Food Shippers Adjust Purchasing Patterns to Address Supply Chain Patterns

Food Shippers Adjust Purchasing Patterns

to Address Supply Chain Disruptions

There have been dramatic challenges facing food shippers in 2022. Transportation delays, constraints in the labor pool, and global uncertainties all have led to supplier slowdowns. As a consequence of these factors in supply chain disruption, food manufacturers in particular have been completely rethinking their purchasing patterns. Some expanded their sourcing pool, while others inked long-term agreements with vendors to jointly add capacity. One business even sent its own workers to a supplier factory to speed up deliveries. So what can food companies do to address these significant challenges? Here are a few recent examples of how food manufacturers are reacting to these challenges to lessen the impact of higher costs, longer lead times and a lack of raw materials in their food chains.

Quickly Building Out Manufacturing Capacity at Oatly Oatly, a Swedish food company that produces alternatives to dairy products from oats, will expand its sourcing options after poor harvest conditions strained the supply of oats. The plant-based milk producer has been increasing prices to offset higher costs for raw materials worldwide, the company has enough oat and other raw material contracts and supply in place to meet its growth expectations for 2022, according to Christian Hanke, the company’s Chief Financial Officer.

Drought conditions last year pushed North American oat harvests to near-record low levels, threatening the supply of a popular ingredient used in plant-based milk, says Hanke. U.S. oat production declined 39 percent last year from 2020, with harvested acreage at a record low 650 thousand acres, according to the National Agricultural Statistics Service. Canada is a major oat supplier to the United States, yet the country saw its smallest oat crop since 2010, according to Agriculture Canada. In addition, rail shipping issues also have added to supply woes. Unseasonal flooding in western Canada at the end of 2021 washed out major rail lines, and railroads were unable to meaningfully make progress on the resulting backlog due to a cold snap at the beginning of 2022. Continued rail constraints come as Oatly already expects lower production volumes in the first quarter due labor and raw material challenges. To add complexity to the supply challenges, these conditions have been factors in elevating oat prices. According to the USDA’s Economic Research Service, the average price of oats in the 2021-22 season is expected to reach $4.20 per bushel, which would surpass the 2012-13 record of $3.89. Oatly is paying anywhere between 8 percent to 50 percent more for oats, depending on the region. As part of the solution, Oatly has been rapidly building out its manufacturing capacity to meet demand for oat milk and mitigate the effects of these ingredients shortages.

Reformulating Products at General Mills

General Mills, a multinational manufacturer and marketing of

AS PART OF THE SOLUTION, OATLY HAS BEEN RAPIDLY BUILDING OUT ITS MANUFACTURING CAPACITY TO MEET DEMAND FOR OAT MILK AND MITIGATE THE EFFECTS OF THESE INGREDIENTS SHORTAGES.

Lansdale has helped us to grow our local business, with excellent shipping and delivery procedures. The staff is knowledgable and “ accessible by email and by phone. Lansdale has helped us to grow our local business, with excellent shipping and delivery Our inventory of merchandise procedures.Lansdale has helped us to branded consumer foods sold through retail stores, is reformulating products to keep them on the shelves amid challenges sourcing certain ingredients. The company has adjusted formulations due to a lack of packaging and certain ingredients. Some products have been “reformulated over 20 times is maintained at the highest standards. ” -- Importer and Distributor of Tomato Products Located within the northeast The staff is knowledgable and accessible by email and by phone. Our inventory of merchandise is maintained at the highest standards. -- Importer and Distributor of Tomato Products ” grow our local business, with excellent shipping and delivery procedures. The staff is knowledgable and accessible by email and by phone. Our inventory of merchandise is maintained at the highest standards. -- Importer and Distributor of Tomato Products ” year-to-date,” says Jon Nudi, Group President of North American Retail. MegalopolIs that runs from Located within the northeast MegalopolIs that runs from Located within the northeast Materials including starch, packaging Washington to BostonWashington to BostonMegalopolIs that runs from and fats and oils were “particularly Washington to Boston challenging” to find, according to Nudi. Supply constraints had the largest impact on General Mills’ pizza, hot snacks and refrigerated baked goods (RBG). General Mills has taken multiple steps to staff up its DCs after labor challenges contributed to lower service - Rail Served Daily by CSX and PNR - Diverse Material Handling Equipment - AIB Certification “ - Rail Served Daily by CSX and PNR - Diverse Material Handling Equipment - AIB Certification - ISO 9001:2018 and ISO 200005 - An Asset Based Corporation Lansdale has helped us to grow our local business, with excellent shipping and delivery procedures. The staff is knowledgable and accessible by email and by - Rail Served Daily by CSX and PNR - Diverse Material Handling Equipment - AIB Certification - ISO 9001:2018 and ISO 200005 - An Asset Based Corporation levels in recent months. But now, challenges in sourcing ingredients are disrupting the company’s ability to run - ISO 9001:2018 and ISO 200005 - Five Locations between Allentown & Philadelphia phone. Our inventory of merchandise - Five Locations between Allentown & Philadelphia production lines – so it has quickly taken action to address the situation head-on. “At the beginning of the year, it was really about our distribution centers and logistics bottlenecks,” says Nudi. ”- An Asset Based Corporation - Five Locations between Allentown - WMS and RF Technology - Licensed to Store and Transport Alcoholic Beverages is maintained at the highest standards. -- Importer and Distributor of Tomato Products - WMS and RF Technology - Licensed to Store and Transport Alcoholic Beverages “The biggest issue we’re seeing is really around materials & Philadelphia Located within the northeast selection. So, ingredients coming into our plants to run MegalopolIs that runs from our products.” - WMS and RF TechnologyWashington to Boston Service levels, which measure the expected probability of not experiencing stock-outs, were “in the 70s overall for Q3,” according to Nudi, down from historic levels of 98 - Licensed to Store and Transport Alcoholic Beverages - Rail Served Daily by CSX and PNR - Diverse Material Handling Equipment - AIB Certification - ISO 9001:2018 and ISO 200005 Dave Emery 215 855 8460 ext. 205 dave.emery@lansdalewarehouse.com percent to 99 percent. General Mills expects to improve www.lansdalewarehouse.com Dave Emery 215 855 8460 ext. 205 - An Asset Based Corporation service levels to somewhere in the 80 percental in the dave.emery@lansdalewarehouse.com - Five Locations between Allentown short term. www.lansdalewarehouse.com & Philadelphia - WMS and RF Technology - Licensed to Store and Transport Alcoholic Beverages

The available supply of oils and starches, which is usually comprised of wheat, has been under significant pressure due to Russia’s invasion of Ukraine. According to the producer price index, which measures inflation on the supplier level, rose 46.2% YoY for fats and oils in March, and 70.1% for wheat. General Mills has deployed various working teams to “ help in bypassing hurdles in sourcing certain products by collaborating with suppliers to ensure it is prioritized for ingredients – as well as fruit, potatoes and cereal. Despite the adjustments, General Mills doesn’t anticipate it will rebuild inventory levels in the next quarter. “If we can do a bit better and service levels improve, we might be able to rebuild a bit, but likely will push into fiscal ’23, where hopefully, we can get back to more historical inventory levels,” says Nudi. Jon Nudi

“GENERAL MILLS HAS DEPLOYED VARIOUS WORKING TEAMS TO HELP IN BYPASSING HURDLES IN SOURCING CERTAIN PRODUCTS BY COLLABORATING WITH SUPPLIERS TO ENSURE IT IS PRIORITIZED FOR INGREDIENTS – AS WELL AS FRUIT, POTATOES AND CEREAL.