Dog food, supply chains and how COVID drove new challenges
As consumers searched frantically for toilet paper, paper towels and other essentials in the spring as store shelves lay bare, logistics networks faced logjams and disruption the likes of which they haven’t seen in years, if ever at all.
Once the initial disruptions from COVID-19 faded away and supply chains adjusted, a potential shortage of another essential came to light: dog food.
Yes, pet food suppliers saw a sudden surge for their products as Americans, suddenly stranded at home, adopted pets at dizzying rates. A TD Ameritrade survey released in August and conducted between April and June found that 33% of Americans considered fostering or adopting a pet. Many shelters across the U.S. reported no animals for adoption in the spring and early summer, and the ASCPA reported the number of animals entering shelters between March and June dropped from 840,750 in 2019 to 548,966 in 2020.
Clearly, Americans loved their pets like never before and that meant a need for increased production of pet food and related pet products. It created an unexpected strain on the pet product supply chain.
“When COVID hit, everybody went out and bought a dog,” JJ Lewis, vice president of enterprise sales for GlobalTranz, told FreightWaves. “What that did was it brought a lot of people to the stores that had never bought pet supplies.”
Lewis said one of GlobalTranz’s customers – a large pet product supply company – saw a 300% increase in freight volumes. The company couldn’t supply the necessary product out of its two existing plants and had to start sourcing from other locations, and that placed pressure on GlobalTranz to secure capacity in locations it hadn’t previously.
“People were buying more pet food, but you didn’t hear that at the beginning of the pandemic when people were buying toilet paper,” Lewis said. “The pet food example shows how freight lanes can change [quickly].”
Lewis said a similar situation occurred with butter. While baking season in the fall/winter typically brings an uptick in butter volumes, a sudden surge earlier in 2020 because of COVID added new challenges for sourcing capacity.
“People are at home and they are starting to cook more for themselves,” Lewis said. “One retailer [typically] orders three truckloads of butter every week, but now they were ordering 10, 12 truckloads to keep up with demand on the shelves. It really hits home at the manufacturing level, at the shipper level, as they try to keep up with that demand. From a logistics standpoint, we are trying to keep up with that capacity.”
Pet products and butter are just two of the products that have seen changes to their supply chains because of COVID. The pandemic has altered supply chains in many other ways as retailers adjust. Some, Lewis said, are overstocking goods to avoid in-store shortages.
“They don’t want to get stuck with no product, [so they are saying] let’s ship the product while we can,” Lewis said. “Shippers are trying to get product out of their warehouses as fast as possible and into stores.”
Black Friday is another example, Lewis said. Many retailers kicked off Black Friday sales, traditionally the day after Thanksgiving, on Nov. 1 and that has meant prepositioning more inventory to distribution centers and even to stores ahead of normal patterns.
A customer’s CEO told GlobalTranz that as long as he “can buy product from overseas and get it into stores, he’s going to do that as fast as he can,” Lewis said. “We’ve never seen anything like this from a market volatility perspective.”
According to a recent McKinsey report on the 2020 holiday season, 60% of consumers have reported changing their shopping habits because of COVID. In the U.S., 73% of those consumers expect to continue that changed behavior, with 37% expecting to shop more online this year.
That dovetails with what GlobalTranz is seeing from customers.
“We’re talking to more customers about final mile – customers that have never delivered in that space before,” Lewis said.
Periscope’s Retail Reimagined report found that 40% of consumers switched brands during the pandemic, and that too has altered where capacity is needed.
The result has been a year like no other, and where it goes is uncertain. Lewis compared 2020 and predictions for 2021 to the years of 2017 and 2018.
“When I think of the markets we’ve seen, and COVID is its own animal, but ’17 and ’18 when we had the hurricanes … ’20 and ’21 seem very similar,” he said. “I think there will be an exhale after Christmas … but people are at home, they’re not traveling, so they’re buying on Amazon.”
Lewis said there could be a “whiplash effect” once the economy fully reopens, creating even more market volatility.
“Market volatility is good for transportation, it’s good for 3PLs and brokers,” he said. “We just need to work through it and be that resource. Shippers are evaluating their supply chain partners. I think the brokers and carriers that have really partnered with their customers will be first in line for rate increases. … Shippers may not try to turn [over] their entire network for an RFP.”
Lewis added that a further capacity crunch could occur, and that’s where relationships will matter.
“Shippers that are good shippers will be able to navigate through [but] maybe at a rate increase,” he said.