Strengthening the supply chain for the future
ARLINGTON, Virginia. — Food retailers face a host of pressures when it comes to keeping shelves stocked and prices low. Already emerging as a pressure point before the pandemic, trucking capacity remains a major issue.
The industry is currently facing a record shortage of 80,000 drivers, according to the American Trucking Association. Labor is another challenge, with employment in food and beverage stores falling by 7,500 in January, continuing a decline that began in December, according to the Bureau of Labor Statistics (BLS). United States.
Added to the pressure is the evolution of consumer behavior. Demand has shifted throughout the pandemic, shifting from short-term stockpiling to longer-term lifestyle changes that have seen consumers continue to cook and eat more at home. This growth in demand has led to increased revenues for food retailers, but persistent cost increases and supply chain challenges have resulted in some products not being available in stores.
Data from NielsenIQ shows food and beverage retailers missed $82 billion in sales of out-of-stock items last year.
“Unfortunately, this lack of availability can be difficult for grocery stores to predict because it is often regional and I would say consistently inconsistent in its prevalence across the industry,” said Leslie Sarasin, President and CEO of IMF—The Food Industry Association.
Keeping shelves stocked and prices low has been made more difficult by continued inflation. Food-at-home prices jumped 7.4% in 2021, and two in three consumers now say they’re feeling the impact of inflation on their grocery bill, according to BLS and IMF data.
“As an industry, we continue to do everything we can to avoid passing on the price increase to our customers,” Sarasin said. “A major component of this work aims to mitigate current supply chain challenges, while collaborating to future-proof our operations so that we can deal with planned and unplanned events that come our way as we move forward.”
Increasing the flexibility and adaptability of the food supply chain is both the biggest challenge and the biggest opportunity for future operations, said Ricky Volpe, PhD, associate professor of agribusiness at the California Polytechnic State University. From production to manufacturing to retail, most supply chain agents have sought to reduce uncertainty and transaction costs through long-term contractual agreements.
“Producers, shippers, processors, manufacturers – many of these companies and businesses have become very specialized over the last 15 to 20 years focusing more on the restaurant side or the retail side,” said volpe.
This rigidity was highlighted early in the pandemic when the restaurant channel experienced a surplus of food and unusable labor, while the retail channel experienced stock-outs and a severe labor shortage.
“The pandemic has revealed how difficult it can be to pierce that veil and move food, labor and other inputs from one marketing channel to another,” Volpe said. “Moving forward, flexibility and adaptability are going to be very important because we don’t know when the next shock is going to come. It is incumbent on sellers and producers to maintain a repository of potential outputs and potential buyers of their product through marketing channels.This will require some involvement of state and local governments regarding regulations on how products are used and labelled.
Technology upgrades and advancements in areas such as artificial intelligence, machine learning, and data analytics are another key area of focus. Supply chain players are striving to better use data to automate parts of the decision-making process and enable better prediction of potential disruptions.
“The industry is also looking at ways to strike a more resilient balance between a maximum-efficiency just-in-time supply chain model and a more robust system that relies on a little more inventory, so that bottlenecks Unforeseen chokeholds at one link in the chain will have less impact at other points in the chain,” Sarasin said.
Reduction of food waste
Reinventing the food supply chain necessarily involves combating food waste. The IMF estimates that businesses and consumers throw away between 25% and 40% of food grown and processed in the United States each year.
Companies can use the data to create achievable food waste reduction goals or develop a composting strategy, according to IMF. Grocery retailers and manufacturers are also collaborating to streamline and standardize wording on package labels – for terms such as “sell before” or “best before” – to provide greater clarity regarding product quality and safety. products.
Leveraging new departments is another potential strategy to reduce waste. Retailers can use products that would otherwise be discarded for fruit and vegetable platters, smoothies, baked goods and other freshly prepared offerings.
“I would like to see retailers commit to repurposing and repurposing the food they receive,” Volpe said. “I would also like to see more education for consumers, as there is a lot of variation with food IQ in the United States. In many cases, it is still missing how to buy, store and prepare foods. foods, especially agricultural products, specialty crops and dairy products.