Compounding issues such as labor shortages, increased product demand, and COVID-related shutdowns have caused one of the most substantial supply chain challenges in modern history.
As supermarket retailers and suppliers alike look to the future, the industry must work together to increase transparency, and deploy technology that can minimize supply chain risks, noted Boyede Sobitan, co-founder and CEO of OjaExpress, a Chicago-based international foods delivery service helping smaller retailers address the current supply chain landscape.
“Suppliers need to be very transparent on what availability they have,” Sobitan said. “Grocers need to very transparent on opportunities that exist for them to sell more to their customers by looking at a supplier’s real value. What do I mean by that? Look at the movement of their product, ask what suppliers are anticipating. There needs to be more collaboration in the industry.”
While the industry is in the throes of the deepest supply chain challenges it has seen in a long while, being able to anticipate what’s to come and implement industry-wide standards and changes will go a long way in preventing problems from worsening.
Looking at the short-term: holiday impact
As supply chain challenges continue to impact the grocery industry during one of the busiest seasons of the year, Chicago-based IRI collected data focused on the availability of a basket of 25 holiday-related grocery categories.
Key holiday-related findings included:
- Five holiday-related categories have elevated and worsened out-of-stock rates. Product availability of whipped toppings, liquid gravy, frozen pie/pastry shells, refrigerated pies and bakery pies categories was between 5 and 11% lower than the same time last year, and between 1% and 9% lower than the recent two-month average.
- Promotional and pricing activity reflects shortages. As a result of lower supply, retailers are running between 1 and 9% fewer promotions in those five categories compared to last year. On average, prices in these five categories have risen about 3.6% over this time last year.
- As the holidays approach, retailers will have less incentive to promote this year given the high demand and low in-stock rates. As a result of availability, lesser anticipated promotional levels and continuing inflation, shoppers may need to substitute items across key holiday categories.
- There are early indications of supply chain risk to other holiday-related categories. As the holidays approach and demand begins to spike, data foreshadows availability risk for additional holiday-related items, including cranberries and stuffing.
Rob Fox, director of Greenwood Village, Colo.-based CoBank’s Knowledge Exchange pointed out that while there might not be much retailers can do to prevent shortages from occurring, they can have plans to help their shoppers improvise.
“The retail spending for Halloween items was up 40% from pre-COVID levels,” Fox said. “That told me that customers are very into the holiday spirit and they have a lot of money or ample money to buy for holidays and they want to celebrate and have fun. Retailers need to be flexible and providing alternative solutions for customers.”
That could mean recommending fresh produce if there’s a shortage of canned or frozen produce and vice versa, or suggesting customers make a sweet potato pie instead of a pumpkin pie if store shelves are low on pumpkin.
Looking at the long-term
While it will take some time, the supply chain will eventually begin to correct. Fox predicted acute supply chain problems to last through approximately mid-year 2022, with some lasting effects such as transportation costs and labor shortages.
Recent times have been challenging, but the industry has learned from the experiences brought on by the pandemic.
“It's forced food manufacturers to limit their SKUs and increase production runs of their most important profitable products,” Fox said. “I think [suppliers are] happier in general dealing with fewer SKUs, more simple production schedules, more simple supply chain district distribution channels, schedules and so on. I think we're going to see a longer-term trend toward more simplified production and product offerings.”
Fox doesn’t think, however, that the grocery industry is in danger of repeating the widespread shortages of March 2020 that left meat cases mostly empty, and shelves bare throughout the country.
“I think the food companies really did a good job within a couple of months, figuring out ways to kind of move channels,” he said. “I think they probably learned a lot about being able to be more flexible to meet retail demand.”
From this point forward, the industry must realize the importance of communication between channels. Being able to communicate potential shortages in advance can allow retailers greater flexibility to prepare for alternatives.
Technology will play a huge part in helping retailers better communicate needs to suppliers, and help suppliers better prepare retailers for the realities of the supply chain.
Smaller retailers must invest in technology too
Without the implementation of digital technology, OjaExpress’s Sobitan doesn’t see much of a way forward — especially for the smaller specialty grocers he works with.
In the current landscape, many smaller grocery stores don’t have the same type of infrastructure national and regional chains do — from both a technology and a manpower standpoint. That’s where OjaExpress comes in.
“I think the future is technology,” he said. “Technology has to be part of your operational strategy plan moving forward. If technology isn’t a part of your plan in the next couple of years, I don’t see a viable path forward for those stores versus the ones who do embrace technology and leverage data to plan inventory forecasting and also just reaching customers and other partners.”
OjaExpress helps its customers understand what products are selling and when, through machine leaning and artificial intelligence that allows retailers to connect with distributors and suppliers about various needs.
Sobitan has worked with customers who previously didn’t have so much as a website get established online with a digital platform that not only gives them more customer visibility but can also help them understand what their customers’ needs are.
“Gone are the days of the traditional mom and pop store where there’s paper and a lot of manual processes,” he said. “You have to implement technology where it’s appropriate in order to succeed in the future, as well as really assess those distributor and supplier relationships.”