How to get products has become a problem

Restaurant owners had no idea in February 2020 what they would be facing in a few weeks. Because a virus on the other side of the world had jumped from bats to humans, dining rooms would be closed, customers would be asked to stay home and employees would be laid off by the millions. Operators were thrown without warning into a crisis that was unimaginable even days before.

But one thing shouldn’t have come as a complete surprise, say observers of the systems and processes that had allowed supplies to slip through restaurant backdoors.

Before Americans added “COVID-19” to their vocabulary, the pipeline had rarely been disrupted, and those rare cases were usually short-lived. Yet experts knew the supply chain was more fragile than it looked. With enough shaking, these issues would hit big time.

A bat virus turned out to be that catalyst.

“What is clear is that the pandemic has laid bare what the underlying reality was that the supply chain was stressed even before the pandemic,” said John Porcari, a group leader from White House supply chain work, during a press briefing. “And we clearly have changes to make to build a more sustainable and resilient supply chain.”

“All of these elements were coming to a head.”

“The supply chain is a bit like our electrical grid: we thought our supply chain was a well-oiled machine, and we didn’t give it much thought until it wasn’t,” said Charlie Souhrada, vice president of regulatory and technical affairs. for the North American Association of Foodservice Equipment Manufacturers, better known as NAFEM.

Equipment remains extremely difficult to find. Many chains have postponed or suspended openings because they were unable to equip the kitchens of new stores. Even if the necessary items and materials can be found, they can take far longer than any semblance of pre-pandemic norm to reach a site.

Souhrada traces the issue back to 2018, when few people outside of the medical or scientific communities had even heard of the coronavirus. To protect American producers, the Trump administration imposed a 25% tariff on steel imports and a 10% surcharge on incoming aluminum. Shipments from many countries have plummeted and the cost of what has arrived has also allowed US suppliers to charge more.

Simultaneously, the White House imposed separate tariffs on many finished products imported from China. The country is a leading manufacturer and exporter of many items used in restaurants, from furniture and rugs to uniforms and small merchandise.

“These measures kind of set the tone for some of the material shortages that suppliers across the country are still facing today,” Souhrada says. “The shortages are in things like metals, steel and aluminum. These have been rare since 2018. Plastics – all types of resin – were relatively rare until around April 2021. I wouldn’t say they’ve moved much since then.

“Semiconductor chips have gotten a lot of attention,” Souhrada continues, noting how tiny computer switches are an essential part of today’s “smart” kitchen appliances. “These have been rare since April [2021] and have been even rarer since August.

Complicating matters were the inland transportation challenges faced by all manufacturers and importers. The movement of raw materials and finished goods, whether from an American port or factory, was hampered by a nationwide shortage of truck drivers, shipping containers, and even freight train engines.

And then the pandemic hit, knocking out needed personnel from factories and transportation. Factory workers were encouraged along with everyone else to shelter in their homes, and they could hardly build a fryer or a combi oven in their living room.

“All of these elements were coming to a head,” says Souhrada.

The final complication is the relatively small size of many OEMs. For every Middleby or Hobart there are dozens of smaller manufacturers. “That means they have fewer resources internally to adapt to such a changing landscape,” says Souhrada. They could not pivot, as countless restaurateurs could, for lack of capital.

meat of matter

Ironically, scale is cited as one of the factors compressing the country’s food supply pipeline, especially protein. President Biden has repeatedly pointed out that most U.S. processed beef, chicken, and pork comes through just four sources, creating a bottleneck and driving up prices. He even castigated this situation in his State of the Union address.

His administration hopes to ease the flow of meat by funding the start-up of many small processors. The president says these additions should also ease food inflation.

Operators say their food supply problems have paralleled difficulties with equipment supplies, but only up to a point. Initially, suppliers could not supply their catering customers due to the scarcity of raw materials.

