A year and a half later, the restaurant industry is still reeling from the effects of a global pandemic. First came the massive closure that saw the sector lose more than $290 billion in revenue and forced the closure of more than 90,000 restaurants.
A resurging economy and widespread vaccination efforts handed restaurants a much-needed lifeline. All looked rosy and set for a strong rebound, but unfortunately, the effects of the pandemic linger and appear to have the entire industry in a chokehold.
Besides the labor shortages, restaurants are grappling with a massive product shortage occasioned by a global supply chain interruption. The pandemic may have exposed the soft underbelly of the worldwide shipping industry. And the supply chain issues are expected to spill over into 2022 and beyond.
Dig in as we explore restaurant supply chains and the challenges you’re likely to encounter in 2022.
1. Massive Shortage of Popular Menu Items
Product and labor shortages are the biggest sticking points of a resurging global economy, which has led to spiraling product prices. In early 2020, many industries shut down or scaled down their operations to prevent the spread of Covid-19 and cope with a reducing demand. The closure and lowered production triggered massive supply chain issues that continue unabated to date.
Suppliers of popular, high-volume items such as onion rings, chicken wings, pasteurized crab meats, sweetened coconut flakes, French fries, can fruit, and soft drinks are overwhelmed by the surging demand. Successful vaccination campaigns created a massive demand for restaurant meals that caught food suppliers and producers off-guard. As a result, distributors all over the country have limited allocations against a surging need, creating a massive shortage.
Supply chain issues aren’t limited to product availability alone as they’re also logistical issues at play. New York and its surrounding area are bearing the worst of it. The trains and the trucks networks that facilitate the smooth movement of goods between regions are buckling under ongoing pressure.
Much of these issues stem from unprecedented congestion at the country’s major ports. Washington Post reports that most port facilities are overwhelmed, creating a ripple effect the country’s railroad and trucking network.
Congestion at the ports creates massive logjams for truckers, reducing the number of trucks available to ferry products to the market. The massive delays drastically increase the shipping costs, saddling restaurant owners with huge overheads.
2. Shrinking Distribution Nodes
The current supply chain issues are driving many companies to cancel mid-level and small contracts with suppliers. The spiraling cost of shipping, coupled with the long wait times, makes it untenable to buy products in small batches. The cost of shipping has nearly tripled since the onset of the health crisis. The systematic elimination of smaller players from the supply chain nodes creates additional bottlenecks.
The ongoing labor crisis is throwing a spanner into the works in the supply chain debacle. Most manufacturers had halted or scaled down their operations during the height of the virus outbreak, lowering the amount of inventory they had in stock.
Surging demands following the reopening led most manufacturers to deplete their existing inventory.
Now they have trouble restocking and meeting market demand because of a crippling labor shortage. And when they’re able to ramp up production, they face additional challenges trucking the product to the market due to logistical challenges.
3. Massive Stockouts
The current supply chain hiccups are driving companies to place precautionary orders to avoid stockouts. The frenzied buying only compounds the pressure of an already struggling supply chain.
The backlog in the supply chain disrupts every inch of the restaurant sector. Large national distribution companies have trouble filling their massive orders. Some of them report meeting only 85% of their orders and an inability to prevent shortages.
Widespread shortages are forcing suppliers to ration supplies without alerting the distributors. Therefore, national distributors get to learn about the shortage upon receiving the products.
There’s much a distributor can do to alleviate shortages if they only learn of the shortfall once the truck pulls up at the bay.
Unless the supply chain issues are addressed comprehensively, trucking challenges coupled with labor and product challenges will likely persist deep into 2022. Until then, customers must be content with the periodic absence of popular menu items in most eateries.
4. Crippling Labor Shortage
There’s a biting labor shortage that’s affecting the entire restaurant’s supply chain. Many distributors are struggling to fill their ranks from drivers, loaders, pickers, and office workers.
Most people are hesitant to return to work without being fully vaccinated. Some won’t report to work until the kids are back in school or safely return to daycare.
The resultant shortage has driven the wages through the roof, leading to thinning margins. Dwindling profits are increasingly driving many distributors away from the business. A shrinking pool of distributors against a spiking demand creates further problems in the supply chain.
5. Overwhelmed Trucking Sector
The trucking sector was grappling with labor shortage long before the health crisis struck. By 2019, the industry had a shortage of 60,000 truck drivers, and the figure has since gone up after the pandemic. Besides the labor shortage, the sector is facing another unprecedented issue – truck shortages.
Large trucking companies reveling in the booming are struggling to expand their fleets and keep them running smoothly. It can take up to two months to order a replacement part for any truck that’s out of commission. Worse still, most firms have held off buying new truck cabs and trailers.
In 2019, it took trucking companies up to eight months to order a new semitrailer from a manufacturer. The post-pandemic turnaround time has shot up to 18 months. Most companies have held off new acquisitions, and this puts a significant strain on their available fleet. A shortage of raw materials such as aluminum coupled with a labor shortage indicates the problem will persist.
The restaurant industry, which accounts for 4% of the country’s GDP, faces massive pressure from the global pandemic. The health crisis has created huge hiccups in the global supply chain, and the effects are reverberating at a local level.
The logistic issues facing the restaurant industry are likely to persist into the near future. Failing to account for and address these logistical challenges can prove expensive and drive many operators out of business. Embracing intelligent and innovative solutions such as Chefmod can help you navigate and thrive in uncharted waters. Let us help you overcome supply chain, food costing, and ordering problems in 2022.
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Power to the Chef!