Sounding the alarm on supply chain: Q4 shipping crisis’ impact on bakery

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Sounding the alarm on supply chain: Q4 shipping crisis’ impact on bakery

15 Dec 2021

Joanie Spencer

Since 2008, Joanie Spencer has covered the retail and wholesale sides of the baking industry.
Serving associations such as the American Society of Baking (ASB) and BEMA, Joanie is also in demand as an industry presenter on bakery operations and trends. She holds a bachelor’s degree in communication from Rockhurst University and a master’s degree in journalism from the University of Missouri.

When she’s not running or playing soccer, Joanie spends her time with her husband and 11-year-old son.

KANSAS CITY, MO — Throughout the supply chain disruption that’s hit manufacturing over the past two years, shipping and logistics have been at the heart of the crisis. It could be considered the first pebble that created the ripples when COVID-19 first caused global factory shutdowns in early 2020.

This deeply complex and multifaceted manufacturing crisis has shown few signs of slowing, and shipping is one small part of a much larger picture.

Over the course of 2021, Commercial Baking has held several meetings with key industry executives experiencing direct impacts of the disruption. In this installment, the group discussed the state of shipping delays, how the holiday shopping season is affecting bakery production, and thoughts on the viability of proposed solutions.

While the situation hasn’t improved, for some suppliers, it’s not completely devolving.

“Some of our wrapper components come from Asia, so we still have to stay on top of shipping issues,” said Dennis Gunnell, president of Formost Fuji. “But we finish the machines domestically, and we bring in a lot of parts ahead of time, so we just have to work hard to maintain that inventory. That’s something we were doing before COVID. Now, it’s more important than ever.”

Although COVID shutdowns triggered specific aspects of the shipping disruption — around the world, empty containers were halted at ports and full containers were diverted to alternate locations — the system was already off-kilter prior to the pandemic.

“There are some long-standing problems that have been exacerbated,” said Lisa Anderson, manufacturing consultant and president of LMA Consulting. “People being out with COVID at the ports and the misalignment of demand and supply that was originally caused by it, those things have made all this worse. But there are long-standing problems that didn’t cause the disruption; they’re keeping it from getting resolved.”

One side effect to the disruption is the mainstreaming of the term “supply chain.” Before 2020, most consumers were not aware of the long process involved in getting foods onto store shelves or restaurant tables. But as supply chain makes its way into more media headlines, people are better able to make the connection between chip shortages and CPG, and baked foods and other consumer goods.

It’s become even more prevalent with the holiday shopping season causing mainstream media to sound consumer alarms and raise awareness for possible solutions, such as extending hours at the ports in Los Angeles and Long Beach.

While the effort is laudable, a short-term fix doesn’t necessarily solve the problem, especially when major retailers like Walmart and Amazon have the ability to commission their own logistical resources, virtually circumventing the chain altogether.

Opening the terminals is only one piece of the puzzle.

“You still have to get people working in the ports,” Anderson said, noting that labor shortages and backlash from vaccine mandates are making that a tricky proposition.

Even with the ports open, getting the materials off the containers is still a challenge, especially as the trucking industry remains a drivers’ market. “You have to send the trucks to the appropriate terminals,” Anderson added. “And because there are so many delays with the backup of ships, they may change which terminal the ship goes to, and the exact time of arrival. And the trucks can’t just sit there for hours. Not only is it difficult to coordinate, but there also just aren’t enough drivers. A lot of people are just saying, ‘You know what, it’s not worth it because I’m not going to make money on this.’”

The driver shortage is creating competition not only within the baking industry but also across all manufacturing. The American Bakers Association (ABA) has endorsed the DRIVE Safe Act, a pilot program that would open the driver pool to workers younger than 21 years old by pairing them with experienced drivers.

“That pilot program is something that was included in the infrastructure bill,” said Lee Sanders, senior VP of government affairs and public relations for ABA, noting additionally that that the FMCSA extended the COVID emergency declaration to Feb. 28, allowing flexibility on hours of service.

“That helps a little bit,” Sanders said. “The workforce, coupled with the driver shortage, is one of the biggest issues we’re facing right now. And it’s one that we were facing before the pandemic started. We are continually working through it and developing the best possible strategies to alleviate that stress point in the supply chain.”

Ingredient shortages are also being exacerbated by the supply chain disruption, and logistics are directly impacting that.

“Bakers operate ‘just in time,’ especially with ingredients,” Sanders said. “Now with the glitches in supply chain, they have that extra hurdle of not being able to count on ingredients coming in. They have to think bigger, more long-term down the road, in order to have smooth production day-to-day.”

ABA is working with the federal government to continue regulatory flexibility that was put in place at the onset of the pandemic. That flexibility was designed to help alleviate some of the pain points that come with those shortages and delivery hurdles.

“I’ve re-emphasized to the FDA recently that, for various reasons, we need that flexibility to continue on through the pandemic, especially with the emergence of a new variant,” Sanders added.

What’s more, transportation has a peculiar relationship with procurement of certain ingredients.

The Environmental Protection Agency’s proposed volume increase for advanced biodiesel — a form of biodegradable fuel made from animal fats and vegetable oils (most notably soybean oil) —would continue to negatively impact bakers’ access to soybean oil. This means bakers will have to continue long-term strategizing for adequate supply. With soybean oil already seeing price increases of more than 50%, small and medium food producers, in particular, will struggle to source this critical ingredient between price and competition from the biofuel industry.

Solving for supply chain requires a deep look at every facet and prioritizing accordingly.

For companies like Benchmark, a ProMach brand, which relies on national carriers for shipping, timing and price have been the main logistical issues to overcome. And relative to the complexities of overall supply chain disruption, timing and price feel more like pests than game changers.

“We might end up paying double for freight, or a truck will get out of our facility later than it normally would,” said Vince Tamborello, VP of business development at Benchmark. “But in reality, that’s not our biggest struggle. If something’s a week late when we are completely on schedule, that’s a problem; but when we’re already running a few months behind because of several other supply chain issues, then shipping a week late feels more like a nuisance.”

Although it’s still a guessing game when trying to predict an end to the crisis, bakers and suppliers have little choice but to look forward.

Many believe that “pre-pandemic” supply chain is destined to be part of history and not something the industry will return to.

Strategies like nearshoring are on the radar as realistic aspects of supply chain and not short-term workarounds.

“I don’t see that the shipping container issue is going to get better anytime soon,” said Kerwin Brown, president and CEO of BEMA. “I have heard about companies finding other ways to do things — I’m hearing a lot about nearshoring — and it will be interesting to see how that plays out in the future.”

Anderson said that processes like sales inventory operations planning must be looked at from a long-term perspective.

“It requires better forecasting demand and keeping track of what your customer needs are,” Anderson said. “Then it requires understanding what that means in terms of capacity — whether it’s materials, suppliers or people.”

She also noted that manufacturers who employed this strategy prior to the disruption will soon break away as the leaders in developing a “new” supply chain that functions in — or, rather, in spite of — the disruption.

Conversely, she noted that those focused on going back to pre-pandemic supply chain will not be as successful, whether those businesses dwindle or become absorbed.

“Let’s just say they are going to pull away from the pack … in the opposite direction.”

Perhaps for the first time in history, the manufacturing supply chain will have no choice but to function holistically. The entire network — people, processes, ingredients and raw materials, logistics, operations, and business — will recognize the impact each has on the other. And when that happens, the new chain will emerge … stronger.

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