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ASCM offices will be closed in recognition of Juneteenth on Friday, June 18. Normal hours will resume Monday, June 21.

ASCM Insights

Can Restaurants Bite the Bullwhip Effect?

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After an exceptionally tough year, more and more restaurants are finally at full capacity once more. Unfortunately, now they’re being squeezed by food shortages and escalating prices.

Recently vaccinated diners are returning to restaurants in droves, causing a demand shift that’s a 180-degree turn from COVID supply chain modifications. A year ago, food producers everywhere pivoted to servicing grocery stores and other vendors that support at-home consumption. Meanwhile, the restaurants that were able to stay open offered limited menus, leading manufacturers to offer less variety and demand for bulk items to plummet.

Now, the pendulum is swinging again — and in a big way. “Over the last six weeks, we have seen the market come roaring back faster than anybody would have anticipated,” Mark Allen, chief executive of the International Foodservice Distributors Association, told The Wall Street Journal. “The startup has been, in many ways, as difficult as the shutdown … Everybody is trying to turn it on immediately, and the capacity might not be there.”

Restaurant operators from New York to Denver to Las Vegas are at a loss for how to source key ingredients. And with supply so low, they’re facing major price increases too. The Journal article cites one Indiana pizzeria manager who says pepperoni prices jumped 60% in the past five weeks. The owner of a small restaurant in Nebraska notes that the price of the soy oil and meat he buys has tripled.

Unsurprisingly, smaller and independent restaurants are getting the worst of this latest bullwhip effect because of their quantities of scale. However, big chains are not immune. ASCM Executive Vice President of Strategy and Alliances Douglas Kent was interviewed on KNX10.70 News Radio in Los Angeles about Chick-Fil-A limiting the number of sauces customers can request, depending on the item ordered. Moe’s Southwest Grill, McAlister’s Deli and sandwich chain Schlotzsky’s all note on their websites that some items may be temporarily unavailable, particularly condiments, as a result of the recent ketchup packet shortage.  

Further up the supply chain, delays in overseas shipments are reducing the availability of international products such as tuna and olives, as well as packaging for goods produced in the USA. “We can make salad dressing but we can’t make the bottles to sell the salad dressing in,” says Suzanne Rajczi, chief executive of Ginsberg’s Foods Inc.

Real-world inspiration

Each and every day, supply chain professionals work diligently to innovate, synchronize and surmount extreme supply chain challenges. Here at ASCM, we know how critical it is to examine and unravel the toughest questions facing today’s global networks. But we’re also passionate about identifying opportunities and applauding victories. One way we do this is through the ASCM Awards of Excellence, which honor superior performance and dedication to advancing the field of supply chain management. Past winners include DuPont, GE Oil & Gas, Hewlett-Packard, Intel, Johnson & Johnson, Roche and numerous other supply chain frontrunners.

We’ve just extended the deadline until May 31, so you still have time to enter. Whether your corporation deserves recognition for organizational transformation, commitment to productivity and employee advancement, or creating a better world through supply chain, I highly encourage you to submit an entry. This is an exciting opportunity to share your success and be part of a global celebration of extraordinary supply chains.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer at ASCM, the largest nonprofit association for supply chain and the global leader in supply chain organizational transformation and innovation. Prior to this, he was the managing director for the Operations Consulting Group of American Express Tax and Business Services. His leadership roles have included project management, business process redesign, and individual and organizational alignment. Eshkenazi may be contacted through editorial@ascm.org.

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