, fast-food locations, coffee venues and casual-dining locations by 27%. Statistics confirm this assumption as food retail within the fresh, frozen, and packaged categories are maintaining sales at 15-20% higher than typical rates.
Despite the restaurant and foodservice industry’s struggle from the consequences of COVID-19, many are combating these purchasing trends by making changes to their operations. Some helpful strategies companies have implemented are:
- Limiting menus to fan-favorite meals
- Providing curbside pickup
- Promoting (or implementing) take-out and delivery services
- Transitioning a high-end menu to casual dining or meal kits
- Changing suppliers as a last resort during severe supply chain disruption
Something important to recognize is the speed in which managers have restructured their supply chain, as they continue to find solutions in the midst of this unprecedented pandemic. However, this means there is additional competition and pressure in redistributing your supply to stop market volatility from affecting your company’s operations.
It’s also important to note that impacts on specific food products are yet to be discovered and are varying in terms of severity and the stage within the supply chain. As a result, companies will struggle at differing moments and in unequal measures.
The Importance of Data-Driven Food Supply Chain Processes
Supply chain optimization seeks to strategically plan inventories to ensure companies reduce costs and utilize products with limited unnecessary backstock. In promoting consistent efficiencies, managers hope to reduce the impact of market volatility and therefore be surprised when they discover their supply chain lacks a safety buffer during uncontrollable circumstances, such as this pandemic.
Restaurant chains often have numerous distribution channels and managing them through separate excel-based processes is an inefficient method of tracking and targeting supply chain risks. Even with staff striving to maintain best practices, delayed and unreliable product data cause the company to fall short of urgent profit goals.
Businesses need to be prepared to make rational, evidence-based decisions in response to the inevitable supply chain disruptions. These may include a rise in food prices and widespread economic downturn that causes high unemployment rates. To combat this recognition, managers are deploying digital solutions that create end-to-end visibility of their supply chain, while leveraging data to make smart decisions.
Learn More About How You Can Overcome Supply Chain Disruptions
Improve data processes to ensure your restaurant chains can proactively prepare for risks while focusing efforts towards smart contracting, supply sourcing, and quality control. Protect your foodservice operations by using digital solutions that access real-time data. Effortlessly check the status of facilities used throughout your supply chain with mapping-based analytics. Using automated technology to cross-examine supply chain movements with relevant data sources can save up to 80% of your time spent on inventory stock management.
Click here to learn more about implementing a long-term plan to reorient your supply chain during COVID-19.