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05/10/2021

Supply Chain Strains Grocer Relationships

Numerous supply chain challenges are straining the relationship between grocers and suppliers, as late or incomplete orders pile up across the retail sector.
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grocery aisle

The order hiccups were pardoned during the Covid-19 pandemic, but now, a year later, retailers are pushing back against suppliers with fines, according to The Wall Street Journal. Many grocery stores are still unable to meet demand for cleaning supplies that have been desperately needed during the pandemic.

Executive Summary

The relationship between grocers and suppliers has recently shifted, with more businesses attempting to resume normal operations as more Americans are vaccinated against Covid-19 and feel more confident returning to work, stores and restaurants. Retailers are putting pressure back on suppliers to overcome pandemic-related hurdles in order to meet consumer demand.

 

Walmart, the world’s largest retailer, told its suppliers in September that 98% of orders needed to be on time, in full, otherwise the retailer would charge 3% of the cost of the missing items. Similarly, whole restaurant food distributor Sysco put new fees into effect for its suppliers for “partial orders, billing discrepancies and missing data such as nutritional information,” the WSJ reported. 

“We believe all our supplier partners subject to these policies have the capabilities to meet them,” Sysco spokesperson Shannon Mutschler told the WSJ.

Suppliers are facing their own struggles, from higher freight costs, a mounting labor shortage and supply challenges. Those struggles are impacting all categories across the food sector. The retailer fees are adding more costs for suppliers--and increasing the cost of goods everywhere.

Restaurants are facing the same issues, from higher costs to lack of supply. In addition, some struggling restaurants haven’t even paid for orders placed before the pandemic began, hurting suppliers.

The remaining supply chain challenges reveal that the Covid-19 pandemic’s impact is likely to continue for some time, until manufacturers can meet the pent-up demand. However, higher costs are making that even more difficult.