How the Capacity to Pivot Could Protect the Food Supply Chain

despite some disruptions to certain elements of the food supply, the food retail industry has so far demonstrated remarkable resiliency during the pandemic.

The theme of food has loomed large in the narrative of COVID-19. Early in the pandemic, fears of mass disruption of food supply chains led consumers to ransack supermarket shelves and hoard non-perishable items like soup, pasta and rice.

Yet despite some disruptions to certain elements of the food supply, such as shortages of meat resulting from COVID-19 outbreaks at critical meat processing facilities, the food retail industry has so far demonstrated remarkable resiliency during the pandemic. This is not to say that the food supply chain has emerged unscathed.

Lessons Learned about Food Supply Chain Resiliency

In a recent article in the journal Applied Economic Perspectives and Policy, Chenarides et al (2021) examine the devastating impact of the pandemic on the food service distribution channel and the lessons we must learn about food supply chain resiliency. In March 2020, sales for restaurants were $32.4 billion in the United States, well short of the $65.4 billion in sales from a few months earlier. When food services in non-restaurant operations, such as recreation venues and hotels, are accounted for, the total deficit for the beginning of 2020 was close to $80 billion, a pattern that has continued for the duration of the pandemic. This is the lowest level of consumer spending in the food services sector since 1984.

According to Chenarides et al, COVID-19 exposed a fundamental lack of food service resiliency in the form of an inability to reallocate the food supply from the food services to the food retail industry. With the almost total shutdown of the food services industry, the food supply chain became irrevocably clogged as food service producers had nowhere to send their product. As a result, a great deal of food was sent to foodbanks, while the rest was simply destroyed or sent to landfills.

Food Producers Can’t Pivot Quickly

Most food producers did not have the capacity to pivot quickly from food services to food retail production. Everything from growing, packaging and shipping is built on an inflexible model that works well enough under optimal conditions but easily collapsed in the early weeks of the pandemic. Chenarides et al propose a more flexible and resilient model of food production in which manufacturers build capacity to meet both service and retail industries simultaneously, with the ability to increase or decrease production in either area to meet demand and disruption.

While this would require food producers to meet the cost of developing this capacity, it would mean that they would no longer lose an entire revenue stream during a widespread disruption like COVID-19. If demand from food services dropped, producers could quickly pivot to food retailto meet that surge in demand. The result would likely be a minimal impact on revenue while maintaining a resilient and productive food supply chain.

There will be many lessons that industry must learn from the COVID-19 pandemic. Perhaps one of the most important is to recognize that resiliency in the face of disruption must be built on a flexible foundation that can accommodate rapid shifts in production priorities. For many industries, adopting this model could mean the difference between survival and collapse during the next inevitable crisis.

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