“What happened behind the scenes, especially on the protein side, was that producers started to cut raw material production,” recalls James O’Reilly, CEO of casual barbecue chain Smokey. Bones.

The agricultural industry lacked the supplies to grow the crops that fed the livestock that grew into sausages, chicken sandwiches, and quarter-pounders.

“Many if not most of our suppliers had to slow down production because there was so much uncertainty,” O’Reilly said, adding that Smokey Bones considers itself a protein candy store. “We’ve had many tough conversations with our supplier partners where they’ve been like, ‘We love you, but we just don’t have enough supplies.'”

Food processors have not laid off their workers like equipment manufacturers have. Employees were considered essential workers, meaning they had to continue working despite the risk of contracting COVID.

Many fell ill. In May 2020, 22% of workers at a Tyson factory in Storm Lake, Iowa – about 550 people – were reportedly diagnosed with the potentially fatal disease. At a pork processing plant in Logansport, 890 people, or nearly 40% of the workforce, tested positive, according to published reports. At least one other factory had to close due to the high infection rate.

Other processors were similarly hit. A total of 334,000 meatpacking workers contracted COVID before May 2021, according to a study published in the journal “Food Policy.”

It remains unclear how many employees have moved on to other industries or lived on government subsidies to avoid getting sick and bringing the virus back to their families. All the supply industry knew was that labor was becoming as scarce as other key resources.

“Everyone was like, ‘Whoa, maybe I’ll just shut down the second shift and try to hobble through this,” says Phil Kafarakis, CEO of the International Foodservice Manufacturers Association, or IRMA. “It happened so fast. The nature of the event was so quick. Our business models were so rigid. What was the way to do it? There were no examples.

Even though meat and other foodstuffs came out of a factory, there was always the challenge of getting it to a restaurant. Operators have felt the national shortage of truck drivers harshly, a situation that persists.

The other major factor was the choice many food brands had to make if they had a presence in both foodservice and retail food stores. The most optimistic projections from the early days of the pandemic predicted catastrophic declines in restaurant sales and traffic. Meanwhile, consumers were finding empty shelves in their neighborhood supermarket.

Processors reorganized their production line to create the retail versions of their products, leaving many restaurants with the choice of paying what consumers paid, removing an unavailable item from their menus, or finding new suppliers.

Smokey Bones decided early on that it needed to offer certain items to fulfill its promise of being a protein candy store.

“We held top-down meetings with our top six to 10 protein suppliers,” O’Reilly said. “The message was very consistent, and it was that capacity was significantly affected and will remain so for some time.”

And after?

Things have calmed down somewhat on the food side, but operators on all sides are reporting that an item readily available today is nowhere to be found. They liken the situation to the arcade game Whack-A-Mole, where players try to push moles back into their holes as they spawn in rapid fire with no discernable pattern.

“There’s a lot of creative problem solving,” O’Reilly said. Still, “we see this as a medium-term situation – we don’t think it will be resolved in a few weeks.”

In the meantime, “it has become much more of a daily problem for us”, he continues. “We spend a lot more time working on that part of the business and talking about it.”

“There’s a new normal that’s already taking shape — deeper, broader, and more frequent communication with your customers,” said IFMA’s Kafarakis. “It almost boils down to scheduling shifts. You see a lot more.

Moreover, “the dynamics of redundancy came to life,” he continued. “Instead of having two suppliers, now you have maybe three or four.”

The equipment situation also continues to pose a challenge.

“We’re in growth and expansion mode,” O’Reilly said. “We’re seeing significantly longer lead times to get critical components – equipment, furniture.”

Souhrada also credits the ingenuity with making it easier to crimp the supply on the equipment side. “Based on some of the information we got from our members in a study we produced, pressure points are stabilizing somewhat because manufacturers have learned to adapt,” he says.

But “they’re still playing Whack-A-Mole with the components they might be missing today,” he continues. “Most of these shortages will likely continue through 2022 and into 2023.”

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Rozella J. Cook