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Lessons Learned from a Pandemic

Survey provides insights into value chain impacts

by Dan Lemke

There is no playbook for businesses to follow when navigating a global pandemic. The COVID-19 outbreak brought widespread disruptions to commerce of all types, including agribusiness. Businesses did their best to manage during unprecedented times; some successfully, while others struggled.

AURI and several key partners are digging deeper into the impacts COVID-19 had on food and agriculture to help create greater resiliency along the entire supply chain.

When COVID-19 emerged and grew into a global concern, the nation’s food and agricultural supply chain that had operated smoothly for decades, suddenly faced unprecedented challenges. Consumers who could previously find nearly any type of food product in ample supply at nearly any time, now saw intermittent shortages. Food processors faced labor shortages and numerous livestock producers suddenly found themselves without a facility able to process their animals.

AURI leaders recognized the need to determine the underlying cause behind spot shortages and supply chain interruptions. The AURI effort focused on the causes of disruptions to that supply chain and sought to identify potential new resources or collective solutions that could benefit Minnesota businesses.

“The overall idea of this study was to act quickly and be more proactive about solutions that AURI could support immediately or begin planning new initiatives that would be helpful to Minnesota’s ag and food processing sector,” says AURI

Executive Director Shannon Schlecht. “Other efforts focused on the grocery store shelves and the consumer perspective. We all know the first point of delivery or intermediate processing segment of the ag industry is vital to ensuring consistent demand opportunities for our producers.”

Taking the Pulse

AURI, AgriGrowth, the University of Minnesota College of Food, Agriculture and Natural Resource Sciences, GreenSeam and the Minnesota Department of Agriculture partnered on a survey to better understand how COVID affected the food and agricultural supply chain. The survey sought to identify problem areas for businesses while identifying potential solutions.

“We wanted to know what pain points respondents experienced; what did they need, and what potential supportive actions could help improve supply chain resiliency,” says Linda Thompson, AURI director of organizational advancement.

Each partnering organization contacted their database of food and ag manufacturers and processors. The groups used the North American Industry Classification System to identify businesses that fell into the food and agriculture supply chain.

“We focused on the messy middle as it is sometimes referred to, everything that went into and out of the manufacturer and the processor that connects production agriculture to the consumer,” Thompson says.

From late June through early August, more than 110 Minnesota businesses responded to the survey. Thompson says there was a well-rounded response. Thompson says 35 percent of survey respondents came from the Twin Cities metropolitan area and 65 percent were from greater Minnesota. Every region of Minnesota was represented in the survey.

Forty percent of respondents had been in business less than 10 years, while the biggest share of replies came from businesses that had been operating for 10 to 99 years. Thompson says 40 percent of survey respondents reported less than a million dollars in annual sales. However, larger companies, including some with over $1 billion in annual sales, provided feedback. Forty-six percent of respondents saw their business revenue decline during the pandemic, 20 percent stayed steady and about 22 percent saw increased revenue.

“A few respondents lost their business as a result of COVID but still took the time to respond,” Thompson explains. “They provided some very open responses. Other businesses that succeeded during the pandemic, still reported on things they needed to be more resilient.”

Inside Stories

From the varied responses, Thompson says several themes emerged. Most importantly, even though the food and supply chain bent, it did not break. Most of the responding companies used creative strategies to stabilize their businesses.

Survey responses showed that government intervention designed to help relieve challenges brought on by the COVID pandemic sometimes had unintended consequences. Some respondents said the additional $600 per week on top of regular unemployment benefits resulted in challenges in hiring employees. Some businesses reported scaling back production because they did not have enough workers.

Other businesses had difficulty attracting employees or getting employees to return to work due to health concerns with COVID-19.

“It was reported that some people were fearful of getting COVID, which impacted their decision to go to work,” Thompson says.

States set many of their own regulations to combat the spread of the virus. For companies providing products nationwide or even regionally, adjusting to each state’s rules took a tremendous effort.

Thompson says a few responding businesses felt excluded by the Paycheck Protection Plan (PPP), which provided forgivable loans to businesses to help meet payroll and other expenses.

The cause of some disruptions was not surprising. Businesses dealt with bottlenecks because upstream suppliers had to shut down due to COVID. In other cases, upstream suppliers could not get necessary inputs, meaning downstream businesses were left without important inputs. In other cases, some businesses providing inputs and services were reported to not be classified as essential,
impacting parts and inputs needed.

Some responding businesses made tough decisions to shut down temporarily and furlough workers or close permanently. Some businesses and processors limited the items they chose to produce, focusing on a vital few. Others shifted some of their marketing efforts to e-commerce. Nearly all the businesses, however, had to respond to shifting markets.

