When the pandemic first struck, life ground to a halt. Restaurants were immediately tasked with turning their operations upside down to adapt to new restrictions. Meanwhile, farther upstream, manufacturers, distributors, and processing facilities were facing their own challenges, ones that would quickly trickle down to foodservice operators.

In the years leading up to COVID-19, major supply chain crises were largely the result of extreme weather, deteriorating environmental conditions, and outbreaks among livestock and poultry. But as with so many things, 2020 presented one unprecedented situation after another. Amid regulations and mounting health concerns surrounding the coronavirus, suppliers lacked the workforce to meet demand.

“It’s hard to argue that we had a bad crop last year during COVID. … What we saw over and over again was that the processing points couldn’t get people in because of COVID, whether it was fruit packing or salad packing, whether it was in the beef slaughter or chicken slaughter facilities,” says Michael Swanson, the chief agricultural economist for Wells Fargo. “We had the product; you just couldn’t move it or process it.”

Swanson adds that adjacent labor shortages also came into play. Even if food manufacturers and distributors could boost their output, they still had to contend with transportation. Fewer trucks on the road and low staffing at ports compounded the existing gridlock.

Later on, other goods, like containers and bottles, also posed problems. When plastics and glass factories shut down, inventory fell behind, leaving food and beverage with limited means of being packaged.

“It’s amazing how there’s a domino effect with all of this. I don’t think the average person, or even some people in our industry, had thought about it prior to this,” says Patrick Roso, senior director of purchasing for casual-dining chain Twin Peaks. “There’s a lot more supply chain than people think; it’s not just a truck showing up at your back door. And the fact is the general public doesn’t understand that.”

For a time, the Texas-based brand struggled to source tequila, which had nothing to do with the available quantity of the spirit, but rather the glass and plastic bottles that housed it. So, Twin Peaks pivoted and told its operators to source whatever size of various alcohols they could instead of sticking to the usual bar bottles.

The meat of the matter

Although consumers have been less privy to these secondary supply chain issues, they’ve been attuned to other commodities, namely livestock and poultry, whose shortages even extended to the grocery aisle early in the pandemic. While these goods equalized somewhat by summer 2020, prices were still erratic, especially for beef and pork; costs soared amid the spring shortages only to bottom out in the fall when ranchers and meatpackers found themselves with a backlog from the earlier slowdown. The low prices were a boon to buyers—both consumers and retailers, including restaurants—but at the expense of producers who couldn’t recoup lost profits from earlier in the year.

Chicken, however, was and remains more complex. Not only was poultry subject to the same bottlenecks as livestock, production was also disrupted by harsh winter weather. All the while, consumer demand for wings soared, which could be partially chalked up to a desire for comfort foods in uncertain times. The limited nature of wings—only two per chicken—exacerbated other supply chain issues, creating the perfect storm this past spring.

“Chicken wing prices are sky-high. Until they start hatching more chicks, we’re going to have high wing prices,” Roso says.

As with most pandemic-related challenges, figuring out the chicken conundrum required some fancy footwork.

Florida-based Smokey Bones serves a variety of animal proteins, which granted it more wiggle room than specialized brands in the wing category. Still, smoked, bone-in chicken has been a menu cornerstone at Smokey Bones; the company even launched a chicken-specific virtual brand, The Wing Experience, along with another ghost concept, The Burger Experience, back in 2019. The Wing Experience serves 50 different flavors of wings and last November—even before the shortage began in earnest—it expanded its offerings to include boneless varieties. So going into 2020, Smokey Bones had sizable inventory orders to fill across its brands.

“We have never experienced this level of demand for chicken wings ever,” says CEO James O’Reilly. “It put more pressure on our supply chain, which led us into more frequent, constant conversations with our vendor partners, our distributors.”

When the wing supply began to ebb, Smokey Bones tried a number of different avenues. It sought different suppliers and tried buying whole birds rather than wings, but the most effective change involved rethinking the menu and dining experience.

Smokey Bones began sourcing and serving whole wings rather than just the drums and flats. O’Reilly says this menu addition opened the door to fun, educational moments with guests who may not have encountered whole wings before.

“We launched whole wings partly in response to the challenges we were seeing on the supply chain side, but also because we have a strong chicken wing business,” O’Reilly says. “The availability of the whole wing was greater at the time and is somewhat [still] greater because it requires less processing.”

