Why supply matters

David Read, founder & chairman of Prestige Purchasing discusses how an explosion of demand and the current shortage of HGV drivers has put parts of our sector’s food supply chain into crisis

In the summer of 1940 Hitler launched his invasion of Russia. It involved over three million troops, 3400 tanks and 2700 aircraft. In spite of huge technical superiority, and enormous early successes, the invasion ultimately failed. It did so for many reasons, but at its heart were supply problems. The extended supply lines, providing ammunition, diesel and food when combined with the winter weather weakened the attacking force to such an extent that they were forced to abandon the exercise.

In 2021 we are thankfully not at war, but a combination of the pandemic and government policy has generated some highly extreme circumstances within which the supply of food, drink and many other goods are no longer stable and predictable. As the German army discovered, we ignore the essential nature of reliable supply at our peril, as supply failures can totally wipe out success, even if there are many other positive aspects of the endeavour.

Last week jobs website Indeed reported that searches by EU-based jobseekers for work in the UK were down 36% year-on-year during May. For hospitality and its supply chains the fall was 41%. Hospitality operators reading this will know only too well the struggles of employing staff in the current environment but may be less familiar with just how chronic the challenges are within our supply chains.

This week UK food distributors have called for the army to be mobilised to prevent the imminent breakdown of the nation’s food supply chain, due to a critical shortage of HGV drivers. The Federation of Wholesale Distributors (FWD) has warned that its members are facing unprecedented challenges in getting food deliveries out to the restaurants, pubs, schools and care homes that they serve.

This crisis has been in the pipeline for a long time, but with Brexit drastically halting recruitment from the EU, a huge backlog of HGV driving tests caused by the pandemic and IR35 tax changes leading many drivers to quit the industry, this shortage has now tipped the sector into genuine crisis. The FWD said “The shortage of drivers is now critical. We are meeting with ministers this week to discuss options, which we believe should include having army drivers on standby to ensure food distribution is not interrupted.”

Among the solutions being put forward are:

· Adding EU drivers to the temporary seasonal works visa scheme

· The temporary extension of drivers’ hours, perhaps limited to multi-drops in remote areas and regions with a food supply threat.

· The end of furlough for HGV drivers

· The waiving of requirements for both medical certification and Certificate of Professional Competence (CPC) in the case of drivers’ whose CPC has expired

· A massive ramp up of Testing for new HGV drivers, which has been severely curtailed by the pandemic

The key suppliers are all impacted to some degree, and the south of England is the worst affected area. Many suppliers have depots that are a day behind on deliveries, rolling them into the following day, or even two days later, and pick shortages are much higher than usual.

I have spoken to a wide variety of hospitality operators in recent days, and it is common to find service levels in the mid 80% range. Usual contracted service levels are at 98% or 99%.

What is clear for hospitality operators is that this is both a serious systemic problem, and one that will not be resolved quickly, particularly as the re-opening of the sector will not complete for at least another month.

The situation is serious because shortages of supply can cripple a restaurant’s ability to deliver for the customer. With whole deliveries being regularly missed and stock-outs common, the threat is rising. Reports of hotels capping occupancy levels because of supply shortages, and restaurants restricting menu ranges are all too frequent.

And it’s long-term because the solutions are complex and will take time to implement. The fact that many suppliers are putting a freeze on new business highlights how they feel they must concentrate only on servicing their existing customers as well as they can. Some are even reducing demand by raising minimum order values, which will impact smaller operators.

What is certain is that we don’t suddenly have a whole industry of bad suppliers out there. Indeed, we should be grateful for the fact that we have a strong, diverse, experienced and generally well-invested supply community who will grapple with these challenges and ultimately prevail.

But these challenges are systemic, and they are not just a minor and temporary blip caused by the sector’s re-opening. Our suppliers will need our support and understanding and raised levels of positive collaboration to adapt requirements - to ensure that the storm is weathered by our industry. This is a time to reach for the phone, not the contract drawer or we will all incur even heavier losses.

David established supply chain consultancy Prestige Purchasing in 1998, since when it has become recognised as the thought leader on procurement and distribution within Foodservice sector. David has spoken at World Travel Market, Food Ethics Council Business Forum, and several Propel M&C Report events.