“One of the most frequent responses was about the market sales and losses,” Thompson explains. “For some businesses, their markets shifted overnight. That was huge. They might have lost it while others gained overnight.

Just as each survey respondent had a different COVID experience, many also had a different view of the future. Thompson says some respondents believe it will take 2 to 6 years to move through the pandemic, recoup their losses and get going again.

“Some thought the future looked exceptionally bright while others didn’t have that feeling at all,” Thompson adds. “The uncertainty is absolutely there.”

Lessons Learned

AURI published results of the supply chain survey in a report called “Navigating Challenges: Minnesota’s Food and Agriculture Manufacturers and Processors Supply Chains.” This report was an early analysis of the impact of the COVID-19 crisis on the supply chain of Minnesota’s food and ag processing sector.

While no one anticipates another global pandemic, lessons learned from COVID19 are applicable to many situations where the normal business operations are suddenly disrupted.

“Resiliency isn’t a one size fits all, although a couple key themes emerged,” Schlecht says. “Management efforts that were more agile, transparent, and proactive in finding solutions versus those having a reactive mindset waiting for ‘normal’ to return weathered the situation better. Additionally, collaborations and partnerships were vital in this effort as more communication and transparency occurred across the value-chain nodes.”

Partnerships

New partnerships and collaborations with other businesses and customers are critical to recovering from the economic impact. Rather than forging ahead alone or relying solely on one entity, some businesses successfully navigated the changing business climate by reaching out to their partners and diversifying their business partnerships.

“More conversations occurred with suppliers, more frequent payment terms were employed, discussions were more frequent with capital providers on needs, and new market channels were explored via connections,” Schlecht says.

New Markets

Businesses had to seek alternative markets and suppliers. They worked to develop secondary suppliers and new market channels rather than relying on one vendor or partner.

“The dedicated facilities and companies servicing one segment of the food market struggled due to the rapid drop in food service demand and being able to pivot to retail, while retail-focused companies couldn’t keep up with the high demand during the crisis period,” Schlecht says. Another example here was the pivot ethanol facilities made to hand sanitizer markets to offset the loss of demand in the fuel market.

Crisis Management Plans

For future crises, companies will need a robust crisis management and response plan. While no one can anticipate all the potential disruptions that can occur, having a plan for addressing sudden changes is critical to businesses responding quickly and effectively when challenges arise.

Technology

Technology is key to helping businesses adapt and respond to significant challenges. Virtual work opportunities and the digitization at all points in the supply chain is increasingly critical. The survey also reinforced the need for broadband and the ongoing efforts to digitize supply chains for increased efficiency.

“E-commerce will get bigger,” Thompson explains. “Additionally, broadband will be needed in making resilient supply chains that have information available electronically. If you can see that information all along the supply chain, you could build in a lot more resiliency.”

Additional Resources

Better resources should be made available to help businesses find and access support available from the state and federal governments during unprecedented economic times.

“Businesses may need some management training. There may also need to be some sort of a hotline or portal when they’re going through a crisis and they don’t know what to do,” Thompson says. “It may be helpful to have a place where businesses can bounce ideas off of others and connect on changing needs.”

Moving Forward

Thompson says there is strong interest in the information gathered through the value chain study. She says lawmakers at both the state and federal level have indicated an interest in the results. Results were presented during the Agri-Growth Council annual meeting and through the AURI Connects’ Webinar Wednesday program.

“We know that the challenges of COVID-19 have put tremendous strain on Minnesota farmers, processors, and the entire agriculture industry,” Minnesota Commissioner of Agriculture Thom Petersen says about the study. “But it’s important to keep hearing from people about what they’re experiencing so we can make good policy decisions to help them. These survey results give us one more tool we can use to help guide our work.”

A second round of focus group conversations with responding businesses is possible as well. Thompson says when companies are caught in a crisis, it can be hard for them to know what is needed. They may have more insights once more time has passed.

“AURI will explore multiple action items with its collaborating partners to put this information to use,” Schlecht says.

Schlecht says possible options include support for management training or short courses on best practices during crisis situations, a digital-based platform to more easily connect with other members of the value chain on needs and available resources, additional resourcing on requirements and opportunities around new market channels, and exploring options to utilize AURI’s meat laboratory for additional training to assist meat processor needs.

“Our collaborating partners will undoubtedly have additional ideas for exploration and potential collaborations to best meet the needs of this vital industry segment,” Schlecht says.

The full report is available online at www.auri.org.