What does a restaurant that specializes in pizza do when cheese and flour prices skyrocket? How far ahead should a wholesaler buy copper wiring when it has no idea when a shortage will end?
Disruptions in the global supply chain have caused headaches for consumers in the United States since the onset of the COVID-19 pandemic.
Supply issues are a business problem, too. Local and regional companies are feeling the pressure of rising prices and diminishing resource availability, and they are searching for ways to stabilize production and profit now and in the coming months.
A price problem
Turoni’s Pizzery & Brewery, which has two locations in Evansville, has yet to feel a severe effect from the slowdown, at least when it comes to the availability of items on its menu. Brian Mallow, the manager at Turoni’s main street location, said the restaurant’s food purveyors have still been able to purchase supplies, or they’ve been able to find it somewhere else — an advantage of ordering the majority of its items from local and regional manufacturers.
The real change has been in the prices of those items, which Mallow said has increased significantly. Meat, especially.
“Steak prices are way higher than we’ve seen before,” Mallow said. “Chicken’s almost twice what we used to pay.”
Chicken supply was down nationwide through May, but Mallow said he’s noticed price hikes all throughout 2021. At first, Mallow said, price increases were just “minor” — in line with the normal fluctuations Turoni’s buyers typically see in their market. The difference with this spike, though, was that it kept increasing without end.
“This trend was different in that we haven’t had much relief,” Mallow said. “It’s all just been preparing for the next hike.”
The slowdown hasn’t necessitated Turoni’s raising its prices yet, he said, but a shortage in a few key ingredients could change that.
“As long as we can make pizza, we’ve got an avenue (to profitability),” Mallow said. “When we start seeing problems with flour or yeast or cheese, then we’ve got something to worry about.”
The diminishing availability of essential ingredients is causing a trickle- down effect that’s squeezing businesses in the food and beverage industry, as well as their suppliers.
Haubstadt-based Dewig Meats has packed, processed and distributed chicken, ground beef, pork and sausage around Indiana since 1916. Customers include Gerst Bavarian Haus and Schymik’s Kitchen on the west side of Evansville.
Owner Dean Dewig said the company hasn’t had much issue regarding meat availability, but that’s because they own their own cattle and have long-standing relationships with local hog farmers. But when it comes to the seasoning ingredients for products like baloney or summer sausage, it’s been tough sledding.
Fearing a shortage, the company stockpiled enough seasonings to last up to four months. Before, they’d keep a month’s worth of supplies in their warehouse.
“We haven’t run out yet,” Dewig said. “But I’m sure we’ll run out of a product or two in the future, just because our crystal ball wasn’t clear enough.”
Dewig said he’d recently gotten notice that the price of corrugated cardboard, which the company uses to ship and store its meat, would be increasing starting on Nov. 1. The prices of other packaging items have gotten expensive, as well — nearly double what they were before the onset of the pandemic, he said. This has led to a trickle-down effect that is pushing prices higher across the board.
“In the last year, in the majority of our process products the meat cost isn’t the number one contributor to what the cost of the product is going to be,” Dewig said. “Our overhead has went way up, which means our insurance and our packing supplies and all of our seasoning and everything that we put into it is through the roof.”
And while Mallow is hopeful his restaurant will stop feeling the effects of the slowdown soon,Dewig isn’t as optimistic. “I think it’s a lot more than an interruption,” Dewig said. “I think it’s gonna take more than a couple weeks to fix it.”
The question of when it will end — some experts predict October of next year — is also on the minds of the regional buyers and manufacturers who work with places like Turoni’s and Dewig Meats.
Buyers under pressure
Greg Lindsey, the regional buyer in southwest Indiana and Kentucky for electrical wholesaler Gexpro, which has a shop in Evansville, expects the slowdown to continue through at least the middle of 2022. This time last year, he said, he thought it would’ve ended this past summer. Lindsey said the slowdown has no precedent in his industry. Sure, a certain manufacturer might struggle or a particular product might get recalled, but nothing with this great a scale. “I’ve been doing this for 40 years,” Lindsey said. “I’ve never seen anything close to this.”
One of Lindsey’s main jobs is to manage fill rates for each of the Gexpro stores he buys for. That requires him to look at each product the store carries, how much or how little the store has in stock currently and, if an item is missing, whether or not that’s an inventory issue or a supply chain issue.
For Lindsey, the goal is to stay ahead of issues like this and adjust his buying system when necessary. That includes buying items as far as six months in advance, just in case the manufacturer experiences a shortage. Like Dewig, Lindsey equated advance purchasing with trying to tell the future by looking through a crystal ball.
“If you’re selling 1,000 of something a month, you may buy 6,000-to-10,000 of it now if the manufacturer will let you,” Lindsey said.
Household items like light switches, which Lindsey said he used to be able to place an order for and get within a week, have been on back order for most of the year. Now, it takes three or four months for an order to ship.
Items like fuses, semiconductors and the copper wiring that runs all through your house have been on back order since spring, and prices have jumped seven or eight times the amount they were pre-COVID, Lindsey said.
Lindsey used PVC piping as an example of massive price inflation. Pre-COVID, Lindsey said, a 10-foot section of PVC piping might cost around $12. Now? $75.
Why the inflation? And why are manufacturers struggling to fill orders on time?
Lindsey said it’s a multipronged problem that starts with shipping and work-production delays along with transportation issues brought on by the pandemic.
And the worker shortage.
Supply chain disruptions stemming from a diminished availability of competent workers is affecting a broad range of businesses, both on the demand side — for businesses such as Turoni’s — and on the supply side.
“In a lot of places, manufacturers are just trying to get people to work,” Lindsey said. “When they do get people, they’re not experienced, and that’s when you get stuff like shipping errors.”