Transitions to retail, necessary shifts in production, not to mention the ever-present threat of COVID-19 — food manufacturers have a lot on their plates right now.
One of the biggest concerns about coronavirus in today’s environment is food supply. While food manufacturers, retailers, and others in the food and beverage industry have remained adamant about their commonly shared assessment that there’s no danger of a food shortage in the United States, all eyes have been on the food supply chain. In the midst of manufacturer shutdowns and steady (high) demand for groceries, keeping food supply chains intact has become critical.
A few stats about this essential industry:
- There are over 200,000 registered food manufacturing, processing, and storage facilities in the Food and Agriculture Sector
- The Food and Agriculture Sector is responsible for about 20% of America’s economic activity
- Food distribution centers process 95% of our nation’s food before sending it on to grocery outlets
Food companies that catered to bars and restaurants pre-pandemic have risen to the challenge of serving grocery stores during the crisis, an undertaking that’s called for them to shift supply chains from business-facing to consumer-facing in a very short period of time. With significant investments of time and capital, food manufacturers have made their warehousing, logistics, and purchasing processes ready for retail.
Demand surges for food products
To understand the impact of coronavirus on food manufacturing, let’s examine the panic-buying trends of the last six weeks. It didn’t take long after the start of COVID-19’s spread in the U.S. for consumers to clear supermarkets and drugstores of food products, like rice, baking products, and canned goods. This spike in demand prompted retailers to place orders for unusually large quantities, which overloaded food manufacturers and caused them to prioritize necessities.
In the next two weeks, we saw an all-time high of replenishment freight. Authorities ordered bars and restaurants to close, and grocery stores experienced increases in traffic. It wasn’t a seamless transition; the pandemic exposed gaps in the food and beverage supply chain and provoked some grocery retailers to engage in price gouging. Authorities were quick to create websites, email inboxes, and hotlines for consumers to tip them off to instances of price gouging.
Towards the end of March, experts confirmed that panic-buying was exacerbating supply chains and warned consumers to stop, for fear empty shelves would become commonplace. Mark Cohen, Director of Retail Studies at Columbia Business School and the former Chief Executive of Sears Canada, said, “We’ve whittled down the inefficiencies to the point where logical and orderly demand creates logical and orderly resupply. But this is a different situation: This is serial hoarding — and no part of the machine that supplies consumers is geared for this.”
The jump in demand as a result of coronavirus illuminated the problem of restocking items just in time: Supply couldn’t keep up with demand and stores either sold out of certain products or were forced to ration them.
On April 1, the market took a turn; the effects of non-essential business closures and economic factors began catching up to the market and aggregate demand slowed. However, the demand for groceries like packaged foods and meats remained steady, highlighting the importance of keeping supply chains intact.
Now, two weeks into April, there’s still plenty of uncertainty, but consumer panic has dissipated. Expanding partnerships and staying flexible, among other tactics, have helped food manufacturers meet demand. Their supply chains, while stretched, haven’t cracked because carriers have been able to deliver freight. In fact, a Los Angeles Times article notes that “food transportation from packing facilities appears to be operating well, a sentiment confirmed by large food shippers…”
Standards for supply chains
Regulatory agencies have been monitoring food and beverage supply chains and issuing temporary regulations for food manufacturers as new coronavirus developments occur. (Forklift operators, truck drivers, warehouse teams, forecasters, and sales personnel are among the affected workers.) Keeping manufacturing employees healthy is the best way to secure food supply chains. That’s why the latest rules pertain to worker safety.
The Food and Drug Administration (FDA) advises food manufacturers to take the following precautions:
- Physically separate staff to encourage social distancing
- Remind employees to wash their hands and wear gloves in accordance with section 2-301.11 in Food Code 2017
- Boost sanitation practices
- Wear (then clean) face masks in compliance with sections 4-801.11 and 4.802.11 in the Model Food Code and the Centers for Disease Control and Prevention (CDC)
- Seek guidance from local authorities if a worker gets sick
- Refer any sick workers to this CDC resource
To further protect manufacturing workers, the FDA released a temporary policy about food packaging. In short, food manufacturers have looser requirements for labeling their products right now.
