If you’re looking for a perfect storm of how supply and demand have left us all struggling, look no further than the humble chicken wing.
From canned corn to coffee beans, it has been increasingly difficult to get ahold of certain ingredients and products across the industry. Restaurants have seen everything from out-of-stock flour and yeast to a shortage of ketchup packets. Earlier this year, Burger King had to delay the launch of its new chicken sandwich because of a pickle shortage. Despite all this drama, restaurants are thinking fast to plan around issues when they arise.
If you’re looking for a perfect storm of how supply and demand have left us all struggling, look no further than the humble chicken wing. A pizza party staple, chicken wings saw a massive spike in popularity as people were forced to stay home during the pandemic. Unfortunately, the result is that 16 months after the pandemic began, chicken wings are becoming difficult to source.
According to the USDA’s Livestock, Dairy, and Poultry Outlook report for May 2021, chicken production during Q1 was down 3 percent compared to 2020. Making the issue worse is chicken being held in cold storage is at its lowest levels since November 2014.
“Chicken wings, which have been in high demand as a takeout item during the pandemic, are at their lowest level in cold storage since 2012,” the report added. “As the restaurant sector begins to reopen, in the short term, supplying the growing demand for chicken will be a challenge.”
Restaurants and eateries are getting creative to keep guests fed and maintain profit margins, but the impact is widespread. From the local American Legion ditching wing night in favor of clams to Wingstop launching an entirely thigh-based concept at all 1,400 of its U.S. locations, due in part to supply concerns, the current shortages will likely have a lasting impact through the end of the year.
Supply and Demand: Why the Food Supply Chain Matters
Like any good supply chain, several forces dictate how food gets from manufacturers to restaurants. Supply and demand are the two biggest factors. When one outweighs the other, it can quickly throw everything out of alignment.
When demand for items like flour and yeast, and later chicken wings, increased, retailers increased their orders to meet the growing demand. The run on these items created a bullwhip effect that moved from consumers to retailers, who then ordered more products to keep up with the higher demand. Wholesalers, confronted with larger orders from retailers, then made even larger orders to keep up with what the retailers wanted, putting immense pressure on manufacturers to produce.
The problem with the bullwhip effect, especially during the COVID-19 pandemic, is that it can totally derail the supply chain, both in terms of sheer volume and in production time. Food production needs to increase to meet higher demand, and that takes time. The longer turnaround time means that in some cases, like chicken wings, current supplies get strained. Combine this with more product moving from facilities and not enough truck drivers to move it, and eateries are left without products to sell.
Fruits and vegetables are often impacted by supply chain issues because of their seasonality. For example, the supply of oranges is down this year, thanks to bad weather and an orange-killing disease ravaging Florida’s crops. As a result, the state is on pace to produce fewer oranges, leaving the market to bear the brunt of the shortage.
In terms of chicken wings, the process is similar. Americans made a run on grocery stores right as restaurants were beefing up orders for takeout and delivery. As the country reopens, restaurants are stressing supply chains with an influx of new orders that leave distribution centers, manufacturers, and growers overwhelmed.
How Restaurants Can Avoid Food Shortages
Restaurants feed millions of people every day and rely on everything from meat processing plants, farmers, and delivery truck drivers to their own managers, cooks, and servers to get everything right.
Kevin Rood, Director of Product for PAR Data Central, says restaurants can avoid many issues associated with ingredient availability by keeping better tabs on the menu items they keep in stock.
“By being able to accurately predict future usage, combined with on-hand inventory levels in the restaurant, you can order accurate quantities from food suppliers or inform them in advance to get ahead of shortages,” Rood said. “If your mainline suppliers are expecting shortages, you can look for alternative local suppliers, or adjust the menu to promote alternative items, changing the product mix to drive sales of items that aren’t in shortage.”
However, Rood is quick to note that coming out of a food shortage unscathed requires diligence. Restaurants need to maintain accurate inventory levels to prevent the bullwhip effect from occurring in the first place.
It might seem like a simple task, but keeping accurate inventory levels is something many restaurants struggle with. Whether they’re fumbling with manual spreadsheets and graphs, miscounting their ingredient usage, or simply not taking an inventory at all, those mistakes quickly add up. Rood says implementing a back-office inventory tracking system that is easy to set up and maintain reduces errors and lessens stress on their suppliers.
“By tracking inventory, a back-office system like Data Central can accurately predict how much of each inventory item will be consumed in the future, uniquely by day and by restaurant,” Rood explained. “The software is able to use item-level historical sales data and week-over-week comparisons to generate accurate forecasts uniquely for each restaurant, as opposed to using static par values or using a summary-level sales forecast that doesn’t have product mix level granularity.”
The Hidden Costs of Food Supply Issues
No restaurant wants to 86 a menu item simply because they don’t have enough ingredients available to make it. Today’s guests expect convenience and accuracy at a great price, so if they hear, “I’m sorry, but we’re out of pickles,” that likely isn’t going to cut it. Accurate inventory measurements keep everyone in the loop so operators, owners, and cooks can get the ingredients they need when they need them.
“Under-ordering can leave your guests high and dry, where you run out of ingredients to satisfy the demand,” Rood said. “Worst-case scenario, if your menu isn’t updated to reflect what’s out of stock, guests try to order items for which you’re out of the ingredients and you run the risk of losing the guest permanently,” Rood explained.
Inventory isn’t only about not having enough of something, either. Restaurants can easily order too much of an ingredient, expecting it to sell out, but it never does.
“Over-ordering will eventually lead to waste if you aren’t careful,” Rood noted. “If you don’t use all the product and it expires, you’re just throwing money in the trash.”
Despite ongoing food system shortages across the United States, restaurants not only can weather the storm but improve their bottom line. Investing in the right technology, including a robust inventory tracking system, helps reduce the number of mistakes that occur and helps maintain more accurate stocking levels over time.
While that isn’t to say keeping better inventory will make it easier to find chicken wings, it will give you a better idea of how and when to pivot if you need to.
Take control of your food supplies and improve your bottom line with PAR Data Central. Click here to learn more!
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