Food Shortages & Distribution Issues

We continue to face many unprecedented challenges across our different businesses but this week I wanted to focus on the particular problems being encountered by our Food business and take the opportunity to update you on the current food shortages and distribution challenges that have been impacting our on-shelf availability in stores and what steps the Food team are taking to help improve the situation. 

The current situation

We have been experiencing poor or intermittently poor service from our distribution network for several weeks now.  At its peak last year, the network was transporting 12m cases a week.  Last week this was at 10.2m.  The hope is that by the end of August this will back closer to 11m, however, the flow of goods remains challenging and parts of our supply chain continue to struggle. 

These issues have been driven by a combination of factors.

Driver shortages - the shortage of drivers has been well documented in the media and has been caused by a combination of fewer drivers coming to the UK since Brexit, a backlog of HGV tests due to COVID, and a section of those drivers moving to different jobs within the industry due to enhanced pay rates. This has particularly impacted two of our largest direct to store suppliers for bread (Warburton) and sandwiches (Greencore).

The ‘Pingdemic’ – last week there were distribution sites with 20%+ absence rates, much of which was driven by large numbers of colleagues having to isolate due to being in close proximity to a positive COVID case. The peak of the holiday season has further compounded the issue.

Supplier production issues – caused by the inbound transportation of raw materials, the outbound delivery into our network and the reduced production capacities driven in the main by the points above.

System generated issues – There have been intermittent localised issues caused by the Co-operative Group’s (tCG) SAP integration. These are now becoming less frequent and less impactful but do cause problems when they arise.

Weather – the combination of the Euros, lockdown easing and the two weeks of very high temperatures placed a demand on the network that would have been difficult to fulfill in normal circumstances and compounded with the aforementioned issues has taken a level of stock out of the network that we have since struggled to replenish.

Action being taken

Senior-level intervention constant contact with our distribution partners and suppliers and is working collaboratively to improve the situation through a joined-up approach.    

Daily contract tracing protocols are now in place across the distribution network as per the Government’s guidelines for food distribution workers.

Ranges have been temporarily reduced to focus on high volume lines, helping to create some space in the distribution network.

Reduced frequency of deliveries – we are accommodating both changes to delivery days, for example switching volume into the week to avoid the weekends when driver availability is more challenging, and the frequency of deliveries to reduce the number of drops on each run or rotating stores on different days.

Two-way communication – we are in daily discussions with our tCG colleagues; a set of escalation processes have been created to ensure that the voice of each independent Society is being heard.

Supplementing with Local – where appropriate we are working with our brilliant local suppliers to help meet demand, particularly on produce and milk.

I appreciate that this situation has created a number of challenges for everyone working within our Food Retail operations and I wanted to say that I have been hugely impressed by the commitment of the team in doing their very best for our members and customers during this very difficult situation.