In the span of a few weeks – the lives of everyone across the globe has changed dramatically. The grocery stores have also seen unprecedented demand causes shelves to empty in alarming fashion. Why has that happened?? Do we have a food shortage?? (The short and quick answer is absolutely not.) But why have we suddenly struggled to keep grocery shelves stocked and how can you be assured that you will have food available for your family? It is a concern for a lot of Americans (as well as Canadians, Europeans, Asians and others). So let’s talk about how the supply chain works, where it broke down recently, and what the industry is doing to ensure you continue to have a reliable food supply.
How does the supply chain work?
In order to understand the sudden shortage of certain products, lets talk about how the grocery supply chain works. It is a highly optimized, highly efficient supply chain. It has been driven to be as efficient as possible due to consumer demand to keep food prices low and ensure products are as fresh as possible. Inventory optimization is one of the most critical pieces of management for grocery stores – and it is also one of the most difficult. One of the required courses for my operations management MBA was focused entirely on grocery (another was on restaurants), that’s how important and complicated this supply chain is.
Grocery stores have also moved to different types of inventory management, especially stores like Whole Foods and Target. They have moved to utilizing an inventory management system known as: order to shelf. According to the article: “In order to make it work, it really [requires] a lot of coordination, and the retailer supply chain might not be used to this kind of close coordination,” said Chen. “So there’s some learning that needs to be done.” It is modeled after the very popular “Just In Time” manufacturing inventory management system that was made popular by Toyota. So what is the bottom line of all of this from the grocery story perspective? They have to be as efficient and effective as possible. They forecast relentlessly and Coronavirus demand was certainly not in the forecasts.
Further up the supply chain are distributors. These are companies such as SuperValu, C&S Wholesale Grocers, and others. These companies are equally as optimized and utilize demand forecasts based on short term trends as well as historical data. They have designed their staffing plans based on these expected needs. These wholesale grocers are the “middle mile” of the supply chain. They work closely with grocery stores to hopefully ensure on time and adequate delivery. On the other side of the equation is the middle mile for restaurants, schools, etc which is dominated by US Foods, Sysco, and others. These companies are supplied by the agricultural food giants such as Archer Daniels Midland, Cargill, General Mills, Ardent Mills and many others.
We are now back to the farm gate side of the supply chain. On the farm side we are continuing to function as always have. The entire supply chain from agriculture to the grocery stores is considered an essential service. This allows us to continue supplying, producing, and moving food throughout the supply chain to ensure the grocery shelves are as well stocked as possible. Now that we have run through the complicated supply chain (and this is over simplifying it to be honest) let’s talk about the impacts of Coronavirus.
A Shock to the System
Coronavirus has been a shock to the grocery system and the supply chain. Demand has skyrocketed, according to this article from ABC some staples have seen an increase in demand of 230%! The USDA studies how much is spent on food outside of the home in the United States, in 2010 that percentage had risen to over 50%. The link to the report summary is here. Orders to shelter in place, working from home, and more have caused people to stock up when they normally do not have that many groceries in their home. I know the way I stock groceries living in a rural area is far different from when I lived in Seattle.
Tori Draeger’s family owns a small grocery chain in the San Francisco Bay Area. She talked to Slate last week to discuss some of the challenges they are facing and had this to say about the empty shelves: “… everything is kind of merging together in the grocery industry right now, which means we only have one main company to go to. They literally told us, “That order you put in? It got canceled.” They don’t have room on their trucks and don’t have enough drivers. I heard that they recently hired 200 new truck drivers, so hopefully we can get the supply chain crunch worked out soon.”
Staffing has been a significant issue throughout the grocery supply chain. This time of year is not considered a busy time of year for the industry, staffing was already fairly low. I have staffed drivers for both Amazon and UPS and March and April is a fairly “slow” time of the year. The ability to ramp up for this type of demand shock is incredibly difficult. Truckers are already in short supply, now they are even more so. This is the root problem that is causing empty shelves. Companies such as ADM, Ardent Mills, Cargill, etc have enough food within the system to handle the extra demand, farmers are continuing to produce, but the kink in the supply chain is in the “middle mile”.
How to recover?
Unfortunately no one can prepare for this kind of shock. The grocery industry is innovating in real time to recover from the shock. They are ramping up hiring or truckers, as well as getting creative. US Foods, which has seen a dramatic DROP in demand because they supply restaurants, schools, etc has announced a deal with Krogers to flex their laid off workers into the grocery industry.
The shortages vary by region. For our region it is difficult to find things like flour, rice, pasta, soup, and canned vegetables. Other areas are really struggling with milk and eggs. Milk processors across the country are fairly consolidated and are simply at maximum capacity to fulfill demand. NPR talked with Bloomberg agriculture editor Millie Munshi about strained capacity: “. . . there’s a finite number of trucks that can actually load up at a warehouse to bring chicken or ice cream, toilet paper, that kind of thing into the grocery stores. There’s finite numbers of hours that people can spend on stocking shelves, stocking rail cars and all of that.”
How to stock your home?
So what do you do to ensure you have enough food at home? Patience is one, buy what you can, but do not horde. Last week I bought 4 gallons of milk – even though I know we need 6 at least a week, I noticed the store was already out of Skim and 1% so I did not buy extra. I can get the other two later in the week to ensure everyone can have some. We can also be creative with what we do with fresh vegetables and fruit. These freeze fairly well, especially IF you have freezer space (I know chest freezers are less common outside of rural areas). Fresh produce is typically well stocked because with the closure of restaurants, schools and other places those supplies have been shifted into the grocery supply chain.
There are also options for farm to table to fill the gap as well as simply having some patience waiting for things to restock. I have several friends who supply beef and lamb directly from their farm. Ranch Wives Beef Company provides beef from the Gallatin Valley in Montana. High Five Meats provides both lamb and beef through the Yellowstone Valley Food Hub. You can also find a great supply of lentils, wheat and other products through places like Farver Farms. These are just a few of the many options available to consumers.
I know many do not have hours to devote to freezing vegetables and fruit, but it can be done fairly quickly. Invest in a cheap vacuum sealer from Amazon and Target, google some options, and freeze some fresh food and veggies for later. Soup is also fairly easy and quick to make – it also can easily be sealed in vacuum seal bags. There are a lot of ways to bolster your supply of food without spending hours in the kitchen, having tons of kitchen gadgets, and still having good options.
A Safe Food Supply
Ultimately what you need to know is that agriculture and grocery stores can and will continue to provide an abundant supply of safe and nutritious food. While we may see some temporary supply chain hurdles, these times are unprecedented, however we will adapt as an industry and emerge better and more efficient. We know it is an incredibly scary and uncertain time and the last thing you want to worry about is food security. Food security in this country is still not an issue, we have an abundant supply and will continue to. The entire supply chain from agriculture producers to the grocery story are considered essential services and we will continue to work to get food to your table.