Supply Chain of Events
By George O’Brien
That’s a two-word phrase that had rarely made its way into the lexicon of most area residents before the COVID-19 pandemic; it was generally assumed that the shelves in the stores would be crammed with product — because they always had been.
But in a year when there have been shortages of cleaning supplies, surgical masks, beef, fish, hair coloring, paper towels, ice cream, rice, frozen pizza, and, yes, toilet paper — a product that has become a metaphor for a crisis — people can no longer take supply chain, and full shelves, for granted.
This has been a learning experience — on a number of levels.
So too for those who work to keep the shelves stocked. For them, it’s a time of relationship building, finding new ways of doing things, and providing ongoing proof that, while the supply chain has been bent — severely and repeatedly — it hasn’t, in their minds, been broken.
“The supply chain has definitely been tested through all this, and there have been shortages of some things, as everyone knows,” said Michael D’Amour, chief operating officer at Springfield-based Big-Y, the fourth-generation, family-owned grocery chain. “But, overall, I think this crisis has shown just how resilient the supply chain is.”
Doug Baker, vice president of Industry Relations for the Food Marketing Institute, (FMI) agreed.
“Almost weekly we’re getting back numbers, and we’re still seeing double-digit growth across many categories — and you can’t have double-digit growth if inventory is not available,” he said, referring to specific product lines ranging from cleaning supplies to frozen foods. “It’s just a matter of matching inventory with consumer demand, and that’s been the challenge.
“And that’s why we’ve seen shortages — because that inventory output hasn’t been able to rise to the level of consumer demand,” he went on, adding that recent numbers show a slowing of demand that is giving many producers at least a chance to catch up.
In March, on average, the industry was seeing 35% to 40% increases in overall sales volume, Baker said, while in late May, the number was closer to 20% to 25%.
“We’re seeing sales slow, which is helpful because it allows the supply chain to catch up to an extent,” he explained. “But we also have to understand that those are still pretty significant increases, and we’re not going to go back to pre-COVID days, because the public still has yet to engage in a livelihood that they engaged in before the pandemic, and that’s based on where you see them spending their food dollar.”
D’Amour agreed, noting that, as May turned to June, a good number of people were still in something approaching lockdown mode. They were eating most meals at home because restaurants were only open for takeout. They were also still working at home and, therefore, eating lunch at home. Meanwhile, children are home from school, and college students are home as well. This all adds up to people buying more at the supermarket.
As phase 2 of Gov. Charlie Baker’s reopening plan takes effect on June 8, restaurants will be opening for curbside dining, and preschools and day camps will be reopening. And as more and more people go back to their offices — the ones they left in March for space on their dining room table — the ratio of food dollars spent out of the home will start to rise higher.
How long it will take to reach pre-COVID levels — when 54 cents of each dollar was spent outside the home — remains to be seen, said Baker. However, what is certain is that the situation is fluid at best and it could change in a hurry if cases start to surge, a second wave arrives, and people start spending more time working — and eating — at home.
Meanwhile, this new normal has essentially forced chains like Big Y to forge new alliances with suppliers, said D’Amour, noting that as restaurants, colleges, and schools of all kinds closed earlier this year, this created an enormous surplus of inventory, but put the demand on grocery stores, while also creating an opportunity to redeploy goods and resources to grocery retail to meet demand and reduce waste.
One such alliance, one that typifies how suppliers and grocers are working together to forge solutions, involves Little Leaf Farms in Shirley, a local partner and grower of lettuce that saw demand decline dramatically as schools and restaurants closed a few months back and was looking for new opportunities to sell product and reduce the kind of waste that was seen almost nightly on major news broadcasts.
“They’re one example of so many local partners who have sat down with us and worked to figure out how to maximize business between us and keep their stuff growing and moving through the pipeline when the restaurants were shut down,” D’Amour explained. “We worked with them on supply and hotter deals and pricing to keep it moving through the grocery channels.”
For this issue, BusinessWest talked with several players involved with supply chain about the lessons learned to date and how they will help the broad food industry through the uncertain months to come.
Food for Thought
As noted earlier, the laws of supply and demand generally take care of shortages on store shelves — in normal times.
But these are not normal times, said those we spoke with. Still, those laws have applied to items like surgical masks. Hard to find only six weeks ago, they are now seemingly everywhere, and in large quantities, as a number of companies started making them — and more of them.
“Everyone’s getting into the mask business now,” Baker explained, adding quickly that it’s much easier to convert machines to make those products than it is to supply more canisters of Lysol or make more rolls of toilet paper, as simple as that might sound.
