A trading landscape like no other.

Changes to buying behaviour, being experienced in many areas right now, but particularly in hospitality, can seriously impact a catering operation’s chances of survival when faced with supply chain challenges as well, warn food procurement and supply chain management company, allmanhall, who have some advice to offer.

GOING AGAINST GROWTH

With the food supply chain facing unprecedented challenges such as delays in delivery and availability of ingredients, as well as energy and staffing issues, suppliers have had to change the way they operate, in some cases actively looking to downsize - an unthinkable strategy in normal times, in a sector where scale is often key to survival, acknowledge allmanhall.

Oliver Hall, the firm’s MD, has identified the key factors driving these changes, as well as what actions he feels catering operations can take to mitigate the impacts on their own businesses. “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,” says Oliver Hall.

“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. 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.

“The turmoil facing suppliers has forced many 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 trying to reduce their existing customer base. They are being forced to go against one of the universal ambitions of businesses in any sector, growth.”

LABOUR SHORTAGES

The significant reason for this is the current labour shortages across the whole UK. As well as around a 100,000 deficit in HGV drivers, it is estimated that the food and hospitality sector (including production and the supply chain) is devoid of over 500,000 employees, allmanhall point out.

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 that’s without even mentioning 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 product that foodservice suppliers receive from processors and manufacturers.

“At allmanhall, 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,” reports Oliver Hall. “This is having a knock-on effect upon all catering and foodservice operations. But buying behaviour changes can help ensure a catering operation remains a valued customer of foodservice suppliers, at a time when they are looking to reduce in size.

“It is essential to remain, or become, an attractive business customer. 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. This is known as the ‘cost to serve’, and by reducing the cost to serve, a business becomes a more attractive customer to suppliers.”

POSSIBLE SOLUTIONS

1. Increase average delivery value – where possible consolidate and have higher value orders. 2. Reduce average delivery frequency – minimise the number of deliveries received each week. 3. Increase the delivery timeframes in which suppliers can make deliveries. 4. Order full cases and reduce splits – where possible, order full cases, as splits increase the picking time and cost of the order to the supplier.

5. Place orders day one for delivery on day three, rather than next day – giving suppliers additional lead time aids planning and routing. 6. 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 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,” adds Oliver Hall.

“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.”

OPINION

More help needed

More help is needed for businesses struggling with supply chain challenges if consumers are not going to face long-term rising food costs and limited availability. That’s the message from Bridge Cheese’s managing director, Michael Harte, who says the government is “passing the buck” and needs to do more to support food and drink producers and processors. In his budget announcement, chancellor Rishi Sunak mentioned the supply chain crisis in his opening address and warned of months of disruption as the problem would take months to ease. Yet, his autumn budget statement made no real commitments to resolving the crisis in the short term, feels Michael Harte, who says that his Telford-based business - which supplies cheese and dairy products to food manufacturers and the food service sector - is facing yet more upheaval in the weeks and months ahead as supply chain challenges begin to bite. “A huge amount of work goes into plugging the dam in the food industry before shortages and price increases impact consumers,” says Michael Harte. “But the challenges are becoming so big now that consumers are being impacted, and we are seeing this reflected in the rising cost of food, reduced menu choices and even limited opening times for some eateries. “With energy prices on the up and the availability of goods and labour proving problematic and adding yet more fuel to the fire, it means that in the short term we as consumers will have to get accustomed to the empty shelves and reduced choice.” At the Conservative party conference earlier this month, the prime minister suggested that the blame for supply chain issues should be laid at the feet of UK industry – comments that Michael Harte says are unfounded.

“The government is saying it’s not their job to fix the issues, but when they have played a part in creating the issues then it is frustrating for the buck to be passed back to businesses who are already embattled by the problems caused by Covid and Brexit,” he adds. “We need a more robust food chain strategy and we need to see the government and British industry working together in partnership to solve the supply chain problems – not being at odds with each other. But this appears to be the position we find ourselves in today.” Michael Harte also believes that the government’s narrative around low pay and low skills being to blame is also misleading. “SMEs are often lauded as being the backbone of Britain’s economy, but in today’s world big businesses are offering signing on payments and lucrative bonuses which attract more staff from smaller employers, thereby moving the labour shortage to another part of the supply chain. The labour pool is simply not there to meet the demand across all levels,” he claims.

Bridge Cheese says that it is working hard to reduce the impact to the company of the kind of labour shortages seen in other sectors. For example, the rapidly expanding cheese company has a dedicated fulltime team working solely on recruitment, retention and development to ensure Bridge Cheese attracts and retains good people at all levels, from apprentices and students to graduates and those looking to make a career for themselves in the food industry. “We are investing in everything from improved staff facilities to a new travel support payment scheme to help employees with the cost of getting to and from work,” explains Michael Harte. “We couldn’t run our business without them, so unlike many of the challenges we are facing at the moment, strengthening our workforce and ensuring they feel valued is one thing that is in our hands.” “It has been a challenging few months and I wish we were coming to the end of it, but I fear we aren’t. The focus now has to be on creating a resilient and robust food supply chain which meets demand in the short term and long term, in a sustainable way that works for all parties.”