Supply Chain Drama & Consequences

Supply Chain Drama & Consequences

By 

Rich Wolverton

Former VP of Category Management, FSA

Published 

January 21, 2022

Supply Chain Drama & Consequences
Put your hand in the air if you have been frustrated by supply chain issues. Go ahead, put it up! You are probably at home anyway.

Put your hand in the air if you have been frustrated by supply chain issues. Go ahead, put it up! You are probably at home anyway.

Whether you are involved in the supply chain professionally, or just living life in 2022, you’ve had issues with something being out of stock, or supply and demand causing inflation. We moved into a new home last summer. I finally got around to ordering a door for my office, so my wife doesn't have to listen to me all day. The door is “Made in America,” but the hardware comes from, you guessed it, China! So, we have a lengthy delay.

For those in the hospitality industry, you know about the challenges all to well. My friends working for distributors spend an exorbitant amount of time just finding products for customers (hotels, restaurant operators, healthcare customers, etc.)

In the good old, pre-covid, days while working for a distributor we expected our vendors (food manufacturers) to fill orders at a minimum level of 98.5%. Many hit the number, but many did not. With vendors that had continual issues, “talks” were necessary to understand the situation and get improved order fill. As the foodservice distributor, our standard to for delivery to our customers was 99%.

As a distributor, unfilled orders means dissatisfied customers, expensive hot shot shipments, and bottom line, it means lost business as the customer buys from a competitive distributor, cash & carry, Amazon, etc.

So, what are some of the factors at the root of supply chain problems for manufacturers and distributors? (In no particular order):

  1. Labor shortages. First, people were out with covid. Shortages of employees happened for the manufacturer, our transportation providers, and distributors. Next, people stayed home because the U.S. government paid as much money as they would make working. Subsequently, the Great Resignation happened!
  2. Labor will continue to be an issue throughout the supply chain. Employee expectations have changed and I expect employees doing the hard work to continue pushing for better wages and working conditions. Wherever you are in the supply chain make sure you are evaluating your corporate culture and how it effects those doing the hardest work.
  3. Shipping containers are backed up at our ports. You see it in the press. Container ships are delayed unloading at ports. Containers are full only one way & the cost of containers has skyrocketed!
  4. Playing it tight with inventory. The closer you get to “just in time,” the greater potential to beheld hostage by supply chain disruptions.
  5. Equipment issues. If a manufacturer changes plants for production, there is always a risk of things not going smoothly. Different equipment sometimes makes different product. The changes may be minuscule or can stop production.
  6. Process issues. You know when a vendor or distributor changes inventory systems there will be problems!  While working for a distributor, we had a manufacturer do a system conversion and they were not shipping our product because they couldn’t find it in the new system. I remember telling one guy to put on a jacket, go in the cooler, find our product and ship it! They knew the product was in the cooler, but the system could not find it.
  7.  We’ve always done it this way, or we don’t have time. Some businesses are reluctant to change or flex when customers need help. Right now, we need help!!!
  8. Fuel prices gone crazy! Ships, trucks, and trains all use fuel. According to eia.gov, in 2020 diesel fuel was $2.56, in 2021 it was $3.29, and diesel is anticipated to be $3.54 per gallon. You will see these prices show up in your COG.

As we start to return to normal, orders will continue to be shorted for several months, especially for international products. As an operator, how do you ensure your orders will be filled?

So, what are the challenges for the hospitality industry?

  1. Labor, labor, labor. Labor will cost more. Retaining the right team is critical. Build the right culture to create the atmosphere where people WANT to come to work!
  2. Can you count on your distributor(s) to fill orders?
  3. Is the full amount of each price increase justified?  
  4. When you run out of an item, you need to adjust your menu, which may cause lost sales!
  5. Inflation is tearing your business apart!
    b. As ingredient costs rise, restaurants must react. Menu prices need to change, too. If this means printing new menus, this could cost hundreds of dollars.
    a. Will new menu prices scare away customers?
  6. When buying product, can you easily determine if your price on an item has increased?
  7. Can you easily determine if you are being overcharged on each item?
  8. When will you find the time to verify pricing, place orders, verify what is NOT coming and find replacement product?

      

The Reeco platform will help hospitality and restaurant operators solve many of the issues they face today and do it in less time. Once you place your order guide on Reeco, you will be able to track your inventory, place your order knowing the best price from competitive distributors and have high confidence your order will show up when scheduled!

One of the benefits for the hospitality industry partnering with Reeco is the Reeco system will look at all of your product needs, evaluate the best solution for YOUR business and ship from the distributor that brings YOU the most value. By partnering with Reeco, you have someone in your corner when shipments run late, if there is damaged product and other issues! Think about it. As an operator in the hospitality industry, you may receive product from multiple distributors, but you only have one invoice from Reeco! You really have to see it to believe how easy Reeco makes it for you to make great decisions every time.

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