Is America’s food supply chain nearing its breaking point?
The massive strain placed on the nation’s grocery supply chain as a result of the coronavirus pandemic may be revealing some shortcomings in the system.
The challenges include:
Escalating demand at food retail: The shortages at retail of staples such as eggs, flour, soup and pasta are partly due to stockpiling. Grocers are limiting purchase quantities and even reducing discounts to shore up supplies, but consumers continue to hoard due to fear of product shortages. Less talked about is how out-of-stocks reflect a significant increase in home cooking with restaurants closed and shelter-at-home mandates. Supply is expected to eventually meet demand. Mike Duffy, CEO of C&S Wholesale Grocers, told USA Today, “It just takes a while for the system to catch up. Some of these categories may take six, eight, 10 weeks to fully republish at the shelf.”
Sick workers: Factories are operating at or near full capacity to keep up with excessive demand, but output is slowed by social distancing and worker health concerns. A number of beef, pork and chicken plants have closed as a rash of workers have tested positive. Infection risks at meat plants are high. The work is labor-intensive and employees often work side-by-side, raising infection risks at meat plants where COVID-19 testing has been so far limited. Companies are slowly improving the distribution of masks and other personal protection materials to workers, but absence rates remain high. Some plants are exploring alternatives in case large numbers of workers become sick.
Retailer versus foodservice supply mismatches: Despite significantly less food being donated to food banks due to out-of-stocks at retail, food is being dumped by farmers as a result of a surplus caused by the massive drop-off in demand from restaurants, hotels and schools. Stock from foodservice channels is hard to shift to retail in part because of labeling. A bigger issue is that units heading to foodservice customers are significantly larger than even those heading to warehouse clubs. Companies are transitioning from processing and packaging items for foodservice clients to retailers, but it’s taking time. Mark Allen, CEO of The International Foodservice Distributors Association (IFDA), told Marketwatch, “I think supply chain will look fundamentally different coming out of this.”
- Coronavirus pandemic shows the U.S. food supply chain is due for an upgrade, experts say – MarketWatch
- U.S. Food Supply Chain Is Strained as Virus Spreads – The New York Times
- Meat shortage 2020: Coronavirus has led Smithfield, other plants to close, farmers to dump milk – USA Today
- The Supermarket After the Pandemic – The Atlantic
- The Grocery Supply Chain Is Failing Us – RSR Research
DISCUSSION QUESTIONS: Which current supply chain challenges facing the grocery channel appear temporary and which need longer term attention? In what ways do you see the coronavirus pandemic changing the food supply chain?