U.S. food supply chains are still struggling due to labor shortages, weather and trade disruptions, says a report from ING bank.
According to ING, food manufacturers will be looking for a balance between quick fixes and structural solutions to increase resilience. Economic headwinds could ease pressure, but also cast uncertainty over investments.
For U.S. food and beverage manufacturers, many disruptions in their supply chains began with the pandemic. In terms of consumption patterns, the impact of the initial COVID-19 has clearly subsided.
Food spending has recovered to normal levels and now accounts for 52% of all food and beverage spending. However, demand remains dynamic, as food inflation tightens household finances and leads some consumers to switch from premium products to cheaper offerings. This forces food manufacturers to review aspects such as product ranges, production volumes and marketing.
In addition, food processors have to deal with many other issues. Supplier delays are commonplace for many companies, and labor shortages are one of the biggest problems on the supply side.
“Labor shortages range from truck drivers to warehouse workers to factory personnel to stockers to restaurant staff. This situation is exacerbated by the fact that absenteeism due to illness remains higher than before the pandemic,” asserts the research.
There are currently two job openings in the United States for every unemployed American. In addition, trade suffered setbacks and input prices soared.
“For U.S. manufacturers, elevated price levels for raw materials and non-food inputs, such as packaging, energy and fuel, are the result of strong domestic demand and overseas developments,” ING’s experts say.
Increased port delays have caused additional difficulties for food producers in the past two years, as they affected import flows of foreign ingredients and commodities (such as coffee and cocoa) and export flows of U.S. products. Increased lead times have also made it more difficult to obtain the equipment, parts and packaging materials needed to keep production lines running.
“Although the United States is not particularly dependent on agricultural products from the Black Sea region, the impact of the war on world prices had an impact on the country’s grain and vegetable oil buyers,” the report says.
Some of the causes of supply chain disruptions may be receding, but the impact on the food industry is far from disappearing, experts assert.
It will be a trade-off between what companies want to do and what they can do, because creating a more resilient supply chain comes at a cost. While these costs may be harder to bear in times of input cost inflation, the costs of production line stoppages and empty shelves could be even higher, experts estimate.
To read the full report you can access the following link.