On today’s episode, we’re talking with Rick Williams, Practice Lead in operations and supply chain management at JPG Resources. Williams talks with us about the top supply chain issues impacting food and beverage processors in Spring 2022… and beyond.
From the impact of geopolitical issues, to ingredient and packaging material availability, we touch on all of the current links impacting today’s supply chain. You’ll definitely want to listen the entire way through this episode as Rick offers his perspective on how labor issues can be fixed or corrected as well as leaving us with two things manufacturers will need to master if we’re ever going crawl out from under the weight of our supply chain issues.
Erin: Welcome to the Food For Thought podcast. Let's dig right in. Rick, let's start out by talking a little bit about your background and what you do.
Rick: Sure, Erin. It's great to be here with you. My background, I've been in the food business for over 30 years. I founded some ingredient manufacturing businesses, as well as a CPG food product manufacturer, where we were co-manufacturers for a variety of brands. I moved from there to joining an early-stage brand to run operations and growing from one manufacturing site to four until we sold to a major CPG food company. And now I am Practice Lead with the JPG Wheelhouse, which is our operations and supply chain management practice area at JPG Resources. JPG's a team of over 60 experienced food professionals. We provide end-to-end services for brands and food companies, ranging from brand development innovation to product development to commercialization of products to operations and supply chain, which is my area, and then all the way through to where the brand either brings in their own team to run the business, or we work with them to the point of their exit sale of the business to a buyer.
Erin: You're in the thick of supply chain, and I'm sure you have a lot of great insights about what we've been experiencing in the last year. What would you say are the top three to four supply chain issues the food and beverage industry is experiencing right now?
Rick: I think there are three primary areas. Very early on, in the last couple of years with COVID coming into the world, we certainly saw labor impacted almost immediately with regard to that, which has continued. In addition, ingredient and packaging material availability, and lead times with regard to those. And then the third area is just the cost pressures with the inflationary activity that we're seeing worldwide right now. With labor, obviously, there was an issue with infections and impacting availability of folks to do the work. And they had to support family members sometimes who were ill. On the materials side, I think that that's continuing to be a concern and having serious impacts on our supply chain, and contributing to the inflationary pressures that we're seeing. The ingredients, it's really twofold. I think of as far as what's influencing that one is just, again, COVID-related with the labor not being available to make products, also transportation of materials with the trucker shortage. And then secondly, with ingredients, we've seen weather impact on crop failures, with drought and other things contributing to that. And most recently, recently as in this week with geopolitical influences with what's happening in Eastern Europe.
Erin: Now labor is a really big issue, as well. Can you speak to the impact that labor issues are having on the supply chain?
Rick: Sure. You know, when COVID began, people in many industries were able to pivot to work from home. But in our industry, we have many jobs that require folks to be on-site, whether it be farmworkers there for the harvest that during the window that's available for, say, fruits and vegetables to the truckers, as I mentioned previously, to warehouse workers to folks working in production facilities on the floor, making the food, and finally, retailers and supermarkets that folks that are needed to run those facilities. When we started seeing the impact on availability and workers leaving work, it certainly had a strong impact on our supply chain. And it continues to, even as we've kind of grown out of, hopefully on the backside of much of the COVID influence, but certainly, I've seen the worker shortage can be disrupted with regard to the needs in our industry.
Erin: In your opinion, how is the labor component going to be fixed or corrected?
Rick: I think we're seeing some great efforts by employers who are successful at developing, creating, and innovating ways to recruit and retain workers either through enhanced packages. Certainly, many workers are seeking better job benefits, increased wages, things of that sort, but also, in creating a strong and healthy work environment that's inviting to workers. So, doing that is going to be key to getting folks to come back into the workforce. There's many opportunities throughout the supply chain to do that because, certainly, all links in that supply chain has been impacted by this labor issue.
Erin: In addition to labor, we're also experiencing material shortages. Can you speak more on what sort of materials we're running short on? And how is this impacting the food industry?
