The vulnerabilities of a long-distance supply chain have become very evident over the last couple of years. Covid revealed the weakness of this model as manufacturing disruptions were compounded by disruptions to supply chain transportation.
While United Natural Foods (UNFI – a grocery store supplier) recently reported a slight sequential improvement in fill rates (improving +10% over the last 3-4 periods), they also reported that manufacturers may require more than a year before attaining full capacity. Fortunately, UNFI’s staffing levels are improving both in its distribution centers & its driver force (improving its on-time delivery performance).
All the same, inflation and supply chain disruptions have been very hard on smaller independent grocers who lack scale. Even larger grocers are pursuing scale with merger rumors between Kroger & Albertsons. This explains why UNFI has been working so hard to help the 32,000 retailers it serves (including mostly smaller players) negotiate better prices with the manufacturers while also helping them develop promotions to drive unit sales. This is good, but we especially like the company’s effort to shorten its supply chain via a new agreement to co-locate Square Roots’ indoor farms on-site at select UNFI distribution centers. The first 20,000 s.f. Square Roots produce farm will open at UNFI’s Prescott, Wisconsin facility in 2023. This agreement further helps local grocers by providing year-round access to fresh, locally grown food that provides a point of competitive distinction relative to the larger players.
American innovation like this is the way out of the problems that were revealed to us by covid if we will simply persevere to find win/win solutions.