Grocery store shelves are empty across the United States and the reasons are much more complex than that your neighbors over-purchased. The real reasons are hidden in a web of supply and demand forces, and your fellow shoppers are only one piece of the puzzle.
There are a lot of moving parts in feeding people, and the empty shelves are really caused by the junction of forced, immediately changed consumer behavior (demand) and limited flexibility in the way food is packaged and delivered (supply).
The simplest explanation is that several sudden demand-side changes happened at the same time as one significant supply change happened, the flow of food needed to change as suddenly as demand changed for everyone to get food. Supply side changes just can’t happen that quickly. Solutions can sound just as complex, but are remarkably simple if we choose principled actions over fear-based reactions in the future.
Changes in Demand:
Three significant and sudden changes have occurred to food demand in the 2020 coronavirus pandemic thus far. The first change was that restaurants were forced to stop serving patrons at their locations for social distancing, and were only permitted to sell food for carry-out. Statista data for 2018 shows that 72% of Americans usually visited quick service restaurants for lunch, and 20% of Americans eat at either quick service or full service restaurants every week.
The second change was caused by the first. When people visit restaurants less often, they still need to eat, so they shift buying patterns to the grocery store. This is an entirely predictable human behavior, if you could predict the first event, which nobody could.
The third change came from news outlets and social media, which were flooded with stories and posts telling their viewers and readers to “stock up” for a two-week quarantine in case you get COVID-19, the respiratory illness caused by the 2020 version of the coronavirus. Unfortunately, most of these reports don’t come with a guide of how much to buy of which foods, so people bought everything they could afford, leaving those who could afford to hoard less with less food, and very few choices left on shelves.
Manufacturers, growers, shipping companies, restaurants and retailers do an elaborate dance every day that balances the demands of consumers based on historical consumer patterns. There is some flexibility for gradual shifts and trends, but dramatic, overnight changes are not designed into any of these systems, and consumers rarely consider how food actually gets to their plate.
A Basic Example:
Normally, a store stocks a small number of cans of baking powder, for this example suppose it’s 20 cans in stock on any given day, and let’s use Tuesday for this case.
Typical use of this one product is small, since fewer people are home baking and cooking with it than there were 20, 40, or 60 years ago. The normal consumer package is about 8 oz. Bakeries use much more, because that’s their everyday staple. Commercial packages are 5 lb, and purchasing in cases of 6 is available on some commercial baking supply websites. That’s 60-times the volume sold to individual consumers and could make an estimated 23,000 scones.
A typical 8 oz can of baking powder, by comparison would make an estimated 384 scones using a basic scone recipe from allrecipes.com (if you also happen to have nearly 27 pounds of flour and about 12 pounds of butter).
To make sense of how sudden change on demand affect supply, consider the distribution networks that deliver food, and how they’re oriented. Under normal conditions a certain volume of food is delivered to grocery stores in packages designed and sized for consumers. Another certain volume of food is packaged for restaurants and commercial applications where the volume used before spoilage occurs is much higher and so is the storage, typically.
Package size and type aren’t the only things to consider. Shipping timing and frequency are significantly different. Over the past 40 years, as technology has enabled it, distribution systems have shifted largely to what is called “just-in-time” (JIT) delivery. Think of this like getting Amazon scheduled deliveries based on when you expect to run out of something consumable. Both restaurants and grocery chains utilize this to some extent, but they calculate the timing based on statistical models of how much food they actually sold in the past.
True JIT delivery would attempt to replace all of the stock sold in the previous period in the next shipment. However, a local grocery store manager who asked to remain anonymous said their store is not receiving items that way. This specific location is a member of the Kroger family of stores, one of the largest supermarket chains in the U.S.
What JIT delivery means to the retailer is that they can keep a wider variety of products on limited shelf space because they statistically know how much of a product they will sell on any single day, using math. Our example from the current conditions can illustrate this.
In this pandemic event media outlets often told us to “stock up” on baking supplies. Within days every bag of flour was gone from shelves, and a few days later the yeast and baking powder disappeared. We can guess that most non-bakers needed to look up recipes after buying flour, and then went back to get leavening. Non-bakers (those who don’t normally bake) would have no idea how much baking powder they should need over two weeks of self-quarantine because normal people don’t keep statistics on their baking powder use. Not knowing creates “fear of running out” (FORO), which causes your friends and neighbors to buy two cans just in case they catch the virus and are stuck at home for two weeks. The first ten people get their FORO-based supply, and then stock is exhausted.
Demand, Meet Supply:
JIT delivery scheduled for Tuesday night’s delivery to the store has, in this scenario, two containers because it’s based on the statistical model. The model tells the warehouse that this store only typically sells two cans on Tuesdays in March, so the warehouse only sends two cans. That means that only one person gets to buy two cans Wednesday morning, and the same condition continues for weeks before the computer algorithm recognizes that demand is higher on Tuesdays and starts attempting to deliver more to this specific store.
But, can they even get more?
Supply Chain Bottlenecks:
There is clearly a gap in the effectiveness of purely historical-based algorithm models when sudden changes occur, because there is a certain time delay before an “artificial intelligence,” or “machine learning” algorithm can recognize a change as more than an anomaly. Said another way, you would have to be in the future to recognize the emerging pattern happening right now. An example of a system that does it pretty well is Uber, because they calculate supply and demand in real time based on geography and create “Surge Pricing.” Simply walking a few blocks and then requesting an Uber can get you out of the surge zone and cut the price of your ride by half or more.