“We have never experienced this level of demand for chicken wings ever. It put more pressure on our supply chain, which led us into more frequent, constant conversations with our vendor partners, our distributors.” —James O’Reilly, Smokey Bones

The Wing Experience also decided to toss its hat in the chicken sandwich ring this summer, given the relatively stable price of chicken filets. Like its wings, the brand’s Crispy Chicken Sandwich is available in 50 flavors, ranging from more traditional flavors like sticky honey garlic to off-the-wall varieties, including hot cinnamon candy apple.

O’Reilly says the chicken wing supply was starting to improve in July as distributors were able to bring in more staff for processing. He also thinks that once extended pandemic unemployment benefits expire, productivity will increase even further. (As of mid-September, those benefits had ended, though the Treasury Department clarified that states could continue to use the remaining $350 billion funds from the American Rescue Plan to help unemployed workers.)

Regardless of the timeline, Twin Peaks’ Roso believes that some price hikes will remain, perhaps not as prohibitively expensive as they have been in recent months, but also not as low as pre-pandemic levels.

“Right now we’re in the middle of the storm. I don’t know exactly what those changes [will be]. I think we’ll see some price changes that will remain permanent,” Roso says. “I do think distributors and manufacturers will come up with automation to reduce labor or mitigate it. It’s still a little bit of a wait-and-see game.”

Automation and other alternatives

The new market equilibrium for various commodities remains to be seen, but one change in particular is all but guaranteed: an increase in automation.

COVID-mandated staffing restrictions and subsequent employee shortages occurred against the backdrop of growing wages. The pandemic didn’t start the conversation around automation; it only sped up a shift that was already underway. In the tug-and-pull between labor and tech alternatives, a more expensive workforce tips the scales in favor of increased automation, even if the initial transition requires a hefty investment of time and money.

“Automation is not a panacea in the sense that it’s easy to do and always cost-effective,” Swanson says. “But as you see the labor get more expensive per hour, you definitely see a lot of businesses saying, ‘OK, at this point, I’m going to bite the bullet and go for the automation with all the incumbent challenges that I know will come with it because it has a long-term benefit on a go forward basis.’”

Workers along the supply chain may receive higher wages and better benefits, but those gains could ultimately put their jobs in jeopardy, Swanson adds. On the supply side, technological substitutes could include everything from automated pickers to pallet stacking to robotics in the processing line. For restaurants, which are also entrenched in a labor shortage, automation might work its way into the back of house with food preparation, digital ordering, drone delivery, and more.

“The thing that people forget is that we really live in a world that’s a system. If you change A, it changes B. But B comes around and changes A again,” Swanson says. “One of the benefits of COVID, and it’s hard to call it a benefit, but it really has shaken up a lot of people’s complacency about how the world really works.”

The restaurant industry has an advantage over other sectors in that operators could never afford to be complacent. Ever-evolving consumer demands in terms of food, brand values, and the overall dining experience have historically kept operators on their toes. That said, operational structures, such as how many employees work a shift and where they’re positioned in the store, remained largely unchanged until the last few years. Certain segments (particularly full service) have been slower to embrace technology, and many restaurants had the luxury of committing to a core menu indefinitely, thanks to solid supply chains.

Those points of stability are becoming a thing of the past. Restaurants must constantly reinvent the proverbial wheel in terms of workforce, menu offerings, and sourcing practices. For many, that means strengthening ties with vendors and staying in constant communication. It’s what helped Twin Peaks navigate supply snafus over the past year.

“Having good relationships with those manufacturers, having been fair with them over the years, having paid your bills on time, makes you the guy that when you call they’ll tend to pick up that phone,” Roso says. “We try to avoid going through different layers if we can. In some industries you have to deal through a broker; that’s just the way it is. … But we tend to work directly with the manufacturer.”

More restaurants might soon follow suit by building supply chains with fewer touch points. Wells Fargo’s Swanson predicts businesses of all stripes will start pondering how they can consolidate their supply chains, thus creating a more flexible system.

But even the most optimized restaurant-vendor relationship can’t shield against outside forces like droughts, labor shortages, or even a global pandemic. For this reason, Twin Peaks has made some COVID-era tweaks that it plans to maintain once the crisis finally ends.

Given recent delays, the brand has started putting orders in 12-plus weeks in advance when 4–6 weeks used to be plenty of time. It’s also making QR code menus a permanent part of the dine-in experience.

