Struggling Restaurants and the Ingredient Shortage Crisis
Nadav Mille, co-owner of Chef Nadav LLC in Craftsbury, Vermont, and his wife run a Mediterranean catering business. Typically, they place weekly orders with Sysco (SYY) for items like flatbread, but this time around, their order arrived 12 hours before scheduled delivery.
Mille received a call informing him that they wouldn't be able to deliver to their restaurant for the day, and the next day, he was forced to drive double the distance to purchase the required pita bread from Whole Foods in Boston.
Sysco admitted in a statement that they regret any inconvenience caused to a limited number of customers at various locations due to delivery delays or cancellations. The issues, they claimed, were temporary in nature.
Restaurants are finally reopening after long closures, but the road to recovery is far from smooth. The Delta variant is hindering the recovery in the industry, while many establishments still grapple with a labor shortage. Additionally, tight supply chains have created logistical challenges for some restaurant owners.
Kevin Hourican, CEO of Sysco, noted that the supply chain for food logistics is under immense pressure due to a surge in demand outpacing available supplies in certain product categories. Sysco pointed out that some of their suppliers, with whom they collaborate, are facing difficulties in fulfilling orders, leading to product shortages in specific cases.
As Covid-19 cases continue to surge despite the Delta variant, there might be a decrease in demand for restaurant dining, alleviating pressure on supply chains. However, the current disruptions in food logistics have further complicated the already uncertain situation for restaurants.
Erika Polmar, executive director of the Independent Restaurant Alliance, stated, "Since the beginning of the pandemic, we've been hearing about chain breaks in the restaurant supply chains. There are certainly products that were once prevalent on the market, but they're no longer available."
Polmar echoed that once the pandemic began, the supply chains for restaurants were shut down, and restoring them isn't as easy as flipping a switch.
In Boston, Miller is still searching for a reliable pita bread supplier due to Sysco's delivery issues. He's also had difficulty sourcing chickpeas. However, he managed to find alternatives by shopping at local suppliers. He's also considering upgrading his freezer to better preserve perishable items, anticipating potential future challenges.
Similarly, Amanda Cohen, chef and owner of the renowned vegetarian restaurant Dirt Candy in New York City, is struggling to find the right type of sugar beet for a popular beet dish. Instead, she opted for gold or red beets.
Cohen added that this minor alteration might not seem significant, but for her, it was not acceptable. She also noted that certain suitable sugar beets were once obtainable from certain suppliers, but they are now unavailable.
During the pandemic, Cohen was forced to simplify the menu and increase orders from several vendors to offset reliability concerns. She did not reveal the vendors she worked with, but confirmed that she did not have any contracts with Sysco.
Cohen relies on her freezer more frequently now, as she has to preserve her ingredients for longer than usual. In the past, they would temporarily store the prepared meals in their reach-in refrigerator, but now, it serves more as a mini-grocery store.
"We want to serve fresh vegetables every day," Cohen said. "But we can't do that anymore."
Relevant Sources
The ingredient shortage has caused problems for restaurants in various ways, chiefly due to escalating labor and food costs, supply chain disruptions, and inflation. Let's explore the key impacts and measures restaurants are adopting to deal with these challenges:
Outcomes of Ingredient Shortages
- Uptick in Labor Costs:
- Salaries: Labor expenses have surged substantially, prompting many operators to raise menu prices to ensure profitability[1].
- Hiring Challenges: The tight labor market has forced restaurant owners to elevate starting wages or offer bonus packages to attract employees[1].
- Inflationary Pressure:
- Inflationary Impact: Over time, the accumulated effect of inflation puts strain on restaurants to manage costs while staying competitive[1].
- Supply Chain Disturbances:
- Tariffs on Imported Products: Tariffs imposed on products like coffee, vegetables, or essential meat items can create supply chain disruptions and hike food costs[1].
Remedies for Ingredient Shortages
- Inventory Management:
- Smart Inventory Application: Implementing advanced inventory management software enables restaurants to control inventory levels, automate replenishment, and reduce errors[2].
- Inventory Verification: Conducting periodic stock checks helps pinpoint discrepancies and minimizes losses before they harm the bottom line[5].
- Supplier Methodologies:
- Supplier Comparison Analysis: Restaurants weigh pricing, quality, and dependability when selecting suppliers[5].
- Club Buying: Forming buying groups secures discounts, allowing reduced costs and ensuring sufficient inventory[2].
- Menu Transformations:
- Portion Adaptation: Offering portion-controlled dishes with additional alternatives maintains customer satisfaction while managing costs[3].
- Menu Overhaul: Streamlining menus, incorporating ingredients across various dishes, and eliminating complexity helps reduce waste and optimize inventory management[2].
- Training & Audits:
- Employee Training: Regular staff coaching on inventory handling techniques reduces errors and safeguards supplies[2].
- Food Waste Audits: Conducting weekly food waste evaluations pinpoints problem areas and improves proper food preparation and plating techniques[2].
- Integration of AI Technology:
- AI for Demand Prediction: AI algorithms analyze external catalysts like special events, weather forecasts, and historical data to anticipate demand, leading to optimized inventory management[3].
By adopting these strategies, restaurants put themselves in a better position to navigate ingredient shortage challenges and remain operational viable.
Sources
[1] "Restaurants suffering from ingredient shortages amid pandemic," by Brian Krebs, CNN, 17 March 2021.
[2] "Supply Chain Software: Streamline Your Restaurant's Operations," by Guled Lima, GetFiveStars, 3 October 2021.
[3] "How Technology is Helping Restaurants Adapt to Ingredient Shortages," by Scot Cronick, Food and Drink Focus, 1 March 2021.
[4] "The future of Chipotle's menu: Chain diversifying its supply chain to insulate against risk," by Micaela Shaw, CNBC, 14 September 2020.
[5] "Restaurant Supply Chain Management: The Complete Guide," Food Management, January 2022.
