Experts break down the tensions of supply chain demands

But what is a supply chain and how did it happen? Swan Ray, a specialist in supply chain development with regional sustainability partnerships with the University of Minnesota Extension, shared these insights at the Economic Alliance Coffee Conference, a conversation at largely regular distance between Wadena County leaders on November 15. Ray works with crops that the university breeds such as barley, oats, camelina, and hemp, and has previously worked with Whole Foods Market and the National Cooperative Grocers Association.

“In commerce, a supply chain is a system of organizations, people, activities, information and resources involved in providing a product or service to a consumer,” noted Ray at the virtual meeting. Each company has its own supply chain to manage in the short and long term, which impacts the supply chain as a whole. For example, a company can have parts delivered to its factory, these parts are transformed into a specific product based on the internal system, the products are transported and sold.

Swan Ray, Supply Chain Development Specialist with Regional Sustainability Partnerships with Extension University of Minnesota. Contribution / Extension of the University of Minnesota, 2021

Within a supply chain, the goal is to minimize waste. Companies don’t want to throw away products, create too many products, or have their employees redo work.

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“One thing… that a lot of people think of when they think of the supply chain is that they just think of transportation and logistics; However, supply chain management is production, ”Ray said. “Supply chain management is customer service and information flow. It’s very, very broad.

– Swan Ray, Supply Chain Development Specialist with Regional Sustainability Partnerships with the University of Minnesota Extension

Consumption habits impact supply chains, such as how much of a certain product people buy. This demand helps businesses know how much product will be needed. Ray said consumers decide what to buy based on what’s best for them, whether it’s buying wholesale or focusing on the necessities; and companies aim to increase shareholder profits by increasing sales or decreasing production costs.

When the pandemic really hit the region in the spring of 2020, there was a “demand shock” as people bought additional products and bought different products depending on the funds they had available. Both have altered demand and disrupted the supply chain, Ray said. And as companies have worked to adapt to the new models, there have been short-term supply chain failures.

“Supply is really just a balance between that demand over time and the search for the right level of production for consumption,” Ray said. “It takes a considerable amount of time for production to adapt.

When products and services are available, why are they not reaching consumers? Ray sees the shortage of truck drivers as the “real problem” in addition to the ships waiting at the port. With demand changing often and drivers having to wait long periods of time at the port for their trucks to be filled, it is “quite difficult” for trucking companies to constantly adapt, said Ray.

“When it comes to the local supply chain, convenience stores, small grocery stores and even larger grocery stores, there’s a pretty strong network there. If there is a problem, normally as a business we have a 98% fill rate… the problem comes before the wholesaler and local distribution methods, ”said Wadena County Commissioner Murlyn Kreklau . He worked for 46 years at Mason Brothers, which ships to five states. “If the company can get it, they distribute it, they have trucks going around anyway, and they have the network to do it. The problems extend beyond the distributors that serve most of Minnesota; that’s a bigger problem than when something isn’t available, it’s because they can’t get it.

Haley Dietman is loading a candy order from Mason Brothers in Wadena in March 2020. Rebecca Mitchell / Pioneer Journal

Haley Dietman is loading a candy order from Mason Brothers in Wadena in March 2020. Rebecca Mitchell / Pioneer Journal

Businesses, including agricultural businesses, also encountered problems securing a railroad seat or having enough trucks to transport produce. Availability is a factor that influences how commodities are moved globally, nationally and across the region.

“I expect that in Ag, food prices will continue to rise. Input costs go up directly for the farmer and therefore they will need a higher price per bushel to make ends meet, ”said Cory Detloff, director of Central Lakes College Ag and Energy Center and Farm Business Management, in a message. “Corn alone will cost more than $ 125 / acre more to grow in 2022 than in 2021. This cost will have to be passed on to the consumer. “

The labor shortage in all industries means that some jobs cannot be completed or within a shorter time frame, but Detloff also wonders how students who choose a job over college will impact the long-term supply chain. Although Ray said she hasn’t seen a drop in enrollments, if jobs pay more than before, young workers might choose to work.

“As a university we have to look at the way we educate a little differently, especially in vocational and tech institutions right now, we really see that demand there,” Detloff said. “One thing we’re focusing on at Central Lakes College is trying to get people out faster and prepare them to enter the workforce.

The federal mandate of the COVID-19 vaccine for private companies with more than 100 employees will also affect the number of workers available.

On the logistics side, supply needs such as the different masks required are changing the way companies store products. At Tri-County Health Care, the inventory system was well established and items arrived on time. During the pandemic, the hospital purchased items earlier and is looking for a space to store the items, President and CEO Joel Beiswenger said.

“What we didn’t anticipate, and I think it’s going to create a new… challenge for businesses, is that you have to invest a lot more operating capital into inventory management,” Beiswenger said. “One thing COVID has taught us, and the challenges in the supply chain right now, is that we had better source our supplies. “

– Cory Detloff, Central Lakes College Ag and Energy Center and Director of Farm Business Management

Fresh produce, or cold chains, has long been “particularly strained” by a lack of storage, Ray said. In July 2021, Mason Brothers expanded its overstock grocery storage in Verndale, Minnesota, with the intention of creating a refrigerated space there and expanding freezer space at its Wadena site. They stock a lot of popular products to try to meet the next demand.

“Keeping inventory and keeping merchandise will be a constant throughout this decade,” said Ray. “There are really no easy answers to solving supply chain issues, and COVID has highlighted some vulnerabilities and some opportunities as well. “

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