While the stockouts of the early pandemic may be over, their impact remains — many consumers who were unable to get their favorite products switched brands, possibly for good. With more changes to come this year as the economy opens up, how can food and beverage makers keep their products on the shelves?
To learn more about current supply chain challenges and solutions, we interviewed Maggie Turner, Director of Customer Success at third-party logistics and supply chain technology company GlobalTranz.
The pandemic revealed cracks in the food and beverage supply chain. What do you see as the primary cause(s) of the problems, such as stockouts, that we saw last year?
MT: When the pandemic caused the first wave of lockdowns in the spring of 2020, no one in the food and beverage industry – or any other industry, for that matter –could have forecasted what would happen or had a contingency plan in place to manage the immediate fallout. A confluence of factors created a situation of frequent stockouts in the weeks following the initial lockdown, including consumer fears that the pandemic would lead to real food shortages as well as managing new safety precautions for workers at grocery and retail stores.
On the transportation side, food producers took extraordinary measures to expedite shipments to stores. In the first few weeks of the pandemic, producers and grocers implemented short-term solutions to address the levels of “panic buying” happening across the country. In many cases, that included bypassing warehouses and shipping staple products directly to stores in order to get products on shelves as soon as possible.
It’s important to note that the food and beverage supply chain, from farm to grocery store, has proven resilient amid a now yearlong disruption. Today, the more urgent objective is to understand how new consumer demands and a shift in buying patterns changes how food producers should structure their supply chains, especially now that there is a relative end in sight where you can begin to forecast and plan. Producers are strategically thinking through where to place their distribution centers to keep products close to consumers while also fulfilling e-commerce orders, and how to leverage that strategy post-pandemic.
What lessons can F&B manufacturers learn from what happened? What distinguished the winners from the losers in terms of changing consumer purchasing behavior?
MT: Stockouts can significantly impact consumer brand loyalty. For example, if consumers don’t see their preferred brand on the shelf, they often turn to the next available, and cheapest, alternative. The long-term outcome is that consumers stick with their new choice and it’s difficult to win them back.
The food and beverage manufacturers that were able to flex their operations to meet the simultaneous surge in demand and change in product preferences have come out as the winners. Flexibility has translated to resilience in this market, whether that has meant direct-to-store delivery, securing warehouse space closer to the final delivery, or forward stocking of certain products to precede demand.
The prolonged challenge across supply chains is securing available capacity to transport goods during a time of sustained demand for products. The firms that have adapted to secure more truckload capacity or reallocated their supply chain to be more efficient have positioned themselves for long-term success.
What should F&B manufacturers be doing right now to boost the resilience of their supply chain?
MT: There is a need for food and beverage manufacturers to restructure into more agile operations and supply chain strategies that allow them to better react and predict evolving consumer trends. Solving transportation capacity issues and having the ability to ship products when and where they’re needed is the ultimate challenge. These solutions might come in the form of predictive analytics or data-powered insights that can forecast behavior based on previous market trends. Every company needs to be reflecting on the past year, analyzing what broke across their supply chain and identifying new efficiencies.
In the U.S., port backlogs have persisted in California, creating the need for new places of entry. Does it make sense to bring in product materials through Texas or Mexico? Similarly, there isn’t enough rail capacity to support the volumes of shipments in the market. As a result, companies are seeking to lock in alternative modes such as over-the-road, truckload options that also offer more flexible delivery options.
How can F&B manufacturers position themselves to better keep up with changing consumer habits and market volatility?
MT: It’s evident that the traditional seasonality of almost every type of good, including food and beverage products, is out the door. Typically, the first quarter of the year is slower for the transportation sector coming off peak holiday activity and is the time when certain sectors take advantage of lower transportation costs to restock their products for the summer and into the next peak season. This is true for beverage producers, who are still using this time to restock given sustained product demand but face higher than normal transportation costs.
With the anticipation that consumer demand will remain high, and potentially see another bump with a stimulus package, reopening economy and warmer weather, food and beverage manufacturers will need to stay vigilant to ensure stability throughout their supply chain. The last year has produced permanent changes in consumer buying behavior, and the sector will need to remain flexible and ready to adapt. Short-term planning has driven many through the uncertainty, but pinning down a long-term strategy to address changes to how consumers are buying products online, going to restaurants and even reevaluating diets, will be essential.
What does the “next normal” look like for the F&B industry in terms of supply chain and shipping trends?
MT: There are a lot of positive signs for the economy following the outlook vaccines could have on opening things back up.
Right now, speed is the name of the game. Food and beverage makers are looking to keep their products on the shelves to meet high consumer demand and anticipate continued demand for their products throughout the year as the world opens up.
That said, there’s a likelihood that we’re looking at 12 to 18 months of catching back up on shipping backlogs as companies reallocate supply chain resources and find more market capacity. While it is still early in the year, food and beverage manufacturers need to begin thinking into 2021 and how to they can create and sustain stability in their supply chains.
