The number of confirmed COVID-19 cases in the U.S. consistently declining in recent weeks has led many states and municipalities to start loosening restrictions for restaurants and other foodservice operations. Reopening, though, has unveiled another problem produced by the pandemic: equipment and supplies-related supply chain issues affecting everyone in the foodservice industry from manufacturers to reps to dealers to end-users.

First, the good news. Foodservice equipment and supplies dealers from around the country continue to report an uptick in business over the first ten days or so in March. It’s no coincidence this is happening as COVID-19-related restrictions on restaurants and other forms of foodservice continue to loosen across the country. Simply put, when the dining rooms open, the business gets better for the operator which, in turn, means it improves for other members of the supply chain.

“It really feels like as soon as the weather turned the mood in the country turned. That has buoyed spirits so much,” says Brad Wasserstrom, co-president of The Wasserstrom Company, a Columbus, Ohio-based foodservice equipment and supplies dealer. “Everyone knew there would be this kind of pop we just didn’t think it would be now. We are not back at 2019 sales levels by any means, but growth is growth.”

Indeed, growth is growth and given how hard the industry was hit last year, nobody in their right mind will turn down the opportunity to grow at the moment. With operator growth, though, comes the increased need for everything from china, glassware and flatware to light and heavy equipment. And this is where the bad news comes into play. Getting these basic items will take much, much longer than is usually the case. That’s because in addition to dealing with a global pandemic, the foodservice industry finds itself dealing with a global supply chain crisis.

Dealers continue to report sporadic and wide-ranging supply chain issues almost across the board. Some dealers report lead times on specific products have roughly doubled, going from 4 to 6 weeks lead time to 10 to 12 weeks. “It’s longer if the equipment has a microchip in it,” Wasserstrom adds. “Large equipment now may come with a four-to-five-month lead time.”

What’s more, this issue is not exclusive to any one product category. “I am hearing about this in every category other than Jan/San and PPE which have bulked up already,” Wasserstrom says.

“This is our next challenge from COVID,” Wasserstrom points out. “We have very long supply chains because we have off-shored so much of our products. And you can’t assume those countries are in the same state with COVID as we are.”

What’s a dealer to do? “As a dealer, I can do my job, but my limiting factor is when is the equipment available, shipping issues, etc.,” says Michael Keck, president of Concept Services, an Austin, Texas-based foodservice equipment and supplies dealer. “We just have to be vigilant and not forget to order something.”

These challenges led some dealers to alter their purchasing patterns in anticipation of trying to meet customer needs. “In our company, we are looking at what items we should bulk up on to insulate ourselves,” Wasserstrom says. “We are buying six months of supply at a time now rather than buying weeks in a time.”

The biggest challenge for all the members of the supply chain is the seeming randomness of some challenges. “The manufacturing community is doing the best they can, but they often don’t know what to say,” Keck says. “Today they will address one problem and tomorrow another one will pop up that will require their attention. For now, the main concern is there’s a lot of uncertainty as to if something can ship when it will ship, and if all of that will change. We are working on deadlines and just in time arrivals with staff in place to accept the shipments and I am often finding out it’s not going to happen at the 59th minute of the 11th hour. The challenges are invisible to us for an awfully long time.”

Even as a manufacturers’ rep, Jeff Hessel, principal at BSE Marketing in Hyde Park, N.Y., sees many of the same things as the dealers. “You would call a refrigerator manufacturer and tell him what you need on, say Wednesday. You send the order in on Friday, and they tell you it’s out of stock at the moment,” he says. “So, you ask for the next delivery date and they tell you they are out of handles or foam or can’t get the compressor. If you ask why you didn’t tell me this earlier, they say we did not know then. Some manufacturers quoting 16 weeks on a piece of cooking equipment. Others can’t ship because they don’t have enough packaging. The issues are random and seem to pop up out of nowhere.”

How We Got Here

How did it get to this point? “It’s a brutally complicated issue,” says Charlie Souhrada, vice president, regulatory and technical affairs for the North American Association of Food Equipment Manufacturers.

Some of it has to do with the ripple effect of COVID-19. Take, for example, the shortage of materials. For the past year, COVID-19-related safety regulations made it difficult for companies to mine for minerals that go into making aluminum, stainless steel, etc. Companies could not risk putting too many people in these mines without potentially causing a spike in cases.

At the same time, consumers were confined to their homes and instead of buying experiences such as vacations or concert tickets, they instead began purchasing items to make their time apart from friends, family and even the office more tolerable. “Consumer demand was much greater than anyone anticipated because everyone was stuck at home and ordering things,” Souhrada notes. “And that created a pinch in the steel and aluminum market.”

