Labor Shortages Continue to Impact the Channel's Supply Chain

NATIONAL REPORT — Supply chain issues are hitting every industry in the United States, and convenience store retailers are no exception. Whether it's paper cups and boxes for foodservice items, candy staples or fresh food ingredients like turkey and cheese, c-store retailers are having to get creative to keep their shelves stocked and their customers happy.

"I'm the foodservice director, but over the pandemic, I essentially became a buyer," Jeff Russell, foodservice director at Lockport, N.Y.-based Reid Stores, operating 87 Crosby's locations, told Convenience Store News. "I couldn't get pizza clamshell boxes from my distributor, and I found them at a company in Albany, N.Y., that was sitting on them. I knew they supplied Wegmans and we are selling 3 million slices per year, so we needed them."

At Wesco Inc., headquartered in Muskegon, Mich., Dan Sloboda also expanded his job responsibilities during and after the height of the pandemic. While his title is fresh research and development lead at the company, which operates 55 stores, he said his role morphed into "emergency purchasing" when items couldn't be stocked.

"It's half my job to source and buy now," he noted. "It wasn't as bad during COVID because a lot of places that needed the same items were not open. But once people got the green light to go back to work, labor issues and the high demand started affecting the supply."

It seems labor issues at every level are at the heart of today's supply chain issues, according to Kay Segal, founding partner at Business Accelerator Team, based in Phoenix. Both manufacturers and distributors are dealing with labor issues, and that also includes the suppliers that deliver ingredients to the manufacturers.

"Supply chain issues began a year ago as the extended PPP [Paycheck Protection Program] enabled workers to stay home," Segal explained. "This has affected every level of the work chain, including product production, manufacturing, warehouse and delivery. While some manufacturers with whom I've spoken to are working on robotic options for repetitive processes, these projects are 12 to 18 months in the making at best."

Additionally, prior to the pandemic, the natural aging of the population created an imbalance of older Americans compared to younger working generations and this, coupled with the pandemic, produced more labor issues, Segal pointed out.

Most retailers agree that consumer demand has leveled off and is not the core issue when it comes to the supply chain struggles, although products being out of stock are forcing consumers to switch to products that might not be their first choice, said Jonathan Polonsky, chairman and CEO of Plaid Pantry, a Beaverton, Ore.-based chain of 106 stores.

"The categories being affected move around month to month and week to week," he said. "This week, it might be bagged candy, and last month it was coffee."

Finding Workarounds

Manufacturers, distributors and retailers are all feeling the pressure to get items on store shelves. Out-of-stocks are affecting so many categories that it's hard to predict what items will be available and when. In some cases, manufacturers don't have the labor to produce products and at other times, they are not getting the ingredients they need from those that supply to them directly, according to Wesco's Sloboda.

"It's the ingredient companies sometimes and not the manufacturers," he said. "Every week, there is a new challenge and a new supply chain issue. I had to create a backup list for deli, packaging and other categories, so if one thing is out of stock, we go down the backup list to see what we can get."

For example, Wesco gets turkey from Gordon's Foodservice and now has different types of turkey listed as backups so that the retailer can at least get something delivered. It also helps to have multiple distributors, according to Sloboda.

At Reid Stores, Russell is taking a similar approach, creating backup lists with its distributors. If they can't get pizza clamshell boxes with their logo, they will take plain white.

"We have a backup for every item, so we should never run out of something unless something bizarre happens," Russell said. "This alleviates a lot of stress for myself and the stores."

Russell is also working with smaller companies and other backup distributors and manufacturers as needed to keep items in stock, especially foodservice items needed to make staple items at its stores.

Russell's team actively walks the stores and looks at analytics to find any holes in product assortment. This made them realize that they were not getting cookies delivered for the bakery because the manufacturer cut them from the lineup. Russell decided the stores would simply start making the cookies themselves and, as a result, cookie sales went up 38 percent.

"This manufacturer could not get them in stock, so we started baking them fresh," he said. "Our foodservice sales are up 23 percent and the grab-and go is up 32 percent, so we are bucking the trend."

At Plaid Pantry, the company runs out-of-stock reports to identify items that need attention, but also has had success "pooling resources across stores" to avoid out-of-stocks, since inventory levels and consumer demand can vary significantly by location, said Polonsky.

Retailers also can streamline some of the products they offer from manufacturers or distributors. For example, instead of offering five flavors of something, cut it down to three, noted Segal.

The Outlook

Out-of-stocks can vary day by day and week by week and unfortunately, a significant improvement is not expected by the end of 2022, according to Segal.

"I email everyone asking when they see things coming back and you get the same standard letter of, 'We are not sure. We are working on it,'" Russell noted. "Then, all of the sudden, an item will be back. You don't know when anything will go back to normal, so you just do your best to keep items on the shelf."

On the labor front, job openings dropped to 10.7 million from 11.3 million in June 2022, according to the Job Openings and Labor Turnover Survey, or JOLTS, published in August 2022. This marked the lowest one-month drop since the start of the pandemic.