The Effect of Supply Chain Crisis on the Food Industry - Global Trade Magazine
New Articles
  September 30th, 2021 | Written by

The Effect of Supply Chain Crisis on the Food Industry

[shareaholic app="share_buttons" id="13106399"]

Sharelines

  • Food service distributors face challenges in storing excess inventory and making physical deliveries.
  • Countries can take measures to safeguard the health and finances of agricultural workers.
  • A decentralized approach can be adopted by food manufacturers to avoid drawbacks and risks.

March 2020 marked the beginning of unprecedented times for businesses across the world. The COVID-19 pandemic has had deep socio-economic implications for the food industry. It has imposed sudden shocks across the food supply chain, affecting farm production, logistics, food processing, and market demand for food items.

US Food Supply Chain: Disruptions and Implications from COVID-19

The COVID-19 pandemic has brought a new set of challenges that have affected all industries globally. Similarly, the US food supply chain has been deeply impacted due to physical distancing and strict lockdowns. Here is a list of the major stakeholders affected by the pandemic:

Farmers

Since the beginning of the COVID-19 pandemic, farmers have faced distinct challenges like drop-in grain prices, unavailability of skilled labor, and an uncertain future. Farmers are also facing difficulties in managing excess produce, which is creating an imbalance in the supply chain.

Foodservice Distributors

The foodservice industry relies on foodservice distributors for a steady supply of food items. Due to COVID-19, foodservice distributors have been severely affected by supply chain issues and a decrease in demand from restaurants. COVID-19 restrictions and shutdowns led to a decrease in outbound orders. Even though there has been a steady supply of inventory from farmers or manufacturers, distributors still find it difficult to adjust to the sudden change in market dynamics. Foodservice distributors face challenges in storing excess inventory and making physical deliveries. Some distributors have been able to switch to online ordering and delivery services, but these methods are yet to be universally accepted by outlets.

Foodservice Producers

Foodservice producers have faced similar issues as distributors. The global supply chain crisis effect has led to some significant changes for the food industry. Plant utilization has been significantly lower for foodservice producers due to a decrease in demand from the foodservice industry. Most producers have equipment that is configured for delivering goods for the foodservice sector. Reconfiguring or recalibrating the equipment and changing the business model for the retail industry can be highly inefficient.

Consumer and Packaged-goods Companies

Retail manufacturers or packaged goods food businesses face huge challenges due to COVID-19. Even though demand has been steady for retail manufacturers, they have been facing unprecedented challenges. In the retail food manufacturing sector, employees work in close proximity with each other, leading to a spike in COVID-19 cases among workers. The recent surge in COVID-19 infections in meat-processing plants and other retail manufacturing factories has increased the chances of the mass closure of manufacturing plants.

Grocery Retailers

Among all types of food businesses, grocery retailers have witnessed the highest surge in demand. The primary challenge for grocery retailers has been to serve their customers in these challenging times. Grocery retailers and their employees have been overwhelmed with an increase in demand for food items. Additionally, retailers have been cleaning their stores throughout the day, paying hazard pay and huge incentives to adequately compensate staff for their efforts during the pandemic. Many grocery retailers have introduced online ordering and delivery solutions, which has led to a surge in revenue. This has also resulted in consumer complaints about delivery-related issues.

Effects of Pandemic on Food Supply Chain

The restrictions imposed on the foodservice industry due to the pandemic have hurt the food supply chain. Restrictions related to travel between cities, provinces, and countries have led to some significant challenges, affecting producers, consumers, distributors, farmers, and other stakeholders. Food processing units have become hotbeds for the pandemic. Due to the rapid rise in COVID-19 cases among employees, many manufacturing units had to shut their processing plants.

Effects of Pandemic on Consumer Behavior

The COVID-19 pandemic has affected the financial health of the average household as well. Due to financial issues, the food buying behavior of customers has changed drastically. Consumers currently prefer natural food items like vegetables, pulses, whole grains, and olive oil over different types of processed food items.

Effects of Pandemic on Global Food Trade

Food trade policies have also changed across the world. Many countries now restrict exports of essential food items for uninterrupted supply in the domestic market. Export restrictions have also led to a significant drop in prices, leading to losses for farmers or manufacturers.

Strategies for Food Supply Chain

A decentralized approach can be adopted by food manufacturers to avoid drawbacks and risks. Small-scale storage facilities near consumers can reduce storage and transportation costs significantly.

Recommendations to Minimize the Effect of COVID-19

The pandemic has seriously affected food safety, supply, nutrition, and financial health across the supply chain. Strict lockdowns and impositions have threatened the sustainability and growth of food businesses. Here is a list of recommendations that can minimize the effect of COVID-19 on food-related stakeholders:

Recommendations for Small Farmers

Countries can take measures to safeguard the health and finances of agricultural workers. Agri-produce collection centers near major locations can help small-scale farmers to minimize the loss of goods.

Suggestions for Government and Business

Governments can form a pandemic-handling committee to minimize the effects of the COVID-19 pandemic in the food supply chain. Business bodies can also develop advanced solutions and generate funds to help small suppliers, distributors, and retail outlets.

Businesses and individuals with a clear understanding of the challenges are better prepared in the current scenario. The current shifts in consumer spending habits have deeply affected economies across the world. These ripple effects of the pandemic have affected all stakeholders in the food supply chain, including distributors, producers, farmers, manufacturers, and retailers. Protecting their financial well-being and the general economic activity of the foodservice industry is integral to the economy’s recovery as the pandemic nears its end.

__________________________________________________________________

 Author Bio: Damon Shrauner, Senior Sales Consultant and VP on B2B Sales at CKitchen, working in the food service equipment sector since 1994. With his expertise in market analysis, product placement, sales and project management, he will always tell you what to do for the best of your business.