BRIAN BASHAM, HOST: Coming up next on The World and Everything in It: supply chain changes.
Empty grocery store shelves arrived early on when COVID-19 hit. Panicked shoppers bought every roll of toilet paper and bottle of hand sanitizer they could get their hands on. Staples like eggs and flour suddenly became a hot commodity. Grocery stores put limits on the quantity shoppers could take home.
MARY REICHARD, HOST: Now four months later, most of those quantity limits are gone. But some grocery store shelves are still pretty bare.
Lane Cohee teaches supply chain management at Palm Beach Atlantic University, a Christian college in South Florida. He joins us now to help explain the ongoing shortages. Welcome to the program, professor Cohee!
LANE COHEE, GUEST: Thank you, Mary. It’s a pleasure to be on.
REICHARD: So, we’ve been in this so-called new normal for four months. It seems that suppliers should have been able to adjust by now. Why are we still seeing shortages in some areas?
COHEE: Two things to know. First of all, we, we saw a huge shift in terms of the way in which we were buying things and from where we’re buying them. And although that has kind of stabilized because, you know, we are able to go to restaurants to some degree and we are opening schools or planning to do so, it’s still significantly different in terms of the way in which we’re buying. … So, so radically that, um, it’s going to take some time for manufacturers and the supply chain to catch up.
REICHARD: There was a lot of concern early on about meat shortages. Those haven’t been much of a problem. Why didn’t those shortages materialize?
COHEE: First of all, I think the meat producers and distributors were able to do a really effective job at keeping the plants open. … The other thing, the president instituted the Defense Production Act and basically mandating to keep the food plants open and, you know, that certainly had some weight behind it. And, and in unified decision making at the federal level as opposed to state and municipalities trying to do that. So I think that also provided some capability, but by and large, more resilience than perhaps we originally thought in the supply chain, and yes, we did see shortages, but it wasn’t perhaps as extreme as we might’ve been led to believe.
REICHARD: We’ve talked about cleaning supplies. Most people are sanitizing more often, so some shortages there are understandable. I am a bit surprised by the limited quantities of staples like mac and cheese. Is that because people are keeping their pantries stocked, or is something else going on?
COHEE: Well, … if you look at the strain that that industry has been, I think they’re having to produce at about 130 percent what they were producing at this time last year, just because our, our eating and our buying habits are different. And so they’re pulling out all the stops going to 24/7 operations and so forth and attempt to be able to make that a reality. So I think you’re seeing the residual effects of shifting in the way in which we’re buying. And for sure we’re buying more non-disposable items, things that we can stock them on in, on our shelves. I would add that for those of us who are in certain places like Florida and elsewhere, where we’re getting ready for natural disaster preparation. And I think that’s on our minds as well.
REICHARD: There’s limited supply of certain things, but the sting is in higher prices. Are the same forces driving up the cost of food and other consumable goods?
COHEE: Yeah, for sure. I think we saw two and a half, 2.6 percent average growth from April to May, if I’m not mistaken in terms of prices. … Why is that happening? Well, it’s kind of supply and demand. We have higher demand, certainly at the grocers, the grocers are realizing more sales volume, but at the same time, they’re putting a lot more expense. They’re cleaning a lot more. They’re keeping their staff protected, … They’re paying incentives and bonuses in order to be able to keep their staff operating at the levels that are needed. And so more operating costs and more operating costs tend to translate in one way, shape or form to higher prices. So I think that we will continue to see modest levels of price increases as we try to balance this whole thing out.
REICHARD: Should we expect periodic shortages to continue in the coming months? What do you believe the long-term effects of COVID-19 will be on supply chains of the future?
COHEE: Well, … I do expect that there’s going to be continued spot shortages. I don’t think it’s going to be dramatic. Um, unless we were to see a total, you know, something significant, like we saw a few months ago. I don’t think we’re going to return to that. Um, but I do think we’re going to continue to see inefficiencies in the supply for some time probably is just something we’re going to have to continue to deal with as best as we can.
What will it look like in the future? I think this whole thing is going to change the way in which we look at globalization of supply chains. I think we may be at more regional in nature. I think we’re certainly gonna rely less on single sourcing, like we do for China and India for pharmaceuticals and vitamins. Uh, for example, I think we’re going to have more robustness of the supply chain, and I think we’re going to be able to turn faster. … They’re going to be more digitally enabled, but it’s going to take time and we’re going to continue to see inefficiencies, I think, until some of that is realized.
REICHARD: Lane Cohee teaches supply chain management at Palm Beach Atlantic University. Thanks so much for joining us today!
COHEE: Thank you. It’s a pleasure, Mary.