KANSAS CITY, MO — Despite the supply chain struggles that are pummeling the industry — and the world — business is still booming for bakeries.
That’s what Shawn Moye, VP of sales for Reading Bakery Systems, drove home while discussing the intricacies and never-ending problems of the supply chain. “Some are forecasting a 6% GDP for this year and saying we will stay on this pace for 2022 as well,” Moye said. “We’re as busy as we’ve ever been, and the demand is sky high.”
Although that seems like a good problem to have, increased business with a raw materials shortage is a recipe for complications. In this series installment of Sounding the alarm on supply chain, a group of industry executives elaborates on how new strategies and collaboration can help.
Pre-pandemic, there were essentially two types of customers: those who shopped on price and those who prioritized relationships. And in COVID’s upheaval, relationships have made the difference.
“Customers who have had long-term relationships with their suppliers are performing better than the ones who have typically been focused on price with shorter-term relationships,” said Lisa Anderson, supply chain consultant and president of LMA Consulting. “I work with a lot of equipment manufacturers, and they’re clearly having trouble getting their raw materials, and with the extended lead times and a shortage of labor, it’s become a never-ending cycle.”
At Benchmark, a ProMach brand, Vince Tamborello, VP of business development, has seen the pay-off of prioritizing those long-standing relationships amid the chaos.
“If you’ve maintained a relationship for 20 years, you’re definitely in a better place to get parts from that supplier,” he said. “And if you haven’t talked to a supplier for 20 years because you’ve been doing everything in-house, you’re probably going to be at the back of the line. There’s a networking aspect that’s hugely important when there’s scarcity.”
And according to Anderson, it may be a while before the disruption subsides. She noted that it may be 2023 before anything is resolved, but it’s also important to manage expectations of what “resolution” will look like.
“I’ve started advising people to not think in terms of things going ‘back to normal,’” she said. “We need to find different strategies. Those weaker players that didn’t have the long-term relationships might not make it through this, which will add more volume to the stronger ones.”
Those relationships play a huge role in developing strategic solutions and long-term effects when one seemingly small disruption forces a supplier to put the brakes on.
“The disruption is impacting almost every machine we build,” Tamborello said. “A single component can hold up the shipment of a machine, and then you’re faced with a decision to design around that component with new parts and have a one-off machine or wait for the component.”
The decision comes down to the best strategy for the baker and the willingness to either wait for the install or deal with the ramifications of having equipment that is off-spec should it need repairs or parts replaced down the road. For both options, strong customer-supplier alignment is vital.
Cooperation is also a growing strategy. Kerwin Brown, president and CEO of BEMA, has seen his members work together for obtaining electronic components that become regionally available.
“Some components suppliers operate regionally and don’t sell parts outside of their specific region. We had one member who had a working relationship with another member in a different region; the first member was able to order enough parts to help the other member who had none available in their region. I think there’s a lot of that leveraging of relationships happening.”
Many bakers are using similar tactics to help one another as best they can.
“In our region, we have a lot of bakers and a large population to serve,” said Mike Porter, president and COO of New Horizons Baking Co. “Although competitive, we’ve all kind of worked together in the ways we serve. People now are more apt to work with one another. We may get a call from someone saying, ‘We’re out of an ingredient, can you help?’ and if we can spare a pallet, we will. And vice-versa. Those relationships have always been there.”
New Horizons has a new perspective on raw materials cooperation since its recent acquisition of Coalescence, now Coalescence NHB, which supplies custom seasoning blends for food and beverage as well as non-profits.
“It gives us a different view of the disruption,” Porter said. “It definitely gives me more empathy for the ingredient suppliers. We see those challenges by having the ingredient company, but we hope we can use this to our advantage with the bakery as we’re trying to vertically integrate that business into our own supply chain. That was a key goal in the acquisition.”
“Customers who have had long-term relationships with their suppliers are performing better than the ones who have typically been focused on price with shorter-term relationships,” said Lisa Anderson, supply chain consultant and president of LMA Consulting. “I work with a lot of equipment manufacturers, and they’re clearly having trouble getting their raw materials, and with the extended lead times and a shortage of labor, it’s become a never-ending cycle.”
As the industry looks ahead — and braces itself — for 2022 with new strategies for navigating the supply chain, industry professionals must learn how to live with disruption rather than just getting past it.
“Domestic sourcing is definitely going to increase, and that could create a new set of problems,” Anderson warned.
By then, the industry may be well-versed in disruption, and said Lee Sanders, senior VP, government relations and public affairs for the American Bakers Association (ABA), said she sees some good news in that.
“A new set of problems also means new opportunities.”
Read the first part of the raw materials installment of this series here.
