Jim Warren, chairman of BEMA, has seen the baking and snack industry overcome dozens of challenges during his career, but he hasn’t quite seen a business environment like today with all the disruption in the supply chain.

Baking & Snack asked Mr. Warren, who’s also vice president, Exact Mixing, at Reading Bakery Systems, to share his perspective on the current business environment and how various sectors of the industry are dealing with a host of issues.

For more on supply chain disruption, check out the latest operations report in Baking & Snack’s February issue.

Baking & Snack: How is supply chain affecting the industry and how are companies managing shortages and delays?

Jim Warren: Right now, there are three types of shortages in the baking industry: raw materials to make products, components for equipment and workforce. Historically, individual shortages have occurred, but this is the first time we are seeing these three shortages at the same time. The result, as we all know too well, is creating chaos in the industry. 

How is it creating that chaos?

Take your local grocery store, for example. In the past, larger national brands would have many SKUs on the shelves from different products to different flavors to different sizes of packaging. Consumers can still purchase goods, but they don’t have the extensive choice they did three years ago. There are even bare spots on grocery store shelves that were coveted retail locations not too long ago. While all three factors are contributing to these problems, it does appear that labor may be the greatest challenge today. Even so, these three shortages don’t even begin to address the escalating cost of goods and services today. Currently, and unfortunately, the only industry response seems to be longer lead times, higher costs and less selection. Hopefully this will change soon.

How has the situation alleviated or gotten worse in recent months?

We are beginning to see some softening in the areas of equipment components and ingredients. The workforce shortage continues to be a concern at all levels. Most forecasts do not see anything near normal until fourth quarter of 2023, if not later, as the dynamics of the situation isn’t clear.

How is it affecting the industry from an equipment perspective?

The three key shortages I mentioned are affecting equipment suppliers in several ways. New equipment delivery time has increased anywhere between 50% and 90% in the last two years for most suppliers. Most problems have had to do with components, especially controls components. Similarly, the timeline for electrical components has not improved either. Electrical component manufacturers have said they don’t expect much improvement in 2023. The good news is that equipment system suppliers have gotten better at managing these issues. Now, when they need one item, they’ll order four, then put three in inventory. Suppliers know that electrical components and controls need to be the first parts ordered when a new equipment order is received. When they can’t source a needed part, they will be creative, and think outside the box. While other materials like steel are also experiencing long delays, those extended material timelines tend to fall within the extended electrical components delivery timeframes. 

What other changes do equipment suppliers face?

The real challenge for equipment builders is the skilled worker. Often second shifts can’t contribute simply because there isn’t a machinist available to operate a lathe on third shift. General labor seems to be more available, but it is at a higher cost.

How can automation assist bakers with their labor woes?

Machines and systems are now designed with automation and flexibility in mind. Bakers want to run production lines without having to rely on a large workforce, and they want to be able to run a variety of products on one system. 

How are disruptions in ingredient supply affecting bakers’ ability to meet customers’ orders?

A bakery is very dependent on the labor force available in their area. A reduced labor force limits the ability to manufacture finished goods. Often the baker must adjust production schedules on the fly due to the varying number of employees available on a given day, which negatively effects bakers’ ability to produce products and fulfill orders. It’s become a ship what you can, when you can mentality, realizing that your competitors are experiencing the same problems.

How has the supply chain affected new product development?

I would venture to say there is an indirect effect on developing new products. Prior to the pandemic, new product development was vital to the baker to keep the consumer’s focus and loyalty. Most companies aren’t as focused on developing new products, but rather trying to fulfill orders for their best-selling products.

What is your outlook for the supply chain and what does BEMA Intel and other research suggest?

Our vendors anticipate 2023 to be like 2022 with conditions beginning to improve sometime in 2024. BEMA intelligence tends to support these comments, notwithstanding any unforeseen global events. Yes, there is softening of some commodities pricing but even if prices decrease significantly, the reduced prices will still far exceed those of 18 to 24 months ago. Also, commodity cost reductions will be slow to reach the bottom line as both manufacturers of finished products and equipment have not passed all cost increases on to the end users.

Editor’s note: Learn more about how today’s challenges are impacting capital investing in Baking & Snack’s Capital Spending Insights for 2023 webinar, featuring insights from Jim Warren, Reading Bakery Systems, Mike LaValle, Intralox and Jason Stricker, Shick Esteve. Register Here.