With the global vaccine distribution on the rise and business and personal travel growing, signs of economic recovery are starting to pick up.
While increasing economic activity is great news, the comeback has been faster than anticipated, exacerbating strains on the supply chain. Inflation concerns driven by labor costs, COVID compliance costs, a tightening freight market, and commodity price increases could continue to impact the supply chain throughout the year.
Though supply chains face disruptions across many industries, HPSI is well-positioned to help our senior living members mitigate these challenges. By managing the supply chain at both distributor and manufacturer level, we are able to dampen the impact members would experience without HPSI. HPSI’s contracts, size and relationships minimize price increases; and our processes and systems ensure that the correct contracted prices are charged (i.e., if a supplier agrees to hold prices – we check that they are actually held).
As your business continues to improve, there are six major supply chain issues to keep in mind and actions you can take to stay ahead of supply chain challenges.
Longer Lead Times – Manufacturers are slowly shifting back to normal foodservice production from retail. With retailers still ordering heavy volume, you may continue to experience shortages from suppliers. In some cases, current lead times for new products from the manufacturer to your distributor could be 3-8 weeks or more. Labor shortages also affect production and prices, contributing to longer lead times. Make sure to communicate your needs with distributors as early as you can. This gives them time to speak with manufacturers to update forecasts.
Supplier Staffing Shortages – Labor shortages continue to impact every part of the supply chain, from pickers in warehouses to delivery drivers. There are approximately 8-million fewer jobs in the U.S. relative to pre-COVID. As the economy and wages adjust, the labor force will eventually come back. In the meantime, in addition to communicating with suppliers, you may also need to be flexible when it comes to delivery time windows and be prepared in the event of delays and cancellations.
We continue to work with our suppliers to ensure HPSI members’ orders are prioritized and addressed expeditiously. Our distributors are actively hiring and training new staff to address the spiking demand. To help mitigate the impacts of labor shortages, we recommend members:
- Anticipate demand and order early and appropriate volumes. Try not to over-order to ensure adequate supply is available for other HPSI members
- Ensure you have a couple days of product inventory on hand to provide protection in the event of unforeseen challenges or future delivery delays
- Consider changing your delivery day or time to a window that will result in higher on-time service (consult with your MFD Account Executive on options, including key/night drops) and please do your best to refrain from off-day deliveries to ensure higher service levels
- Consider placing multiple (2-3) orders vs. one large monthly ‘replenishment’ order of food, non-food and chemicals as supply may be in high demand and quantities may be limited
- Contact your Purchasing Consultant if you need additional support or for help finding alternative, contracted suppliers in the event your primary supplier is not able to fulfill your order.
SKU Consolidation – We’ve seen a great deal of SKU consolidation as manufacturing capacity shifted to retail. High-running, popular SKUs are still being made, while less popular ones are not currently being produced or may not come back at all. This means that you may need to substitute items more quickly than in the past. Ask your distributor when items will be available and as an alternative, you may need to look to a different distributor for more unique items.
Personal Protective Equipment (PPE) – In general, the PPE supply chain is in good shape with most prices coming down. However, high demand and increased raw material costs has led to volatile pricing for medical gloves. As many healthcare operators stocked up on medical gloves at the start of the pandemic and maintain a robust inventory, prices are likely to fall or remain flat in the short-term. Long-term prices are forecast to increase at 2.1% annually over the next three years, hampering buyer power. Good news if you’re an HPSI member – we are committed to controlling costs by working exclusively with medical supply wholesaler, McKesson.
Supplier Solvency – Bankruptcies continue to be a risk for smaller and regional suppliers. A Chapter 11 reorganization may mean that a supplier will remain in operation, but you may need to renegotiate terms. Suppliers facing Chapter 7 bankruptcy will liquidate and cease operations in relatively short order, leading you to find a substitute supplier. You may want to develop a contingency plan for suppliers you are worried about to avoid operational disruption. At HPSI, we constantly monitor supplier health and then develop contingency plans and identify substitutes where we have concerns.
Demand Forecasts – Suppliers have had difficulty forecasting demand by geography. Distributors may need to source items from a farther location, increasing lead time. Make sure to communicate with your distributor about upcoming demand. Communicate directly with your supplier representatives in regard to delivery windows, special orders, and unique needs. Update your supplier representative with any material changes to your volume or operations and communicate any inventory or delivery concerns. With a better picture for demand, they’ll be able to get product to the correct distribution centers. HPSI continues to work with our distributors to get as much of the right products to the right places to meet our members’ needs.
With all these factors to keep in mind, the number one thing you can do to stay ahead of issues is to communicate with your distributors – early and frequently. At HPSI, our contract owners are constantly in touch with key suppliers collecting updates, developing alternatives, and sharing best practices.
Need more resources to help run your operation? Learn why more than 31,000 members rely on HPSI as a trusted supply chain partner. Or contact us today to learn more about HPSI’s supply chain expertise including our Commodity Outlook publications and Monthly Food Flashes.
