Source: Wall Street Journal
By Jennifer Smith and Paul Page
Shortages of key ingredients and labor are troubling suppliers as refrigerated transportation costs also surge.
Americans are returning to restaurants, bars and other dining places as Covid-19 restrictions come down, adding new strains in food supply chains.
Suppliers and logistics providers say distributors are facing shortages of everyday products like chicken parts, as well as difficulty in finding workers and surging transportation costs as companies effectively try to reverse the big changes in food services that came as coronavirus lockdowns spread across the U.S. last year.
“Over the last six weeks, we have seen the market come roaring back faster than anybody would have anticipated,” said Mark Allen, chief executive of the International Foodservice Distributors Association. “The start up has been, in many ways, as difficult as the shutdown…Everybody is trying to turn it on immediately and the capacity might not be there.”
Kerry Byrne, president of Total Quality Logistics LLC, a Cincinnati-based freight broker with a large portfolio of business serving food-processing companies and distributors, said shortages of raw materials are leading to erratic deliveries of items that usually arrive on predictable schedules. “That disrupts entire supply chains. Everything is stressed,” he said.
The food sector is seeing a version of what supply-chain experts call the bullwhip effect, where companies that have pulled back their operations seek to rapidly scale up on signs of improving demand, leaving suppliers scrambling to keep up.
Supply-chain executives say the lack of available workers may be the biggest strain on the food-services sector.
Food suppliers allocated more capacity to retail customers like grocery chains during the pandemic, Mr. Allen said, leaving distributors short of some products as restaurants and institutional food-service operations open back up.
Demand has changed too. Restaurants that remained open slimmed down their menus during the pandemic and shifted from fresh ingredients for salad bars and buffets to using more prepackaged foods for takeout and delivery operations. Manufacturers cut down on product range, offering fewer varieties of breaded chicken tenderloins, for example, while meat processors reduced production output to meet Covid-19 safety standards.
One regional burrito chain that normally received three shipments of boneless, skinless chicken thighs a week is now “lucky if they get two, and their supplier was out of chicken thighs for three weeks,” Mr. Byrne said.
The shortfalls are turning promotional efforts into a high-wire act for retailers and restaurants. “Companies are putting things on sale or restaurant chains are offering promotions on special items but then they’re not sure they can get the shipments they need to meet the demand,” Mr. Byrne said. “I’ve never seen anything like it, and there are no indications it’s going to let up anytime soon.”
Restaurants, hotels and institutional food-service operations are coping with big price swings on staple ingredients and erratic availability, according to food and beverage consulting firm JPG Resources LLC.
The cost of pepperoni jumped 60% over the past five weeks for one independent pizzeria in Indiana, JPG Managing Director Glenn Pappalardo said. A deli in the state is only getting about 40% of the chicken it has ordered from suppliers, he said, while flour and tofu are out of stock about half the time.
In the past few weeks, menu mainstays like frankfurters and french fries have been in short supply, said Suzanne Rajczi, chief executive of Hudson, N.Y.-based Ginsberg’s Foods Inc., which serves independent restaurant operators in the Hudson Valley and upstate New York.
Her sales team is steering customers to products the company does have in stock—a 6 oz. chicken breast instead of a 4 oz. breast, for example. “We’re trying to buy as much high-volume inventory as we think we can sell,” Ms. Rajczi said, “but we’re still beholden to those manufacturers that are hampered by their production capacity.”
Broader supply-chain upheaval is also hitting food distributors, delaying shipments of overseas products like tuna and olives and holding up delivery of corrugated cardboard and other packaging materials, she said. “We can make salad dressing but we can’t make the bottles to sell the salad dressing.”
The disruptions and changes in delivery patterns are driving up transportation costs because the specialized refrigerated truck trailers needed to transport food are in such high demand or out of position.
The average price on the U.S. spot market for refrigerated truck transport reached $3.09 a mile in early May, up 20.7% from the average rate in February, according to DAT Solutions LLC, which runs a load board connecting trucks to shippers. It was the first time the company had seen the rate surpass $3.
Supply-chain executives say the lack of available workers may be the biggest strain on the sector since the impact cascades from the production facilities to trucking to distribution centers.
“People cannot get the labor back, whether that’s working in the warehouse or somebody with a commercial driver’s license,” Mr. Allen said.
Write something about yourself. No need to be fancy, just an overview.
313 N Hastings Pl
Eau Claire, WI 54703