More than 60% of foodservice establishments in the US reported product shortages in June, according to figures from analysts Technomic. North America was particularly affected by meat supply disruption after temporary closures of major meat processing plants due to coronavirus infection among employees.
Border restrictions caused disruption of the supply chain between the US and Canada and a shortage of migrant workers.
The crisis has prompted a fresh look at the food supply chain and a new focus on stability and traceability moving forwards. “The pandemic just exacerbated and sped up dramatically changes that were coming,” says Juan Martinez FCSI, founder of Profitality LLC, Miami, US.
Key themes for the future have come to light as a result, including worker safety, operational flexibility and the potential of new technologies.
Disruption
Serious meat supply chain disruptions in North America were primarily caused by major closures due to coronavirus infection among employees. Three of the largest pork processing plants in the country closed temporarily in April and May.
This had consequences at both ends of the supply chain, with farmers being left with animals that they could not sell and operators experiencing product shortages. Grocery store chains such as Kroger and Costco imposed purchase limits and some smaller suppliers turned to selling directly to consumers. 1,000 of 5,500 Wendy’s chains in the US stopped serving burgers and other beef products and 51% of operators considered switching from fresh meat supply to frozen, according to Technomic.
John Radchenko FCSI, president of Van Velzen and Radchenko Design Associates in Ontario, Canada, points out that restrictions on movement have been one of the most significant factors affecting supply. “Closing the border between the US and Canada except for essential goods [limited] the supply chain,” he says. Furthermore, the “use of migrant workers on our farms to assist in harvesting produce” was disrupted by “restrictions on workers entering Canada to do the harvesting”.
Recent evidence suggests that supply is beginning to return to normal. “Ontario is at Stage 3 where almost all venues and food shortages are less evident,” says Radchenko. However, moving forwards, there will be increased attention paid to the supply chain, he says.
“The food chain should return to more normal but the process will be different as there will be more scrutiny in the way food distribution is handled,” he says.
Adaptation
Product shortages during the Covid crisis have emphasized the importance of protecting the supply chain.
Marion Goss, chief supply chain officer for North America at McDonald’s, told CNN the disruption has allowed several key themes to be identified; in particular, the need to protect workers and to take advantage of both local and global resources.
“Compared to a generation ago, there are fewer but much more efficient operations capable of producing greater quantities of food,” she writes. This model magnifies disruption when it occurs. According to Goss, the Covid-19 crisis has revealed a need for a more “agile, diverse supply chain” incorporating a range of suppliers from local farmers to multinational agriculture companies.
To protect employees and customers, McDonald’s has announced nearly 50 updated safety standards in restaurants and throughout operations including two weeks paid sick leave for workers, training in sanitation procedures and simplified menus.
Simplifying menus has been a common adaptation among foodservice establishments. “Many concepts have simplified their menu to make it easier to deliver for the business that they have,” says Martinez.
Simplified menus allow restaurants to streamline their operations and order in bulk, reducing waste and cutting down costs.
IHOP, which used to have a 12-page menu, has reduced it to two pages, and has seen positive results. “I don’t see us going back to the full 12-page menu,” Brad Haley, chief marketing officer, told CNN.
Evolution
In a recent report, the IFDA (International Foodservice Distributors Association) stated that many practices in the foodservice distribution industry are “decades old”. The Covid-19 crisis has exposed the fragility of existing systems and many operators are seeking ways to update them. New technologies including blockchain, warehouse robotics and AI have the potential to bring the industry into the future, the report suggests.
Similarly, the advantages of simplified menus mean that they might be here to stay.
“[Operators] have tasted success with limiting the menu, I don’t believe they’ll go back to the prior complexity that they had,” says Martinez. “It will have an impact on the end user in the restaurant – it helps with less waste, easier operations, and I believe that the guests are going to get used to it.”
Furthermore, trends such as increased emphasis on sanitation and more off-premise custom will mean new demands on suppliers. “Packaging is going to be a bigger player here and people that can figure that out will have some benefits to gain, just like anyone in the cleaning business and sanitation [supplies],” says Martinez.
Greater traceability and transparency will also become increasingly desired by operators, according to Technomic. Operators might adapt how they source and direct their products. “Home grown may be more relevant and acceptable,” suggests Radchenko. “Farm to table may be more localized to ensure a less circuitous route to our homes and our dining places.”
As the foodservice distribution industry recovers from the disruption caused by the Covid-19 crisis, addressing the weaknesses that have been brought to light and taking a future-looking approach to recovery offers the potential for the emergence of a more evolved, flexible and robust supply chain.
Juliet Martin
Further details:
Interested in learning more about trends, challenges and opportunities in the North American hospitality sector? Please join FCSI’s ‘Future of Foodservice in North America webcast on Wednesday 19 August at 11am (EDT). Places are limited to the first 100 to register. Presented by GlobalData’s Mark Dempsey and supported by Wood Stone, Unox and Multiteria, registration can be made here.
