Labor Is The #1 Stumbling Block To Recovery

I had the opportunity to sit in on an open forum of top food manufacturers recently who are pivoting to the new post-pandemic reality. It’s a no B.S. overview offering readers insights on how to provide new solutions to the food manufacturing sector. It’s also a look ahead at the causes for inflation that will continue to impact retailers, restaurant operators, and you the consumer.

It Starts And Ends With Labor

Something happened in the minds of employees during the pandemic. Workers sent home to work remotely reassessed their personal priorities. Many shifted away from valuing the comradery and team mentality of an office environment to a me-first mentality. The result was a record number of employees resigning from their jobs in August 2021 as employers began calling them back into their office. It has left an unexpected void of experience within important job functions that have negatively impacted food manufacturing companies. Meanwhile, companies are finding that some job functions could be consolidated or replaced by software that is resulting in firings.

Among plant workers, post-pandemic attitudes have been even more debilitating to the production of food. Some manufacturers lament hiring dozens of workers each month, with only a 40% retention of workers past their first week on the job. Nearly 20% of new hires walk off the job by mid-day on their very first day in their plants. The pre-pandemic process of requiring the unemployed to secure a job has become part of a system that lets the previously unemployed find a job, then re-apply for unemployment after a food manufacturer fires them because they walked off their job.

Some manufacturers are operating plants with scores of unfilled positions. As a result, loyal and engaged employees are being over-worked to cover the gap of unfilled positions. While their wages have increased, they are overworked and exhausted. As a result, manufacturers are turning to third-party companies to handle the cleaning and some maintenance duties to free up plant workers to fill production jobs.

All manufacturers are turning to automation to lessen their reliance on workers. This is making highly skilled technicians who can program and maintain robots and production line automation some of the most highly sought-after jobs in the market. Technically-skilled workers today have a higher priority by human resources at food manufacturers than college degrees.   

The Supply Chains Is Broken

Labor problems caused by the pandemic have affected the supply chain. Much of the problem involves the transportation of raw materials to food manufacturing plants. From resins used to make plastic lids, glass bottles, or metal cans, suppliers suffer from labor challenges that stifle their ability to ship essential packaging that results in plant shutdowns.

Past practices of offshoring packaging for lower prices from the past four decades have left America without domestic manufacturing options. Government tariffs on Chinese-made packaging have driven up those costs while ships containing the needed packaging sit on ships awaiting to be offloaded at U.S. ports due to labor shortages among longshoremen and truckers to bring the items to the plants.

Meanwhile, the just-in-time delivery practices of food manufacturers before the pandemic have left them with empty inventories. This has resulted in a mad scramble for raw products and packaging and hoarding. The buying power of big manufacturers is leaving smaller food manufacturers in the cold. From feed for animals to oils and spices, labor and transportation issues are requiring food manufacturers to push procurement planning from four months to up to two years in security essential products.

Where ARE the opportunities?

If you have been a secondary supplier to food manufacturers, now is the time to reach out. The good news is that price is no longer the top determining factor. Instead, offering guaranteed supply is the top metric to selling more. This goes for both suppliers and transportation partners.

If you are a worker, there has never been a better time to find a new job aligned with your own core values at a higher wage. If you are recently retired and willing to go back to work, your old work ethic and experience have never been so valued. Among white-collar retirees, your ability to train new workers is invaluable.

If you are a manufacturer, the opportunity is in innovation. I spoke with several manufacturers who are pivoting into new segments with products outside their core competencies. They are outsourcing manufacturing to co-packers while they build their own production capabilities or acquiring companies that do. Look for gaps in the market among product lines that meet consumer demand for healthier, trend-driven solutions. Leverage current market conditions of higher prices to fund new products. At the gathering I attended, there was a record number of new products displayed as food processors prepare for rollouts in 2022.

It is also a great time to reassess a food manufacturer’s brand. Is it time to reconsider your brand name(s), and each brand’s promise and position within your market? Consumer attitudes have changed dramatically in the past two years, so now is the time for retooling your messaging and your approach to the market. At Creative Energy, we’ve helped a record number of brands reposition themselves in 2021. Even more, work is set for 2022 as food manufacturers find their new level set of the new reality. If you are ready to begin the process, we are here to help.