Rick: Sure. Certainly, imported products or products that have complex supply chains have been a challenge. We've seen COVID-related manufacturing shutdowns or slowdowns over the past couple of years. Lead times have extended as materials become scarce, and certainly, transportation delays. We've all seen the pictures of the container ships sitting outside ports waiting to be unloaded. Some of the specific products that we're seeing are the important items such as sweeteners, mini starches, chocolate, coffee. Also, I think that one thing that we're going to continue to see is, even just general commodities that we've seen here in North America due to drought conditions, crop failures, oats, legumes, things of that sort. That's certainly impacted availability and prices. And then also just the geopolitical situation. For example, Ukraine is a top 10 supplier of many of our farm products, such as corn, wheat, barley, soybeans, that they're number one supplier and grower of sunflower seeds. So, what's happening there will have a ripple effect throughout the world.
Erin: Packaging also seems to be an issue, what are we up against there?
Rick: Many materials, such as aluminum, have been in short supply and long lead times. Manufacturers just are out of capacity and can't support new business. In addition, paperboard has been an issue. Many mills aren't able to take on new customers because of supply constraints right now. So, that's a problem, particularly when you're looking at growing businesses or new innovation, and trying to find those materials to support those efforts. In addition, flexible packaging such as film for nutrition, bars, or cookies and cereals. Many components that go into those raw materials are not available or in short supply. So, that impacts availability or needing to pivot to find alternative types of structures that can still provide the barrier qualities that are needed to protect the food.
Erin: All of this sounds pretty dire. What would you say is the highest priority for the food industry to begin to crawl out from under these supply chain issues?
Rick: Yes. I would say this is the most challenging time I've seen in my career, from a supply chain perspective. And I think there are two priorities. One is planning. And the second is communication. Manufacturers, brands, retailers, everybody needs to think ahead, and they need to plan ahead, look at the extended lead times. We're seeing items that used to be three- to four-week lead times, now being seven- to eight-week lead times. It was seven to eight weeks, it's now 12 to 16 weeks. So, need to plan and work with your supply chain partners to understand what those lead times are going to be. And to the extent possible, either contract or buy ahead to protect your supply, as we work through this phase that we're in. And then communication, maintain breaks communication with your partners upstream and downstream, as far as your suppliers, making sure you understand what they're going through and what their needs are from you, from a forecasting standpoint, and commitment standpoint to them. And then also downstream with your customers. And the retailers understand communicating the challenges and making sure that everybody's planning appropriately, you know, resets that could have occurred in 30 to 60 days may now take 90 to 120 days, in order to get materials in place to support those. So, the planning and communication both directions in the supply chain, I think are critical.
Erin: Best guess, what will normal look like? And any guesses how long it will take us to get back on course with the supply chain?
Rick: Well, early in 2021, I thought we were going to get there by the end of 2021, and then Delta happened. And so that had a huge impact on us. And so, you know, there's many questions that we can't answer with regard to the pandemic and potential new variants, it could impact labor. Also, the geopolitical situation is something that's going to be difficult to really get our arms around until it starts to resolve itself a little more. But I think that we're looking at continued challenges, certainly through 2022. And then start looking at coming out to the new normal, whatever that new normal looks like, towards the end of the year in early 2023.
Erin: Right. Last question for you, and it's going to require you to find a crystal ball. Are there any supply chain predictions you care to make?
Rick: Well, I think one thing we've learned over the last couple of years is that our crystal balls are pretty cloudy right now. And so it's a challenge there. As I mentioned, you know, Delta variant came in kind of threw us for a loop and required us to pivot. And certainly, the worldwide weather patterns that we're seeing, they're impacting crops, or are impacting us here, and then the geopolitical situation. I guess I would say that we are in a season right now. It is not going to last forever, it is going to move...we are going to transition into that new normal. And I think it's important that we plan ahead for that, from the standpoint of continuing to look at innovation and growth. And be planning for that now so that when we kind of see the parting of the clouds, if you will, we can execute on that. I don't know what that timeline is going to be, but I think I'm confident that we're going to get there and that we will start... One thing that I will say about supply chain is that it is very resilient. We tend to stretch and stress it, but very seldom does it completely break. And so as folks learn what's going to be the impacts on it, we can take remedial action to mitigate the impact of the circumstances that we're facing and continue to do business and grow and succeed and thrive.