Times have changed in the food and beverage 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, liaising with both suppliers and clients on a daily basis, I have never seen a landscape like the one we are currently facing. In fact, it is fair to say that the current pressures on the supply chain in the food sector are unprecedented in a working lifetime.
Such is the turmoil that suppliers find they have, unfortunately, been forced to do an about-turn on the normal mantra of expansion and growth. Some are not only having to actively decline new customers, but also in some cases try to reduce their existing customer base. In effect they are trying to downsize, which would be an unthinkable strategy in usual times in a sector where scale is often key to survival. They are being forced to go against one of the universal ambitions of businesses in any sector: growth.
The significant reason for this is the current labour shortages across the UK. As well as a circa 100,000 HGV driver deficit, it is estimated that the food and hospitality sector (including production and the supply chain) is devoid of over 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 driver shortage have already had an impact not only on service levels, but also the availability of products 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.
Here are some ways you can plan your approach to this unprecedented landscape.
How do you ensure that you remain a valued customer, in a time when foodservice suppliers are looking to reduce in size?
In essence you need to ensure you remain, or become, an attractive business customer. At a time like this, with significant labour shortages, suppliers need customers with 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’ and by reducing the cost to serve you, you will become a more attractive customer to suppliers.
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, the best way of achieving the above is by consolidating your orders through fewer suppliers, and not looking for lots of alternative suppliers with the intention of ‘spreading the risk’ if one is unable to supply. Doing that latter may sadly prove to be a very short term strategy.
With the root causes of the current 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 is a period of higher food inflation and higher supply volatility than we’ve been used to in recent times.