Buying behaviours to aid your survival during food supply chain crisis
“Times have changed in the food supply chain sector. The relationship dynamic between the client and the supplier, that we have been used to for years, is currently undergoing a significant remoulding.
In the 15 years since founding allmanhall, specialising in food procurement in the foodservice sector, liaising with both suppliers and clients on a daily basis, I have never seen a landscape like the one presented before us. In fact, the current pressures on the food supply chain are unprecedented in a working lifetime.
Such is the turmoil that foodservice suppliers have, unfortunately, been forced to U-turn on the normal mantra of ‘growth’. Some are not only rejecting taking on new customers, but also actively trying to reduce their existing customer base. In effect they are trying to downscale, to shrink. This would be an unthinkable strategy in normal times in a sector where scale is often paramount to survival. Foodservice suppliers are being forced to employ a measure that goes against one of the universal ambitions, indeed of businesses in any sector.
The significant reason for this is the well-documented labour shortages in the UK. As well as the estimated 100,000 shortfall in HGV drivers, it is also estimated that the food supply chain and hospitality sectors are devoid of 500,000 employees. This ranges from produce pickers and butchers to chefs and waiters, and everything in-between. The result is that each step of the supply chain is impacted by labour shortages, which in-turn translates to food product shortages… and we haven’t even mentioned fertiliser, CO2, fuel availability or gas prices yet!
The effects of the deficit of drivers have already had an impact not only on service levels in the food supply chain, but also the availability of product that foodservice suppliers receive from processors and manufacturers. We are aware that the current in-bound delivery levels to foodservice suppliers is ranging between 70-80%, where they normally sit at 98-100%. This therefore means that up to 30% of stock is not even making it to the wholesalers for delivery out to customers.
Let’s look to some food procurement principles to identify glimmers of opportunity to plan your approach to this unprecedented landscape and see what can be done…
In a time when foodservice suppliers are looking to reduce in size, how do you ensure that you remain one of their valued customers?
In essence you need to remain, or become, an attractive business customer. At a time like this, with significant labour shortages, foodservice suppliers need buying behaviours that will enable them to operate as efficiently as possible, therefore reducing the costs and time associated with making deliveries to you. This is known as the ‘cost to serve’. Reducing your cost to serve from a supplier’s perspective should make you a more attractive customer.
There are a number of ways to do this:
- Increase your average delivery value – where possible consolidate and have higher value orders
- Reduce your average delivery frequency – minimise the number of deliveries you receive each week
- Increase the delivery timeframes in which suppliers can make deliveries
- Order full cases and reduce splits – where possible, order full cases, as splits increase the picking time and cost of your order to the supplier
- Place your order day 1 for delivery on day 3, rather than next day – giving suppliers additional lead time aids planning and routing
- Accept that there will be delivery shortages, try to be as flexible as possible and hold emergency stock to ease pressure points. Being an understanding customer when things do go wrong will help build loyalty.
Perhaps counter intuitively at times like these, food procurement insights confirm and corroborate that the best way of achieving the above is actually by consolidating your orders through fewer suppliers.
With the root causes of the current food supply chain challenges being structural, there is no ‘quick-fix’. Unfortunately, things are going to take time to improve. With so much current uncertainty, the only real certainty in food procurement is a period of higher food inflation and higher supply volatility than we’ve been used to in recent times.”
Contact us if you have questions or to find out more about our food procurement services.