The supply chain challenges pertaining to metals pre-date the pandemic, though. In the spring of 2018 the U.S. imposed tariffs on imported aluminum and stainless steel, two key ingredients when making foodservice equipment and many supply items. While the tariffs were put in place to protect U.S. manufacturers of stainless steel and aluminum, they strangled the flow of these key items. “The tariffs did not cause the situation, but they certainly contributed to it,” Souhrada notes. “Ironically, that started as a way to protect manufacturers. From a metals' standpoint, NAFEM has been working with a number of coalitions on contributing factors to the shortage, namely the steel and aluminum tariffs.”

NAFEM started working with Air Conditioning, Heating and Refrigeration Institute, National Electrical Manufacturers Association and Association of Home Appliance Manufacturers to raise awareness of these issues and look for ways to alleviate the challenges. "These four associations represent manufacturers that use a fair amount of steel. And we are meeting every other week looking for opportunities to speak for our members,” Souhrada notes.

A shortage of raw materials represents but one factor contributing to the stretching of the foodservice industry’s supply chain. Another factor has to do with shipping. “Not only were the mines closed but the ports were closed, too,” Souhrada notes.

Manufacturers often source component parts from overseas but those items are taking longer to enter the country due to a shortage of shipping containers and then U.S. ports being closed or operating at a fraction of their normal capacities due to a variety of pandemic-influenced factors. “We take for granted how difficult it is to get these parts from other places and put them together to make something meaningful,” Souhrada says. “This pandemic has shined a spotlight on how fragile this is.”

Other industries’ willingness to pay extra for raw materials, like stainless steel, and even component parts like computer boards, further puts the squeeze on foodservice equipment and supplies manufacturers by creating greater demand for these items and subsequently driving up prices. “And that creates a pinch for those of us manufacturers downstream,” Souhrada says. “Manufacturers were challenged because they were competing with these e-commerce purchases.”

As a result of these factors, a price increase among foodservice equipment and supplies manufacturers seems inevitable. “They are here. Some factories took price increases in January and they will increase prices again in June,” Hessel says.

The confluence of these factors, and certainly others not covered here, creates a perfect storm. “You have all of these cost increases and factories not working at 100% due to various COVID-related issues, you have product delays and longer lead times,” Hessel says. “It’s the global economy that’s driving this. It’s not personal. We are all in this together.”

These kinds of supply chain issues are not unique to the foodservice industry at the moment.

Hessel recently visited a project his firm is working on only to find the job site closed. His mind immediately turned to the pandemic. “The place was empty. I asked the contractor: “Should I even be here? It looks like you are shut down for COVID,” Hessel recalls. “The contractor said they were not shut down for COVID. They had run out of metal studs and there was a three-week back order on them, so the job is shutdown. The guy said he did not see it coming.”

Start Planning Now

What can the supply chain do to offset some of these pain points? Start with some patience and understanding. “We’re in this together and now will prove who your good and trusted partners are,” Hessel says. “Those trusted relationships will cure the ills of the supply chain by working together in being transparent and flexible.”

Becoming more vigilant and proactive with your communication efforts and managing customer expectations will help, too. “As dealers, we need to go in and educate our customers about what’s happening and reset their expectations,” Keck says. “If we don’t do that there will be lots of heartburn down the road.”

Extending the horizon for specific projects can help, too. “We are certainly going to talk to our key customers. There will be issues this summer and we will work with customers on their key items,” Wasserstrom adds. “But we will also ask them to look farther out. If you are talking about doing something this summer, we need to be talking about it now. If you want to open on July 1, we need to order it now. That’s the reality. The end users won’t be happy, and they will push us, and we will, in turn, have to push the manufacturers. Nobody is going to be happy.”

Of course, proactive communication represents one part of the equation that’s easily controllable. Other aspects can be a little trickier. “We are asking operators to do things four weeks sooner than they might normally but what happens if the operator does not have their funding completely in place?” Keck asks “If their funding comes from say a small business loan, they might not have the approval yet. Plus, I don’t want my customers to think we are rushing them into anything. We don’t want to sound like used car salesmen saying buy now.”

Being proactive applies to more than communication. “As dealers, we will have to be hyper-vigilant about tracking and following up orders,” Keck says. “Some of our suppliers have long histories of delivering without incident. But we can’t take that for granted anymore. Now it’s trust but verify. It could be that 48-inch sandwich unit that we’ve grown accustomed to being readily available might not be there when we need it. Nobody is immune to this. You may not have any problems today but tomorrow could bring a whole new set of challenges.”

While most dealers admit the communication between them and the manufacturers is getting better, they add that bigger challenges remain. “What I am hearing now is to a manufacturer they are all getting hit by this pretty hard. The more challenging part of this is on any given day we don’t know the issues that will arise,” Keck says. If it’s not shipping related due to a local carrier having a shortage of drivers or supplies can’t make it in or parts don’t arrive.”

For his part, Hessel sees a clear path forward despite the mounting supply chain challenges. “We can open on time by planning ahead and being flexible in terms of design and what’s specified. Or we wait until the pandemic is past us,” he says. “We can use our years of experience to augment the brand and the layout to meet the design intent. Operators must trust their suppliers. It can be done. “