Grocers Weren't Prepared for the Pandemic
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What is the main topic discussed in this episode?
Here's your Money Briefing. I'm J.R. Whalen for The Wall Street Journal.
Why were grocery backrooms intentionally kept lean before the pandemic?
For years, grocery stores have been using computer programs to optimize their ordering so they didn't have to store a week's worth of supplies in the back room. And then the coronavirus hit.
Many retailers are kind of reverting back to the over-the-phone human judgment calls and conversations, and they're making adjustments to their plans in real time.
That's Wall Street Journal reporter Annie Gasparro. Coming up, she'll explain how the pandemic has forced grocers to rethink their business models and go old school.
If you tried to go grocery shopping over the weekend, you probably saw long lines and potentially a lot of empty shelves, especially in the cans and dry goods aisles. You might wonder why they don't just restock from their backroom storage.
How did grocery ordering algorithms fail to predict pandemic demand surges?
It turns out they don't have that much in there. And that's actually intentional. Wall Street Journal reporter Annie Gasparro covers the grocery industry, and she joins us to explain. So, Annie, a lot of this comes down to how much supply grocery stores have on hand.
When did retailers switch from algorithms to human decision-making during COVID-19?
How has that changed over the years?
The retailers and everyone along the supply chain has been working so hard to eliminate any excess in the supply chain. They figured out that having extra inventory just sitting there is money that's being wasted. So they decided to eliminate that and they cut all the slack out of the system and that boosted profits in the last two decades, but it did not help prepare for a surge in demand like what we've seen through this pandemic.
How does the nationwide scale of the pandemic differ from regional disasters for supply chains?
Now retailers typically rely on complex algorithms to help them determine how much they should order to stock their shelves. Has that been turned off as consumers have been clearing the shelves?
Many retailers are kind of reverting back to the over the phone human judgment calls and conversations and they're making adjustments to their plans in real time. It's no longer the super sophisticated algorithms that are doing the demand forecasting because the pandemic really proved that they were not sophisticated enough to predict what this would cause.
How does this compare to past natural disasters?
In the past, when there's something like a hurricane or a blizzard, it's in a certain region.
What logistics changes are truckers and distributors making to speed grocery deliveries?
So all the resources in the rest of the country are just diverted to serve that region that's impacted. And the nationwide scale of this is just something that our supply chain could not withstand. The good news is that it didn't entirely collapse. It's still working and factories are still running and trucks are still driving and food is still getting put on the shelf.
How are food makers and grocers balancing ramped-up production without creating excess inventory?
It's just not as fast as the demand.
This current ramp up in store chains ordering products must put a lot of pressure on the trucking industry.
The truck drivers are having to increase their capacity and they also are changing how they deliver products. Instead of going to the retailer's distribution center, some of them are going straight to the stores themselves or others are going from the plant to the retailer's distribution center and they're skipping the... manufacturers' warehouses. So there are links in the supply chain that are being cut out to serve, but still there are long lines of trucks waiting to unload.
And how are food companies improvising in the process of getting their products to stores?
The food makers are focused on ramping up production in any way they can. And for some companies like General Mills, they have been able to make more products by cutting out the extensive varieties. So instead of making 10 types of Progresso chicken noodle soup, they would make one or two types of Progresso chicken noodle soup. So that can be different flavors and varieties, but they are reducing the different kinds because Every time they change a recipe or change a size, they have to change over the production lines, and that's time that they don't have.
And what are the concerns among grocers about having to dramatically ramp up their orders, but also trying to find the right balance?
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:09
2
Why were grocery backrooms intentionally kept lean before the pandemic?
0:09–0:59
3
How did grocery ordering algorithms fail to predict pandemic demand surges?
0:59–1:14
4
When did retailers switch from algorithms to human decision-making during COVID-19?
1:14–1:46
5
How does the nationwide scale of the pandemic differ from regional disasters for supply chains?
1:46–2:36
6
What logistics changes are truckers and distributors making to speed grocery deliveries?
2:36–3:00
7
How are food makers and grocers balancing ramped-up production without creating excess inventory?
3:00–5:04
Speakers
2 identifiedMore from WSJ Your Money Briefing
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