For the current example, the entire supply chain for getting baking soda to a retail grocer involves many steps. Baking powder is manufactured and packaged into the various sized containers (4 oz, 8 oz, and 5 lb). Then pallets ship by truck to regional distribution hubs. Next, cases ship by truck to regional warehouses for each retail chain or restaurant distributor. Finally a few cans are put in a tub with a bunch of other random items, and end up on a truck to your specific store where stockers place it on the shelf for you to grab.
Every step takes time and resources. There are a limited number of trucks, humans, and cans of baking powder in the supply chain, and even if you could make a decision to change it immediately, the ripple effect in time would cause any change to be significantly delayed. Without getting into the data which is almost certainly publicly unavailable, there is no way of knowing exactly what the limits and bottlenecks truly are. That said, it’s reasonable to say conservatively that at any single step of the entire supply chain there are possibly significant and expensive physical and process changes needed to make more small containers of baking powder available on the shelf to handle the short-term demand.
Even if manufacturers could quickly switch packaging to supply more small cans of baking powder, are there enough trucks to increase all deliveries? Can warehouses add one more trailer of food to each grocery store in America to accommodate the demand spike? That is highly doubtful based on the number of radio ads for grocery delivery drivers.
There’s a hidden question in the supply chain as well. Would manufacturers be willing to change their entire business model overnight to supply more small cans of baking powder (or any other food item) for a short-term situation? This can only be answered after this specific emergency abates. Time will demonstrate if that occurs over the months and years that follow the 2020 coronavirus pandemic.
What is visibly obvious to anyone looking for flour, baking powder, cereal or toilet paper in late March of 2020 is that the supply chain is not agile enough to handle this sort of short-term spike in demand.
Understanding demand is challenging because it involves so much psychology and sociology. The spike in demand from coronavirus appears to be based largely on fear, uncertainty, and doubt (FUD). Uncertainty just happens to be a key component in all demand, regardless of situational need, emergency need, or luxury want of a product or service. Every business leader and professional salesperson knows that uncertainty creates urgency and urgency creates demand. Every sales course has some instruction on how to generate urgency to create a sale. This is not an accident. Even professional salespeople regularly fall victim to manufactured urgency, despite being trained on it.
Applied to our example of baking powder, we don’t calculate uncertainty specifically because that is math we can’t normally do in our head standing in the grocery store aisle. As a result, we only sense uncertainty vaguely. For baking powder it’s internally normalized based on our own experience of our personal use of baking powder and our perception of normal levels on the shelf at our grocery store, so uncertainty about the future availability of baking powder is minimal. However, when we observe so many other things disappearing from shelves at the store, our uncertainty increases for all things on all shelves based on factors we don’t stop and think through, and certainly can’t calculate the odds.
With this inability to know with any degree of certainty, FUD kicks in, and we all react essentially the same way, limited only by our personal resources. Panic buying ensues.
Identifying the sources of a problem is never enough to solve it. How do we fix it? We have to work together with all these factors present in our awareness in order to avoid breaking our infrastructure and creating shortages of goods, some of which are really essential, and much more so than baking powder.
Hoarders: Breathe. Very little of what you already hoarded is actually necessary to have months of supply on hand. Now you have it, so share what you over-purchased with your neighbors who couldn’t beat you to the rice and toilet paper aisles.
Consumers: Be flexible. Try out the random brand of frozen vegetables and change up your recipes. Sure, it will be a different meal, but that’s not all bad. Every great dish ever invented was an experiment at one time.
Retailers: Fix restocking algorithms. Limit quantities a person may purchase when thresholds are reached, like the number of a specific item sold per day or per hour. You already have statistics on how much of nearly everything a household uses. In most cases, our rewards card has tracked literally every purchase we have made in the past 15 years, so you can tell us we’re being crazy buying two cans of baking powder when the last time we bought one was four years ago.
Suppliers: Get agile. Be willing to suspend some of your processes and make short term adjustments to handle sudden changes. At least make a plan for how to switch from 5 lb bags of baking powder to 8 oz cans and push those to retailers.
News & Media: Stop giving specific recommendations. There is no way any media outlet has enough data or data scientists to make specific recommendations on what to buy or not buy. Just stop it. The fact that you have to fill 24 hours every day with content doesn’t obligate you to add to the noise with your uninformed opinion on what to buy.
Everyone: Learn more. Think more. Breathe more. Plan more. Flex more. Take care of each other. As a long-term strategy to overcome your personal FUD-factors, make a plan and act on it so you’re not paying $10/roll for toilet paper on craigslist.org, or buying 30 pounds of baking powder for $100. Track and understand your buying and consuming habits so you can know how many rolls of toilet paper your household uses per week or month. Then learn from the experience of enduring the COVID-19 pandemic what you actually need to get through 2, 4, or 8 weeks of quarantine. Take an Emergency Preparation course, or ask an Eagle Scout.
Add up the money spent on unnecessary hoarding, panic-buying, and over-paying for things you can’t prove are essential for you. Consider whether it’s worth it for you individually to pay for the innovative solutions that absolutely will come from this pandemic. The only things that exist are those people are willing to pay for, so pay for the things that would have made this all easier this time so that they’re available next time.
If we want to prevent or mitigate future shortages caused by panic buying and empty super market shelves, it is essential that we all put our money, and our awareness, where they matter. Consider boycotting companies that could have retained employees but chose to fire them to boost their stock price. Perhaps we need to ignore what Wall Street says a business “should” do. Perhaps we all need to support only those businesses that support us, the consumer and the employee. We are the people which business exists to provide value to. Any corporation not willing to pay out their Wall Street earnings to save jobs and the broader economy, or putting their corporate “hand” out to the government of the people asking for a hand-out from the very people they just fired, simply don’t deserve to exist. The government of, and for, the people can do better things with every penny of that money.