An article by The Washington Post comments on other measures that food manufacturers are taking. Warehouses and packers are scheduling on-site doctor visits and reducing vendor and supplier appointments.
Furthermore, food manufacturers are finding ways to use technology instead of human labor.
At the end of the day, however, the workforce is responsible for keeping communities fed.
Supply chain management with less staff
Inevitably, COVID-19 has spread to supply chain workers, leaving food manufacturers to choose between closing or downsizing operations due to safety concerns. Either way means fewer workers.
The Washington Post quotes supply chain expert Sean Maharaj, who commented, “The replenishment cycle is going to be the real test here. … Manufacturers don’t sit on a lot of extra inventory…”
Besides implementing extra health policies, how can food manufacturers maximize output during coronavirus? The short answer is they must shift gears to produce top-selling items and halt production of those with less demand.
Food manufacturers can use analytics, machine learning, and point-of-sale data to understand which products are in highest and lowest demand. Modern technology also offers short-term demand forecasts, insight on supply replenishment, and clues about local trends. This information, taken together, may prove key for keeping shelves stocked.
Logistics partners for the food industry
To create supply chain efficiencies and optimize distribution efforts, food manufacturers should expand partnerships with suppliers and packers, retailers and food distributors, and carriers. Let’s break down each category:
- Suppliers and packers Food manufacturers should have a clear understanding of their suppliers’ and packers’ coronavirus response plans. It’s also helpful to be aware that delays, cancellations, or quality issues might prompt contractual liabilities. Additionally, food manufacturers need to be served first. If a supplier or packer goes under or prioritizes other orders, food manufacturers should be ready to order from an alternative.
- Retailers and food distributors Food manufacturers may have the opportunity to create arrangements where they employ the furloughed or laid-off labor forces of retailers and food distributors, which would be particularly beneficial if manufacturing workers are getting sick. (Kroger is currently doing this with Sysco and U.S. Foods) Deals like this may give food manufacturers sure-fire options for selling their products.
- Carriers Dependable food transportation should be high on the priority list for food manufacturers right now because coronavirus is causing changes to their supply chains and the trucking industry. Distribution centers are decreasing load sizes in an effort to send at least some goods to every store, and grocery stores that might have previously taken one delivery a day are now taking up to three. Using a freight broker can take the guesswork out of identifying reliable logistics providers.
The question: TL or LTL? The answer: FlockDirect
Given the food supply chain’s shrinking load sizes, food manufacturers should look for ways to enhance shipments. Food manufacturers can typically choose between full truckload (TL) and less-than truckload (LTL) shipping, but we think they should choose neither.
Simply put, moving freight TL traps manufacturers into paying for more space than they need (with loads that don’t fill the whole truck), while moving LTL takes longer and damages freight (issues that manufacturers can’t afford right now). Add in the facts that the TL sector has been on the decline for months now and the LTL sector has been heavily impacted by COVID-19, and neither option sounds appealing. Luckily, there’s a better alternative: FlockDirect.
FlockDirect is Flock Freight’s premier shipping service. When food manufacturers select FlockDirect, our proprietary algorithm pools their shipments with other shipments that are moving in the same direction, and ensures all of them travel on one truck directly from Point A to Point B — with no handling in between. They arrive on time and free of damage. Best of all, we only charge food shippers for the truck space they need. It’s the best of both worlds: TL service at a better rate.
A unified logistics network means better foodservice
The best ways for food manufacturers to optimize their food and beverage supply chains during coronavirus include:
- Leveraging retail opportunities
- Protecting their labor forces
- Doubling down on the production of the most sought-after items
- Pausing the production of less popular goods
- Developing advantageous relationships with other suppliers, packers, retailers, food distributors, and logistics providers
- Shipping FlockDirect