The Stockout: Midwestern Pet Foods aflatoxin contamination traced to Chickasha, OK plant

Product recalls happen every year and are impactful to the supply chain by delaying production and sometimes it calls for a complete rehaul of sourcing methods. Companies can help prevent recalls by ordering new equipment to replace older worn out pieces, ordering regular maintenance checks, along with better training among employees. 

In the case of a recall caused by a foodborne illness, companies might have to adjust their supply chain by switching suppliers for certain goods. For example, in 2015 when Chipotle had a string of both E. coli and salmonella outbreaks, the company switched their sourcing of tomatoes in a bid to restore faith in their fresh and safe products. The switch came too late to relieve customers of their worries and sales cratered 22% y/y in 2Q2016.

If a company has to switch suppliers then this is certainly going to affect their supply chain. The most advantageous action a company can take is to weave multiple suppliers into their supply chain. If a company has multiple suppliers for one product then this will enable them to minimize supply chain disruptions.

Human rights and the supply chain is a major theme as we head into 2021. Environmental, social, and governance (ESG) is a hot-button issue as the near year begins. In December, I wrote about the bill that is in Congress that will ban imports from the Xinjiang region in China due to allegations of forced labor of Uyghur Muslims in the region. This bill is likely to pass which will introduce hurdles into existing supply chains. 

“Respect for human rights is strongly associated with value-chain resilience and a stable business operating environment,” Peter van der Werf, an engagement specialist at Robeco, told Bloomberg in January. 

So how does this affect the supply chain? CPG companies sourcing their goods from areas that have questionable human rights records will face pressure to receive more transparency into their supply chain and labor conditions. The problem that arises is that it is difficult for companies to be fully aware of what is going on at plants in countries that are known for secrecy and a lack of visibility. 

Reefer capacity tightens further in the Southeast and Midwest over the past week. On a national level, reefer capacity has steadily loosened over the past month, but over the past week there have been multiple markets in the Southeast and Midwest that have tightened considerably on a week-over-week basis (w/w). At FreightWaves, we measure reefer relative capacity by the reefer outbound tender reject index (ROTRI).

Map: FreightWaves SONAR; height: reefer volumes, color: reefer outbound tender reject index w/w change.

Markets where availability of capacity shrunk the most (measured by basis point increase in ROTRI) were Charlotte, North Carolina (+852bps); St. Louis, Missouri (+759bps); Pittsburgh, Pennsylvania (+385bps); Joplin, Missouri (+338bps); and Columbus, Ohio (+175bps).

If you are a shipper in these markets, expect reefer truckload spot rates to expand in the coming weeks. Carriers, it could be advantageous to position your trucks in these markets to take advantage of the lack of capacity. 

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