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Supply Chain Shortages Hit the Customer Where it Hurts

By March 8, 2023Uncategorized

According to the Federal Reserve Bank of New York, nearly three years after Covid-19 was declared a pandemic, supply chains are back to normal. Actually, when looking a bit closer at the numbers, supply pressures actually fell below normal. Zero marks the historical average, and changes in either direction mark standard deviations from that trend. The February reading in the New York Fed’s Global Supply Chain Pressure Index was -0.26, reaching negative territory for the first time since August 2019. Maximum disruptions pushed the gauge to a peak of 4.31 in December 2021. However, before we go congratulating ourselves too much, supply chain shortages are still hitting the consumer where it hurts – in their wallet (and their taste buds).

In October of 2019, I wrote about the food supply chain being at risk. These supply chain disruptions were hitting global supply chains due to a variety of reasons, including climate change, natural disasters, and epidemics. Now, when I wrote this article, we were months away from everything being turned upside down with the Covid-19 pandemic. I wrote that a major threat to the global food supply chain is the risk of airborne pathogens. This was namely the spread of avian flu and swine fever, which were depleting global chicken and pork supplies. In 2023, the food supply chain is still facing a number of issues and supply chain disruptions are limiting product availability and driving up prices.

Avian flu continues to be a thorn in the side of the poultry industry. Over the last 6 years, avian flu has continued to make headlines and disrupt the market. In 2017, a chicken farm affiliated with Tyson Foods discovered a flock had been contaminated. The flock consisted of about 73,500 birds, which were used for breeding. As a result of the outbreak, the flock had to be destroyed. To avoid a full-on outbreak, all farms within six miles of the affected farm in Tennessee were quarantined. This included about 30 farms. That same year, the H5N6 flu strain struck South Korea, which resulted in authorities exterminating about 17 percent of the national flock of chickens and 28 percent of ducks. These birds were not raised for meat, but rather for eggs. Considering how many traditional Korean dishes contain eggs, the average price of eggs sold by South Korean farmers soared 50 percent.

The effects of these outbreaks are still being felt. However, climate change has also affected the chicken and egg market. Climate change has altered the flight paths of many bird species. As a result, the species of birds that come into a given region has become more unpredictable. If these birds are carrying avian flu, this can have a ripple effect on the entire industry. As the number of flocks, and size of flocks decreases, so too does the supply of both meat and eggs. The result is scarcity on store shelves and higher prices.

But chicken and eggs are not the only protein source that has been facing supply chain shortages. The US Department of Agriculture cattle-inventory report highlighted that the number of cattle is down 3 percent from last year, and more ranchers are selling off animals in anticipation of herd size decreasing. While the supply has not been nearly as affected as the egg supply, the result of less cattle is higher prices. Retail ground beef prices, for example, averaged $4.81 in 2022, the highest annual average on record. Ground beef prices per pound are up 25 percent since early 2020.

Aside from hitting customers in the wallet, supply chain shortages are hitting customers in their taste buds. While I have written about the produce shortage in the UK, with many grocery chains limiting the number of tomatoes and other vegetables that customers can buy, I saw two stories of customer favorite foods that have been impacted: In-N-Out Burger and Girl Scout Cookies.

While we do not have In-N-Out on the east coast, I was fortunate to live on the west coast a number of years back, and would occasionally treat myself to an In-N-Out Burger feast. Generally, I would go with a double-double animal style. But for many customers, supply short shortages have made it so they cannot their burger how they want. The restaurant chain has recently faced a shortage of cascabella peppers, which are hot wax-type peppers about 2 inches in length with a canonical shape, fruity flavor, and heat similar to a jalapeno. The shortage was caused by a “combination of bad weather, disease, and poor soil conditions,” resulting in a reduction of 60% in supply of cascabella peppers. In-N-Out opted to substitute banana peppers for the cacabella peppers, but it did not go over well with customers. The company issued a half-hearted apology and said it hoped that the supply of cascabella peppers would return to nomal after the next harvest season.

Girl Scout Cookie is upon us, and supply chain shortages could make it more challenging to get your favorite cookie. Little Brown Bakers , the manufacturer behind Girl Scout Cookies, is warning of unforeseen supply issues that will be impacting both manufacturing and distribution of its treats. While the company did not go into more detail on the matter, it should be noted that the Girl Scouts of America are rolling out an online ordering system to boost sales this year. Little Brown Bakers has said that digital orders could take longer than normal to fulfill due to unforeseen supply chain shortages. However, the Girl Scouts have said that in-person distribution of cookies will not be impacted by the supply chain issues.

Supply chain shortages will continue to be an issue even if the supply chain has returned to normal. This is simply part of the end-to-end supply chain. However, more companies are doing a better job of getting ahead of these issues with better planning and contingency plans. While this can help to alleviate some of the stress for customers, it still hits them where it hurts – in the wallet and the taste buds.

The post Supply Chain Shortages Hit the Customer Where it Hurts appeared first on Logistics Viewpoints.

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