Why the consumer supply chain is disrupted at present

The Last Refuge recently published an article analyzing why we’re experiencing shortages of certain goods, and why the consumer supply chain is disrupted.  It’s one of the best explanations I’ve yet read on the subject.  Here’s an excerpt.

Most consumers are not aware food consumption in the U.S. is now a 50/50 proposition. Approximately 50% of all food was consumed “outside the home” (or food away from home), and 50% of all food consumed was food “inside the home” (grocery shoppers).

Food ‘outside the home’ includes: restaurants, fast-food locales, schools, corporate cafeterias, university lunchrooms, manufacturing cafeterias, hotels, food trucks, park and amusement food sellers and many more.  Many of those venues are not thought about when people evaluate the overall U.S. food delivery system; however, this network was approximately 50 percent of all food consumption on a daily basis.

The ‘food away from home‘ sector has its own supply chain.  Very few restaurants and venues (cited above) purchase food products from retail grocery outlets.   As a result of the coronavirus mitigation effort the ‘food away from home’ sector has been reduced by half of daily food delivery operations, possibly more.  However, people still need to eat.

That means retail food outlets, grocers, are seeing sales increases of 25 to 50 percent, depending on the area.  This, along with some panic shopping, is the reason why supermarkets are overwhelmed and their supply chain is out of stock on many items.

There is enough food capacity in the overall food supply chain, and no-one should worry about the U.S. ever running out of the ability to feed itself.  However, the total food supply chain is based on two segments: food at home and food away from home.

The seismic shift toward ‘food at home‘ is what has caused the shortages, and that supply chain is not likely to recover full service of products again until the ‘food away from home’ sector gets back to normal.   No need to panic, but there will be long-term shortages.

At the top of the food supply there is ample product and capacity.  Its the diversion of customers to the retail grocery sector causing the shortages.

There’s much more at the link.  Highly recommended reading.

At the end of the article, the author asks, “What do things look like in your neighborhood?  Are things improving?”  As I write these words, 493 readers had responded, giving details of how things were in their neck of the woods.  Their feedback makes very interesting reading, particularly comparing rural areas with urban, and the crowded coasts with less populated inland areas.  It’s definitely worth clicking over there to read their feedback, if you have the time.

Peter

6 comments

  1. At the end of it, the supply chain is, in the near short term, pretty much inelastic. Sudden demand increases lead to shortages.

    Pretty much econ 101, really.

  2. I’m making it a point to thank the grocery store workers when I have to shop. People practicing good SD. Staff cleaning every surface.

    Got chatting with the cashier. She’s been sworn at, been told “we’re all in the same boat” (uh, no, you’re not within coughing distance of 1000 people a day), a cashier had muffins thrown at her. People are idiots.

    They have been given a $2/hour raise retroactive to Mar. 1. Not enough, AFAIC.

    Thank a trucker, too, if you have the chance.

  3. I had not ever thought about half the food in the country coming from sources outside the home. Learn something new every day!

  4. I’ve been saying there are people who always cook, people who cook or buy and people who can screw up cold cereal. Now take all of that, and their kids who get school lunches, and throw themselves at a grocery store that only has stock for the first two sets above, and… empty shelves.

    Toss in the ass-hats who are now hording and internet profiteering?

    Yeah…

  5. One of the restaurant suppliers I follow on facebook and a few in my local area have started being pretty upfront about “Can’t find X at the supermarket? We’ll deliver it to your home!”

    Where in the past it’s been sales to business only, now they’d like the sales however they come.

    And it’s one of the things I find amazing about restauranteurs’ access to meat and produce – In the UK a favorite cafe made mozzarella, tomato, and basil sandwiches that always had fantastic tasting tomatoes, whereas my homegrown ones and those from the supermarket are much more variable, especially over time. Same with the basil, etc. A favorite place when I lived in one state served perfectly marbled steaks that were always delicious and with amazing texture, and the plate was hardly more than I would pay for the equivalent raw steak at the supermarket.

  6. And to expand on what has been said.

    Think about a normal disaster. Unless the place is completely destroyed, like during a meteor strike or a nuke blast, within a day of things slowing down, resources begin to pour in. Maybe a week for a really bad snow storm if your area didn’t have plow trucks already. Seriously. NatGuard troops with engineering vehicles can do a lot of normal stuff rather quickly.

    But in Corona-pocalypse, everywhere is a disaster zone. Things like bread which get sucked off the shelves, aren’t restocked immediately. Suddenly all those people with breadmakers remember they have one stashed somewhere in the wedding gifts still not ever used. So they buy flour and yeast.

    So some schmuck like me, who keeps an extra jar in the cupboard, is somewhat screwed when he goes to buy yeast and there are none in the store. Because everyone suddenly remembers breadmakers.

    Think about, if you cook regularly, all the things you would not need to buy if you had the money to order out. So all these minimalists whose kitchen has 500 different flavors of Keurig cup coffee and nothing else suddenly have to buy food to make food, stuff to make food, stuff to store food.

    It’s not just because people have to now cook. It’s that they have to have their own infrastructure in order to cook.

    In my limited travels, I have seen local runs on pots. Spices. And then, a couple days later, fire extinguishers. Seriously. Little red containers that spew stuffs. Because nobody knows just to cover or throw salt on a grease fire.

    Ah, well. My parents grew up in the Depression and had parents who were able to provide during said depression. Many entitled young snots today have never, no matter what they say, ever experienced true want, or true shortages.

    So, now all these shortage-less people are finally experiencing what we all grew up with.

    Think about it. A lot of us grew up with seasonal fruit. Citrus, grapes, tomatoes. When I wander into the stores today, even those hit by hordes, I see stuff available that I only got, as a child, for Christmas. Oranges. Nuts. Or during the summer. Fresh tomatoes. Mmmm. Sun-warmed tomatoes, sliced, on bread with mayo. Mmmmm. Which I can now get year round.

    This ‘crisis’ is going to change the way a lot of people today treat food.

    Will be interesting how many restaurants will survive this change.

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