I'm sure at some point over the last six months you will have experienced some sort of disruption to your deliveries, whether it be missing products, deliveries turning up later than expected or indeed, not turning up at all and being rolled to the next day.
The reopening of the UK has created significant demand on the global and local supply chain. At Regency Purchasing Group, we're working hard on behalf of our members to do all we can to keep disruption to a minimum.
This category, which includes packaging, bags, disposables and other such items, sees products manufactured in the far east. Since the start of the pandemic, this category has seen significant manufacturing challenges leading to major disruption. This is due to the demand for PPE, the amount required globally and the shortage of containers and shipping, both sea and air...
The cost of a 40ft container to ship by sea from the Far East pre-pandemic was circa $2,500. We are now seeing costs varying from $16,000 up to $27,000, and that’s if you can get them booked! The industry is playing catch up not only due to the priority of products being manufactured, but also from the shortage of the manufacturing workforce caused by the pandemic and 'pingdemic'.
If things couldn’t get any worse, add the issue of the blockage of the Suez Canal, the world’s busiest shipping lane, into the mix and we experienced further delays, not just from those ships which decided to wait for Suez Canal to be cleared, but for those who decided to find alternate routes adding weeks on to their journey time. Notwithstanding this, lead-times have increased for deliveries of finished product and in some instances, suppliers are experiencing delays with products taking double the time to arrive.
We have had a number of notifications of cost inflation in this category, and products that have been hit hard include paper bags, paper cups, food containers and paper hygiene products.
The food category has unfortunately not escaped the challenges created by the pandemic.
It’s an industry where manufacturing is personnel-reliant, and both the pandemic and 'pingdemic' has had a significant effect on the availability of workers and product.
If we take the meat industry as an example, abattoirs are currently working to 60% capacity with butchers isolating due to either having Covid-19 or isolating having come into contact with someone who's tested positive. Now that the self-isolation rules have relaxed for those who are double-vaccinated, the industry is having to play catch up or prioritise product just to be able to offer something. The issue then backs up all the way back to the start of the supply chain, where there is less product to meet demand.
The Deadweight Beef price, as an example, is significantly higher than the five year average and this is affecting all cuts of meat. The demands from other countries is also affecting availability with product going to those willing to pay the higher price.
Other examples include Heinz, who has taken the decision to only produce key lines, with Heinz Tomato Ketchup and Heinz Mayonnaise being two of the key products. Other lines are taking a backseat until an element of normality has resumed.
In addition to all of these issues, when the product finally arrives UK, there's a shortage of HGV drivers and warehouse staff, on top of record demand levels, further adding to the disruption. Any disruption adds cost; in order to attract drivers, wages are being offered at rates 25% higher than they were previously.
All of these things add to the cost of the product due to supply and demand.
The challenge is that the whole situation is very fluid and changing by the week, or in some instances by the day, so is very difficult to predict. The current situation is not letting up.
With UK schools and universities gearing up to return in September, we suggest that, if your finances and available storage allow, fill the freezer and dry store with more stock than usual so you have a contingency. Plus, if possible, keep your menus fluid.
The current picture that’s being painted by the industry is not a pretty one; we should be prepared for cross-category cost inflation with no respite for the remainder of this year.
If you have any questions, please do get in contact with your Regency Procurement Manager, but we will keep you updated on the challenges faced as soon as we know about them.