Navigating Supply Chain Challenges

Understanding the Current Economic Landscape and Taking Action

The pandemic, skyrocketing demand, and other factors driving supply chain disruptions continue to impact all industries, including the frozen food sector. While experts caution that supply chain issues won’t disappear in 2022, better forecasting and responses to potential disruptions can help businesses navigate the challenges better.

Yet, despite the pandemic and supply chain challenges in manufacturing, retail, and food service, the frozen food industry has demonstrated resilience and continues to report strong retail sales. Frozen food continues to soar, with sales up 26 percent in 2022, compared to January 2020 (although that is somewhat impacted by current inflation).

There are multiple factors driving supply shortages and supply chain issues.

The Omicron Variant

The highly contagious omicron variant caused record infections in the US in the first quarter of 2022. Many businesses and industries, including within the food industry supply chain, faced COVID-19 rates that impacted short-term worker availability. As employees stayed home and quarantined, food production, manufacturing, shipping and distribution were all impacted by these immediate changes in the workforce.

Labor Shortages

In addition, some employees who worked through the pandemic re-evaluated their situation and have simply quit in what is called the “Great Resignation.” Many companies are working hard to rectify the situation by offering higher pay and additional benefits.

 Severe Weather and Climate Change

Although the weather is not a new issue for the food industry, increased severe weather events and the pandemic have affected crops and the ability to move food.

While supply chain issues aren’t predicted to be restored to pre-pandemic levels in the near future, economist Brian Beaulieu, CEO and Chief Economist of ITR Economics shared insight on ways to mitigate current supply chain interruptions and safeguard against potential future ones at this year’s AFFI-CON.

Beaulieu’s presentation also provided conference attendees with a briefing on the US economy, pricing pressures, employment, financial markets, global supply chains, and practical advice on moving forward. Here are some of his key messages and actions that companies can take now:

Supply Chain Issues

  • Supply chain pressures are easing as global growth slows
  • Avoid making strategic decisions that impact cost at the current high-pressure point
  • The business operations trends of onshoring and near-sourcing are real

Action Step: Determine if a weakening USD will impact your cost structure versus your competitors

The US Economy

  • Consumer financial health is good with incomes rising
  • Businesses are profitable and liquidity is high
  • US economic growth is dissipating

Action Step: Approach opportunities knowing balance sheets are strong

Pricing Pressures

  • Disinflation, a reduction in the rate of inflation, is probable post-1Q22 and through the first half of 2023
  • This disinflation will give the Federal Reserve latitude to be non-aggressive with interest rates
  • An inflationary environment is still likely for the foreseeable future, possibly the next decade

Action Step: Use the lull in pressure to formulate a long-term strategic plan for price increases while expounding upon your competitive advantages with consumers

Employment

  • Employees have the power
  • ​​Culture and retention are key
  • Not all states offer the same growth opportunities

Action Step: Determine how positive your corporate culture is, and make sure you are providing opportunities for skills growth and advancement.

The American Frozen Food Institute (AFFI) provides business intelligence, including data analytics that provides information about trends, industry innovations, forecasts, and opportunities that enable data-driven decisions to help you plan for growth.

Monthly Retail Market Insight reports and the Power of Frozen series provide business intelligence to help identify opportunities and risks using key performance metrics, such as sales trends. In addition, Business Insights opens the door to data that can help determine how to seize opportunities, improve fulfillment processes, mitigate risks, and gain a competitive edge.

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Media Inquiries

For all media inquiries, please contact:
Mary Emma Young
Vice President of Communications
meyoung@affi.com
443-904-3937

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