The restaurant industry was severely impacted by COVID-19 pandemic, with operators constantly having to adapt to evolving government guidelines and customer preferences since March 2020. But even as restaurants began to reopen and guests eagerly dined out again, supply chain disruptions related to COVID-19 prevented what many had hoped would be a return to normal.
In addition to the labor shortage, restaurants are facing major disruptions in their supply chains. From chicken wings to cherries to alcohol to lettuce — and even non-food items like takeout containers, glass bottles, and walk-in freezers — operators are learning to embrace flexibility as shipments are delayed or unavailable. Experts predict COVID-19-related supply chain shortages will continue for the foreseeable future, so restaurants today should take steps to prepare and manage these disruptions.
What's behind the restaurant supply chain shortages?
This year's supply chain disruptions have been caused by a number of factors — from increased consumer demand to labor shortages to manufacturing slowdowns that lead to bottlenecks across the entire supply chain. Below we'll dive deeper into some of the key causes, providing extra context to help you better understand and prepare for future shortages.
Increased customer demand
The vaccination rollout and better understanding of how the coronavirus is spread have allowed many businesses to reopen and consumers to go out again. But this has resulted in a sudden surge in customer demand that caught businesses off-guard. After spending months in lockdown, restaurants are now scrambling to replenish inventories, rehire staff, and reconnect with vendors — all while staying compliant with the latest COVID-19 guidelines. Operators and their suppliers are realizing they simply cannot turn on their businesses overnight.
The same staffing crunch that restaurants are experiencing is happening throughout the supply chain — among farms, manufacturing plants, warehouses and distribution centers, and shipping companies. This labor shortage is also due to many factors, including staff concerns about getting sick, the increase in unemployment benefits, the lack of childcare as many schools and daycares remain closed, and stressful increased workloads handled by a leaner staff.
Macro employment issues are also causing supply chain staff shortages. As baby boomers retire from their supply chain-related jobs, there aren't enough younger generations going into those fields to replace them. The industry is also facing a skills gap, as jobs today often require highly technical skills in an increasingly complex supply chain ecosystem.
Shipping bottlenecks throughout the supply chain
Tighter COVID-19 restrictions, factory shutdowns, congested shipping routes, and the recent shift to lean manufacturing (which, among other things, encourages supplier efficiency and profitability by not stockpiling large inventories) have all contributed to major bottlenecks at each stage of the supply chain.
One example is the scarcity of shipping containers. COVID-19 shutdowns and government lockdowns around the world disrupted the transport of shipping containers in early 2020 — meaning shipping companies couldn't send out containers and recipient companies couldn't send empty ones back to be reused. Now as demand has surged again, the lack of containers means manufacturers and other suppliers aren't able to ship their goods on time, causing backorders and delays for customers.
Tips to manage supply chain shortages
While we can't predict what the next shortage will be or when supply chain operations will get back to normal, restaurant operators can develop strategies to manage ongoing supply chain disruptions. Following are six ways for business owners to keep customers happy and continue to operate their business amid this uncertain time.
1. Streamline your menu
With their inventories in flux, many restaurants are offering smaller menus to simplify kitchen operations and better manage guest expectations. Are there dishes on your menu that require a long list of ingredients, or use items from certain suppliers that you haven't been able to count on lately? Do you offer seven sandwich options when most customers order the same three? Make your staff's jobs easier and avoid frustrated customers by streamlining your offerings and 86'ing unreliable dishes.
2. Make menu substitutions
If you can't bear to pull a dish from your menu, another strategy that many restaurants have undertaken is finding substitutions. For example, Amanda Cohen, chef and owner of Dirt Candy in New York City told CNN that she had to substitute golden or red beets for her usual eye-catching candy cane beets. If you cannot find a substitute ingredient that allows you to maintain the integrity of your dish and stay true to your brand, consider replacing it with another dish entirely. While these changes may feel disappointing in the moment, remaining flexible will enable your business to continue to thrive during today's uncertainty.
3. Overcommunicate to customers
As much as you can, proactively communicate to customers when you know that certain menu items won't be available. Add a banner to your website, place signage in-store, and post on social media to let guests know about your current menu situation. Importantly, be sure to keep your dine-in and online menus (on your own website and your third-party delivery platforms) up-to-date so customers don't place orders for items that are no longer available. Manage guest expectations about wait times for dine-in seating and delivery or pickup times. Finally, ask your customers for their patience and let them know you're doing the best you can with a limited staff and unpredictable supplies.
Unfortunately, not all customers will be understanding, so if someone leaves a negative review or social media post, respond as soon as possible to show other customers how you're on top of the situation.
4. Focus on profitability
Now is a great time to conduct a menu engineering analysis to help you identify your most popular and profitable items. Understanding which dishes drive the most sales — and which are dragging down your profit margins — will help you make data-driven decisions about whether to raise menu prices based on supply chain shortages, launch promotions to highlight your most profitable items, or swap out dishes for more bottom line-friendly alternatives.
5. Diversify your suppliers
While it's important to build strong relationships with your suppliers, it may be a good idea to research additional suppliers so you have options the next time you're in a pinch. Some restaurants have even started to place multiple orders for the same ingredients across several vendors, knowing that some deliveries will get delayed or won't arrive at all. You can even try developing direct relationships with local farms — and then highlight those ingredients on your menu to reach eco-conscious customers.
6. Rely more on your refrigerator and freezer
While chefs agree that fresh ingredients are ideal, take advantage of your refrigerator and freezer to ensure items last longer. Nadav Mille, who owns a Mediterranean catering company in Vermont, told CNN he purchased a new freezer in anticipation of supply chain shortages.
Optimize your storage space and clean out those long-forgotten shelves to make room for more inventory when you can't rely on getting fresh produce and other perishable items delivered every day.
In supply chain shortages, focus on what you can control
Supply chain shortages across the restaurant industry have caused headaches and frustrations for both restaurant staff and their customers. As these disruptions unfortunately won't be going away anytime soon, the best thing that you can do as a restaurant operator is to focus on what's under your control. That means creating a flexible menu that can easily scale up or down, brainstorming ingredient or dish substitutions in advance, and maintaining ongoing communication with your staff, suppliers, and customers.
For more operational tips to help restaurants thrive during the pandemic, watch our on-demand webinar Money Management for Business Owners.