“Initially the thought was just sanitation; people aren’t going to want to touch [a menu]. Or, we have to make a bunch of disposable menus and that costs a lot of money,” Roso says. “We’ve actually found it to be a great tool from a culinary standpoint and from a supply chain standpoint.”

He offers a recent example: Twin Peaks had St. Louis Ribs on the menu until the price jumped so high that consumers would be unwilling to pay, and the brand couldn’t afford to eat the cost. Thanks to the QR code menu, Twin Peaks could instantly remove the item instead of waiting to change the hardcopy menus, which are only updated twice per year.

The agility of its culinary team—both in the corporate office and at the individual stores—also helps in the face of uncertain circumstances.

“Even on the store level, we’ve got experienced cooks, so whatever curveballs are thrown at them, they’re able to manage it,” Roso says. “I think the fact that we also have a focused menu—it’s not 12 pages long—helps us as well with the supply chain.”

Smokey Bones is also employing an adaptive strategy that takes the potential waxing and waning of inventory into account. When the chain sourced whole wings to combat the drumstick and flat shortage, it also doubled down on marketing the new item; on National Chicken Wing Day in July, it offered free whole wings with the purchase of boneless wings.

“Promotions can be managed strategically to help us optimize the demand where we can and to also introduce consumers to newer products on our menu like the whole wings and the boneless wings,” O’Reilly says. “When Smokey Bones starts talking about being, ‘The Masters of Meat,’ we can begin to offer other protein alternatives to consumers that generate incremental business for the company in areas where there hasn’t been as much pressure on the supply chain.”

In addition to bringing in the whole wings as a menu supplement, Smokey Bones also introduced a pork porterhouse over the summer, when pork wasn’t under the same strain as chicken. O’Reilly says the new menu item has not only been a hit with guests, it also exemplifies how adroitly the brand can maneuver through supply fluctuations.

Just in case

Like Twin Peaks, Smokey Bones’ size gives it a leg-up in navigating situations like this. With a system of about 60 units, it’s large enough to have some bargaining power but also small enough to stay nimble. While size isn’t something restaurants can—or would even want to—change over night, this Goldilocks approach to sourcing could serve operators well.

“There’s a lot more supply chain than people think; it’s not just a truck showing up at your back door. And the fact is the general public doesn’t understand that.” —Patrick Roso, Twin Peaks

Back in the 1970s, Swanson says, manufacturers latched onto a “just in time” sourcing strategy, wherein suppliers took out the last bit of inventory to boost efficiency and return on investment while cutting product waste. While he adds that just-in-time supply chains were most popular in the automotive sector, the mindset trickled down to other industries. At the same time, supply chains became longer and more complex.

This system works well under stable conditions but can break under pressure.

“COVID has exposed a real problem,” Swanson says. “A lot of people are asking themselves, ‘Are just-in-time inventories the only model?’ And, if not, ‘Is there a hybrid that’s better?’”

Blending just-in-time supply chains with a just-in-case inventory buffer would leave businesses better prepared when the unexpected happens. Still, this approach comes with its own set of drawbacks. Unlike automotive or tech, restaurant inventory is by and large perishable. While spare car parts could sit around for months if not years, food has a relatively short shelf life.

Overestimating inventory also flies in the face of restaurants’ efforts to cut food waste. According to a 2017 report by the National Resource Defense Council, restaurants generate 22–33 billion pounds of food waste every year. The amount doesn’t take into account disposable serveware, which has undoubtedly increased amid the surge in takeout and delivery orders. Finding the right balance between efficiency and preparedness is a perennial quest for operators, but the past year has been an extreme stress test, revealing cracks at every juncture along the supply chain.

Swanson says things are improving, but in some ways the situation remains a game of whack-a-mole; as soon as one area stabilizes, another problem pops up. So perhaps the key to weathering future supply snafus goes beyond adaptability and into the realm of tenacity.

“What’s kind of frustrating is there are the flare-ups that occur where you thought, ‘OK, we’ll be back to normal,’ and then you’re missing plastic lids for your coffee cups. And you’re like, ‘When have we ever had a problem getting plastic lids for coffee cups?’ Well, you do now,” Swanson says. “Specialization is good in normal times, but specialization in unusual times can really be detrimental. What do you want to do to build in some resiliency around that?”