“Paper manufacturers have been putting in additional lines,” he said. “But the challenge the industry is facing now is that there two types of fiber used to make toilet paper — there’s recycled fiber and there’s virgin fiber, and with recycled fiber, the supply is low, and not every machine can be converted to use virgin fiber, so you’re going to have less output if you can’t convert.”
And sometimes, because of the pandemic, producers simply cannot meet demand.
That was the case for several weeks — although matters have improved — when it came to supplies of meat and chicken, said Baker, noting that, early on, plants were shut down temporarily. And when they reopened, to keep workers safe, production lines were altered in ways that actually slowed production.
Such specific cases help explain shortages of particular items, said those we spoke with, adding that, overall, many of the empty shelves result from unprecedented demand and panic buying that is starting to wane in many instances. But as the year continues, more lessons will certainly be learned, said D’Amour, adding that there have been plenty of learning experiences already.
Elaborating, he said that, from the beginning, those at Big Y have been watching what’s happening globally, anticipating, and “trying to get on top of things” — a phrase he would use many times — when it comes to everything from employee and customer safety to creating efficient traffic flow in the stores, to keeping items on the shelves.
This has obviously led to new policies and procedures — from the directional arrows on the floors to special hours created for seniors to the plexiglass screens at the check-out counters.
“For us, the biggest component is the people part, and that continues to be stressed by our suppliers, wholesalers, and others,” he said, adding that, while much of that panic buying and hoarding is being talked about in the past tense, the need for diligence remains, and chains like Big Y can’t let their guards down.
Getting back to the supply chain, D’Amour said it has been a struggle in some well-documented areas, but suppliers are responding by trying to increase supply and also reduce the number of overall SKUs to help put some product on the shelves.
“Where people are used to walking down the paper aisle and seeing 150 different choices of bath tissue and paper towels, now they’re seeing far fewer,” he said. “But products are coming back; we’re working with all our partners to get them back in.”
Perhaps the biggest key to providing quality service to customers during the crisis has been efforts to forge new partnerships and stronger relationships with those within the food-service industry, said D’Amour. He mentioned ongoing work with Springfield-based Performance Food Group as one example.
“They’ve done a phenomenal job working with us, working together, to figure out what food they have stuck in the pipeline that we can use,” he explained, adding that, over the past several months, PFG, as it’s called, has even helped with trucking and labor for either Big Y’s warehouse or at wholesale partners. “Most of these partnerships we’ve had have been mutually beneficial, but there are strategies and tactics that we’ve never done before; everyone’s been very open and ready to fight the battle, work together, and think of new ways to partner for the benefit of the consumers.”
Which brings him to Little Leaf Farms. Paul Sellew, owner and founder of that facility, which began operations just four years ago, said it is now part of a larger local-food movement that not only puts fresher produce on the shelves, but in many ways helps ease flow of product through the supply chain.
“People don’t realize that 95% of the leafy greens that you see in the grocery store are grown in California and Arizona,” he explained. “And when you have this global pandemic, an unprecedented situation, that puts stress on the supply chain, so imagine managing a supply chain from Selinas, California to Springfield, as opposed to my supply chain, from Devens, Mass. to Springfield.”
Little Leaf has historically seen much of its business fall into the broad category of food service — restaurants, schools, and other institutions. But with the pandemic and the sharp decline of demand on that side, the company, like many other suppliers, has shifted into retail grocery, which has been a win/win/win, for those growers, the grocers, and, ultimately, consumers.
“When you get these unprecedented events, you really want to make this region stronger and more resilient, and food is such a strong, fundamental component of that,” he went on. “And that’s why we’re so grateful for partnerships like the one we have with Big Y, which has supported us from day one.”
Overall, there is a ‘new normal’ within the grocery/food-service industry, a phrase now being heard in virtually every sector of the economy. It involves a landscape that could change quickly and profoundly depending on the pandemic and its impact.
No one really knows when there will be real light at the end of the tunnel, said D’Amour, adding that Big Y, like all those it is partnering and working with, needs to remain nimble and flexible, and continue to work in partnership with others to not only keep the shelves stocked, but also keep people safe.
Summing up the past several months, those we spoke with said it’s been a challenging and in many ways difficult time, where, again, many important lessons have been learned that will serve consumers, suppliers, and retailers well in the uncertain months still to come.
“The United States is a country of abundance, and the supply chain is a beneficiary of this abundance,” Baker said. “Yes, the supply chain is strained, and some shortages will be experienced, but it’s not broken — there are not critical disruptions in the supply chain.”
The hope, and the expectation, said D’Amour, is that things will stay that way.
George O’Brien can be reached at [email protected]