Labor issues continue to fan the flames of supply chain disruption, fueling raw material shortages and poking holes in production output, while food manufacturers struggle to keep up with volatile demand.
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement,” Timothy R. Fiore, Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, stated in the latest ISM Report On Business.
In spite of continuing obstacles, economic activity in the overall manufacturing sector achieved an 18th consecutive month of growth in November, according to the report.
However, all segments of the economy remain impacted by “record-long raw materials and capital equipment lead times, continued shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products,” Fiore added.
Spot Shortages Diversify
While the constrained availability of major food commodities is well in the public eye, supply chain complications are impacting a broad swath of raw ingredients.
“Increased demand coupled with higher sea freight and manufacture costs is leading to price hikes for sweeteners and starches. Some dairy protein suppliers have sold out through the remainder of the year and are looking to add more capacity,” Rick Williams, Practice Lead of Operations & Supply Chain at JPG Resources told The Food Institute. “Chocolate processor lead times have pushed out 30-60 days in some cases, causing chocolate chip shortages for the first time since the pandemic began.”
Climate concerns and increased demand from changing diets are also impacting the availability of individually quick frozen (IQF) fruit and vegetables. “There have been losses due to storms, heat, fires and field labor shortages,” said Williams. “On the food service side, we are still seeing some feeling the impacts of the chicken shortage, and flour and tofu are out of stock up to 50% of the time.”
Meanwhile, droughts in California and Western Canada have triggered tomato paste and mustard shortages, while increased biodiesel production is now taking about half of the available soybean oil supply, Mitch Dingwall, Senior Director of Product Innovation at Golden State Foods told The Food Institute.
“Suppliers of gums have shifted to producing more profitable ingredients and the February 2021 winter storm Uri impacted the U.S. plains states and their ability to supply raw materials to produce starches,” said Dingwall. “All of these raw materials will continue to be a challenge in 2022 and possibly beyond.”
The Labor Dilemma
Pandemic-related labor issues including absenteeism, growing unionization and difficulty filling open positions continue to limit manufacturing growth potential.
“Meeting demand remains a challenge, due to hiring difficulties and a clear cycle of labor turnover at all tiers,” said Fiore.
The shortage of workers at JBS, the world’s largest meat supplier, is affecting operations in every developed nation, limiting production increases and raising costs, reported Bloomberg. (Nov 11)
“Labor shortages are holding back production growth,” Andre Nogueira, head of JBS’s U.S. division said during a November earnings call, “This is a key issue for the industry.”
Guy Courtin, VP and Industry Principal at Tecsys, a supply chain management software provider, sees this strain on labor as the most concerning hurdle for food manufacturers and distributors to watch.
“Farmers, food processing plants and other labor-intensive parts of the food supply chain are dealing with the same staffing and retention issues as so many other supply chain organizations,” Courtin told The Food Institute. COVID-19 has further complicated the issue by limiting access to seasonal labor from other regions and territories, he added.
On a more intrinsic level, the challenge of “corporate memory loss” — when the retiring workforce does not pass their knowledge onto the next generation — has also proven to be costly and disruptive.
“With early retirement, an aging workforce, and other issues that can affect existing talent, prioritizing people has proven to be critical, especially in the food, packaging, and retail supply chain industries,” Neil Coole, Director of Food & Retail Sector at BSI told The Food Institute. “When organizations prioritize their people, it ensures that they can meet their customers’ expectations and build more resilient supply chains for the future.”