How is the food supply chain being affected by COVID-19?

The surge of panic buyers and the decrease of manpower in the workforce has affected not only the grocery stores, but also warehouses and suppliers.

Published in

FOX-TECH CO

6 min readMar 27, 2020

New Taipei City Grocery Store’s noodle section left almost empty by panic buyers on March 20, 2020

If you have been reading the news lately you have probably heard of the impact COVID-19 is having on the health sector worldwide. This has caused many buyers worldwide to panic buy causing a supply shock for local grocery stores. Articles of people buying toilet paper, rice, canned goods, and sanitizing products in bulks first started in Singapore, then Japan, Taiwan, and now the US. Many are panic buying out of fear, unfounded rumors, and some are trying to turn a profit by selling those goods at a higher price to others. In this article, we will explore how the unfavorable supply shock caused by COVID-19 panic buyers has affected the food supply chain due to logistic constraints and lack of manpower and how we can support it.

Negative Supply Shock Graph from Wikipedia https://en.wikipedia.org/wiki/Supply_shock

A supply shock is an economics term for an unexpected event that changes the supply of a product, resulting in an unforeseen change in price. There can be favorable or unfavorable supply shocks.[1]

The rise of cases worldwide has caused several countries (Singapore, Malaysia, and Taiwan in the APAC region) to temporarily ban foreign visitors to their territories to reduce the number of imported cases [2]. However, this action has caused anxiety in many citizens. One of the most prominent cases I saw was in Singapore back in the first weeks of February when the government moved their DORSCON from yellow to orange.

You don’t need 150 rolls of toilet paper and 10kg of rice.

When people rush to buy 100 rolls of toilet paper, 10kg of rice, and 20 cans of beans and vegetables it creates a supply and demand problem for grocery stores. Most grocery stores schedule in a weekly, if not a monthly, basis of the goods that should be delivered to that location. This list is then sent to their HQ where they follow up with their suppliers. As most of these suppliers have been working for months, if not years, with these grocery chains they prepare their produce amount based on forecasts. When you have the event of a pandemic and panic shoppers this forecast becomes obsolete. Grocery stores go from ordering 100kg of rice a week to up to 20% to 30% more.

“Our supply chain is experiencing a truly unprecedented event with this crisis. We have never seen levels like this across the United States. And that’s actually impacting supply chains”
— Greg Ferrara, president of the National Grocers Association in the United States.

Another problem comes with perishable goods: fresh produce such as meats, fruits, and vegetables. People are not buying as many as before and they are left to spoil in some regions. One of the important unit economics in the grocery store is shelf space. The longer a product stays on a shelf, depending on the shelf life, the more fresh food waste it will cause. A celery package’s shelf life is about 2–3 days past its printed date. If a store used to sell 10 packages of celery a day they might order 70 packages a week. However, when people stop buying celery and swap it for a non-perishable good the celery stays on the shelf longer than expected. Depending on the food safety procedures the grocery may keep the rest of the 60 packages in a walk-in freezer or fridge. An important element of this is having a stable temperature. By reducing the temperature deviations the cold chain of the fresh goods is kept intact for longer helping extend the shelf life of the produce. Meat being kept in -18ºC can extend its shelf life for 1 year.

Singapore Food Agency’s Storing Food at Safe Temperatures Chart https://www.sfa.gov.sg/food-information/food-safety-education/good-food-safety-practices

What happens to the +100kgs of perishable goods already in the warehouse?

Most of the manpower in the food chain right now is being moved to the warehouse and logistic space to move essential goods. These essential goods includes water, canned foods and non-perishable goods such as rice, beans, pancake mix, pasta, pasta sauce, dried foods, packaged foods, soups, dried fruits etc. What happens to the 100kgs of meat already in the warehouse? Depending on the country they may remain in the warehouse for longer (in the UK Tesco closed their meat counters). Perishable goods are shipped in a special way to ensure their freshness for their final destination. Although certain perishable goods are maintained below 0ºC their shelf life may become “suspended” for as long as the temperature is maintained stable. If the perishable goods sit for too long, they will perish and this affects the revenue of the buyer.

Tesco’s official Twitter account https://twitter.com/Tesco/status/1240367098922176512?s=20

What about non-essential businesses that are put in quarantine?

For retail locations such as restaurants, bars, and central kitchens most of their manpower will become unavailable. Their shops may temporarily close causing most of their items in their refrigerator to go unmonitored. In the event that they happen to not go under quarantine if they use a delivery service, their sales may increase. Even then the demand for logistic’s manpower has increased exponentially from last year. This will have a domino effect on their food chain, affecting the most the local suppliers who will need to find new customers.

Key takeaways

Fresh goods consumption has decreased due to the demand for non-perishable goods. There is a need to help extend the shelf life of perishable goods.
Unfavorable Supply Shock disrupts the logistics chain of grocery stores and restaurants. There is not enough manpower to move the essential goods fast enough back on the shelves.
Take a look at 5 Things supermarket want you to know by Samantha Sault (World Economic Forum)

Do you know anyone that needs help with temperature and humidity monitoring in the f&b supply chain? Book a consultation with me.

Resources

[1] Evan Tarver, Investopedia (October 1, 2019) Supply Shock https://www.investopedia.com/terms/s/supplyshock.asp

[2] The Straits Times, (March 21, 2020) Coronavirus: Panic buying, lockdowns may drive world food inflation. https://www.straitstimes.com/asia/se-asia/coronavirus-panic-buying-lockdowns-may-drive-world-food-inflation

[3]M.E. Buisman, R.Hijema, J.M. Bloemhof-Ruwaard(2019) International Journal of Production Economics, Discounting and dynamic shelf life to reduce fresh food waste https://www.sciencedirect.com/science/article/pii/S0925527317302335

[4] https://www.consumerreports.org/food-storage/how-to-extend-food-expiration-dates/