How the Latest Challenges of 2021 Affect Foodservice

 

At a high level, the world is seeing unprecedented supply chain challenges. It's a bad enough situation that the White House just formed a commission to address it and its effects on the nation's security and the economy. While not wanting to go down a doomsday path with this post, I will say that the aforementioned statement is important to note that we are in very challenging times and not just in our little world of foodservice equipment and supplies.

 

There has not been a day that has gone by in the last couple of months (and it gets more frequent and more desperate everyday) that our office doesn't get crushed with emails and calls trying to improve lead times or find products that lately are not readily available. Blenders are out several weeks, fryers from certain manufactures are out 15 weeks. I have heard that certain oven manufactures are giving lead times of 26 weeks (6 months!). I had a customer tell me that his customers were tired of hearing about COVID and supply chain issues. On that note, I think we all are, but the reality is we are going to hear it more. So maybe we need to understand what is coming at a higher level.

In a way, the world stopped last March and we radically changed how we lived our day to day lives. People stopped working and then some went back to work but with smaller groups and limited contact. The cumulative effect was catastrophically reduced production, without a corresponding reduction in consumption. Demand for other products increased exponentially. Latex gloves, N95 masks, and regular surgical masks prices skyrocketed due to demand. Basic gloves that most restaurants use for food safety were now impossible to get or impossible to afford. You get the idea.

 

As many people worked from home, we had to buy better computers or monitors to keep up with countless and often mind-numbing Zoom calls or Microsoft Teams meetings. This increased demand for all things that go into consumer electronics, like computer chips, plastics, silicon, etc. All the while, the workforce that produced these items around the world was shut down or being decimated by COVID. Which had us all continuing to consume without any steady production and that has created a massive gap in supply. Let’s add to the problem, that when the world did stop, ships and shipping containers got stuck in ports or at sea. With significantly diminished personnel to receive and inspect these products and containers, supply was further diminished and costs are driven up. In speaking with several different manufacturers that rely on containers for product shipment, they have all said that the cost of acquisition for a container has gone from approximately $1,500 a container to almost $20,000 a container because they are so scarce. This has further driven the cost of goods and materials up for manufacturers.  

 

Our industry is in a dire labor shortage. We have line cooks making wages almost as high as nurses just so a restaurant can keep doors open. That is going to drive the cost of menu items up.  Maybe that is overdue, but that is a blog post for another day. The real problem is many people left this industry when so many doors closed and our waitstaff and bartenders could no longer make a wage. Now we are reopening, but there is no one to work the positions. Locally, a restaurant has advertised that they would beat your current hourly wage by $2.00/ hr, just bring your current pay stub. Wage wars and hiring bonuses are a thing from fast food to fine dining. Several major wedding venues I am familiar with are on the cusp of calling clients to cancel events due to a lack of staff. A local university with amazing benefits has 40 open positions and no applications. Those of us that have been around the industry for a while find it hard to fathom. The same thing happened to manufacturers that had to lay off workers during the pandemic's peak. Those employees had to find other work to support their families and now manufacturer’s are still struggling to get workers back.

 

There are more factors that contributed, but from the above, you should get the basic idea that supply has been depleted and demand remained steady or increased.  

The vaccine appears to be working and the economy, and in particular our industry, is trying really hard to come roaring back. However, the sudden and unexpected demand has compounded the problems previously outlined above and we are severely straining the system. And sadly the patience of many customers. Let's go back to the lead times we were talking about above. They have gotten so bad that some refrigeration manufacturers are refusing to even quote lead times or pricing that is valid for longer than a week. I was recently told that an import refrigeration company can no longer ship products until further notice. The top three global manufacturers in our industry are buying back parts from large parts suppliers in order to complete orders due to components not being about to be supplied from third party OEM suppliers. Plastics and resins are in short supply and that is preventing seemingly simple things like switches and knobs from being available to finish goods, which is holding up entire chain rollouts. The foodservice industry is even competing with the global auto industry and the global electronics industry for the same silicon chips. Auto industry lobbyists have told the United State government that they need to have the chips allocated to them or the car industry will be in jeopardy.  I hope you see where we are going here. 

The biggest thing that we can do is manage expectations. It is imperative to understand that this is global and beyond our foodservice world. With that in mind, we need to first manage our own expectations and then those of our customers and guests. We need to be patient with each other. If you are a dealer, order inventory before the next wave of price increases. Operators -  communicate with your dealer and plan to do the same. Price increases will range from a low of 6% to upwards of 20%+ depending on the product. If you have the ability to, order now and get in front of it but also be patient with the lead times. There is a good chance that more than a few manufacturers will not have much if any product to ship in Q3 or Q4 as we try and rebuild the supply. These times will pass. It's just going to take a little time to close the gap.