Whole Food Market
COVID-19 pandemic has highlighted a number of vulnerabilities in the food supply chain. Now, food retailers and manufacturers must act quickly to address some of these issues.
Here are a few ways they should do so.
1. Ramp up disaster recovery plans
The food supply change depends on a complex ecosystem of partners. That means food retailers and manufacturers need to ramp up their disaster recovery plan as quickly as possible, because food supply chain disruption may continue.
"Having a disaster recovery plan that is not just gathering dust on the shelf is critical," said Alan Amling, a lecturer and researcher with the Global Supply Chain Institute in the Haslam College of Business at the University of Tennessee, Knoxville. Amling formerly oversaw marketing for the logistics and distribution division of UPS and points to that experience.
Conducting crisis simulations at UPS every year was important, Amling said. That way, each member of the team knew what they were responsible for in times of crisis. The company took an all-hazards approach, so regardless of what was causing the supply chain disruption, UPS had a response plan in place. The team would set up a war room in the corporate office that could be ready to go at the first moment of crises.
"In a disaster, you have very little time to plan; you must execute," Amling said.
That means organizations need concrete communication plans, he said. Everyone should know the specific roles they are responsible for if a disaster hits, as well as everyone else's responsibility. This includes upstream and downstream supply chain partners. If food retailers or manufacturers don't have great relationships with the supply chain partners, a crisis will make that reality painfully obvious.
It's also important to include the PR team, who will manage communication with the media.
"If you don't control [communication with media], your internal problems could explode into unwanted publicity very quickly," Amling said.
2. Set up an emergency operation center
One of the most important lessons that the COVID-19 pandemic has highlighted is why every organization should have made emergency preparedness a priority. Now that COVID-19 has wreaked so much supply chain havoc, food retailers and manufacturers that did so are better positioned to handle the supply chain disruption.
San Antonio-based H-E-B is one supermarket chain that showed how planning for the worst enables organizations to perform at their best, Amling said. The supermarket chain has had an emergency preparedness team in place since 2005 with emergency supplies in most warehouses, and other supplies staged for deployment.
"They had a plan, they had emergency products in place, they had a team that knew their roles and a communications plan was in place," Amling said.
The company also had established lines of communications with their supply chain partners. As a result of these measures, the team was able to focus on executing their plan instead of panicking.
Beginning in January, H-E-B leaders stayed in close contact with their suppliers and other retailers in China and Italy, monitoring the movement and impact of the virus and learning from those retailers' experiences, Amling said. This allowed the H-E-B team to improve its own plan before coronavirus outbreaks hit the United States, including responding quickly to employee safety and staffing issues.
H-E-B powered up its emergency operations center (EOC) on March 4. The H-E-B EOC is a central location where the leaders of the most affected areas of the company are brought together to streamline decision-making and collaborate daily.
"These collective actions are helping H-E-B weather the storm for their employees and customers," Amling said.
COVID-19 has radically altered day-to-day operations.
"You hope you never have to execute disaster plans, just like you hope you never have to use your ... disability insurance," Amling said. "But it's wise to have these things in place, because trials and tribulations are part of life."
3. Add purchasing limits
Sourcing is a common issue during disruptions as the flow of supply can be cut off by natural disasters or geopolitical turmoil. However, these issues are typically limited to a specific geographic area, and global demand remains intact. COVID-19 has brought food supply and demand disruption on a global scale and most grocery stores have introduced limits. Those that haven't should consider them, if applicable.
"The erratic demand is seen in the grocery industry where products like hand sanitizer and pantry items have been understandably flying off shelves, as well as head-scratchers like toilet paper and paper towels, Amling said.
Many food retailers are limiting how much of these products customers can buy. Downsizing portions can help as well.
One procurement manager said that she's making tradeoffs like only buying 5-pound bags of beans instead of 10-pound bags to provide more opportunities for shoppers to find what they want, he said.
4. Rethink seasonal demand
People are staying home and that means their eating -- and buying -- patterns have changed as well. Food companies and retailers must respond accordingly.
"One of the bigger supply chain challenges I see, other than panic buying and consumer hoarding, is what I call 'seasonal demand shifts,'" said Randy Bradley, associate professor in the supply chain management program at the University of Tennessee, Knoxville.
Randy BradleyAssociate professor, University of Tennessee
As it pertains to the food and beverage industry, manufacturers are acutely aware of the traditional seasonal demand cycles. However, given school shutdowns or shifts to online education, kids are at home sooner than expected, which also means that demand for comfort foods and snacks are ahead of the traditional summer cycle.
"So, in early spring, we're seeing demands for things that typically wouldn't peak until summer," Bradley said.
Demand has spiked for several types of comfort foods, he said. These include baked goods such as cookies and pastries, snack foods such as potato chips and crackers, and frozen treats such as ice cream.
"You typically would not expect to see sustained demand for frozen novelties this early in the spring, especially given that we have not reached the point of consistent warmer temperatures," Bradley said.
Demand in cereal and packaged food segments have also surged, he said. The out-of-season spikes for these types of goods are due to the high percentage school closings, remote workers, and limited accessibility and changes in offerings by fast food restaurants. As a result, food manufacturers have needed to shift their production and distribution plans, modifying their summer plans and rolling them out earlier this year.
5. Partner with suppliers
One way food manufacturers are staying on top of the unusual demand cycle is by staying in closer contact with retailers than ever before. Many supply chain experts have long stressed the importance of demand-supply integration (DSI), which is predicated on upstream and downstream parties sharing their production and consumption plans to ensure a better balance between supply and demand, in an attempt to reduce further food supply chain disruption such as stock-outs.
"This pandemic is actually pushing buyer and supplier organizations to act on this guidance, as they realize that not doing this could have monumental consequences with respect to consumer confidence," Bradley said.
General Mills is a good example of a company that values this approach, Bradley said. It has established a 24/7 control tower that monitors demand levels globally to make sure it matches production across its manufacturing facilities where it sees the demand spikes. Given that these demand patterns continue to change week to week, the control tower approach -- essentially a central hub for decision-making -- is vital to enabling General Mills to adapt its production plans as close to real time as possible.
6. Keep the plants running
As COVID-19 moves out into the country, it is starting to present issues to the foundations of the food supply chain. Many produce farmers have been forced to destroy produce once schools and restaurants shut down. COVID-19 infections at meat processing plants have forced shutdowns some of the largest processors in the nation.
Companies need to consider things like physical distancing onsite, adjusting scheduling shifts and breaks to reduce employee contact, and limiting the number of people on the plant floor at one time, said David Acheson, founder of food safety group firm The Acheson Group, based in Bigfork, Mo., and former chief medical officer at the USDA Food Safety and Inspection Service.
Establishing good communication overall is necessary as well.
In rural areas, there can be greater challenges with workers ignoring social distancing guidelines while at work, Acheson said. It's important to generate constant reminders, both around the plant floor, and on the mobile devices used by employees.