What bread can teach us about supply chain disruption

Even in hard times, most of us could not do without bread. But the food staple has been under strain recently, as rising costs and disrupted supply chains put pressure on millers and producers. Many of the difficulties they encounter are familiar to many working in supply chains of all sorts of different products.

Francis Cooper runs a small, artisan bread supplier called Cooper's Bakehouse, in South London, UK. His company makes between 310 and 320 loaves per day — a total of about 2,200 per week. They are distributed to people within a three-mile radius by delivery drivers using e-bikes.

He says they have been beset by challenges from all sides.

“So far, we haven't had to put our prices up, but it takes us into a risky place in terms of profitability," he told HERE360. “It has become really hard to make those decisions."

The ingredients of Cooper's bread are simple: flour, water and salt. That makes the supply chain less complex than some baked products that add oil or other flavorings.

Nevertheless, a series of factors have made business tough lately, including the cost of flour alone rising by 50% on this time last year.

Energy prices in the UK have increased exponentially, and using gas-powered ovens has an impact on the cost of producing Cooper's slow-fermented, organic bread and sourdough. The gas is supplied by green energy company Ecotricity.

“It has been difficult to talk to energy companies and we don't know yet how the government is going to support us," Cooper said.

Yet that is not the greatest difficulty.

“We pay the London Living Wage, but the hardest thing is employing people," Cooper said. With fewer Europeans in London since Brexit and the rising cost of living, vacancies in these kinds of jobs have increased. This problem has been described as “prevalent and persistent" by the UK's HR professional body CIPD.

Rising costs

Cooper said he was one of the “net beneficiaries" of the COVID-19 lockdowns in London. Cooper's Bakehouse doubled in size and did not have to play catch-up since the business was already focused on home delivery.

People at home chose to spend their disposable income on high-end foods such as sourdough bread.

However, with a recession looming, it remains to be seen if customers will still pay for a premium product.

“We are at the top end of prices for bread, so it depends how deep the recession is how it affects spending," Cooper said. “It is already getting harder to get new customers."

One thing he is keen to avoid is putting up prices, even though the cost of flour alone has skyrocketed. “It is difficult to do that as a small business anyway — it becomes a real challenge," he said.

“It is everything happening at the same time that makes it difficult."

Against the grain

Cooper's Bakehouse has a relatively simple supply chain from its base to customers. The use of mostly e-bikes to deliver the bread means that they have not been badly hit by increased fuel prices.

“We're doing it because it's the most sustainable way of delivering our bread," Cooper said. “E-bikes are really revolutionary for delivery because of the way they open up cities." Routing is done manually and has been perfected over time.

But what about the flour before it gets to south London?

Cooper receives the raw ingredients from two millers, both in the southwest of the country. One is Stoate & Sons, run by Michael Stoate, who is the fifth generation of his family to run Cann Mills, near the town of Shaftesbury in Dorset.

“We do get a lot of our grain locally," Stoate told HERE360. “About 60% of our wheat comes from a local farmer, and he delivers it on his tractor. As long as he has diesel he can get the grain to us."

However, Stoate gets some other types of grain such as spelt from a merchant. Then there is a small percentage which is imported.

The price of the latter has increased as suppliers have faced difficulties getting the grain to Europe from the Black Sea region. The grain is more expensive now thanks to rises in fuel prices.

Organic panic

To boost sustainability, Stoate & Sons has joined the Southwest Grain Network. The network aims to promote a local supply chain from farmer to miller to baker.

“Farmers are opting for varieties and methods of farming that don't require fertilizers and herbicides. The yield is lower and the cost is higher, but hopefully the product is more consistent and less reliant on chemicals," he explained.

Stoate & Sons is a relatively small operation selling between 800 and 1,000 tons of organic stoneground flour every year. But Stoate said he is less confident now about economic prospects than he was at the start of the pandemic.

“We are being squeezed from every angle," he said. “People are looking at ways to save money in every way, so it could affect demand. We wanted to make organic bread available to everyone, but this is reversing that."

Not only is the milling process “power hungry", he said, but extra transportation costs mean the product is affected “all the way down the line." The mill needs to replace its vans soon and the cost of vehicles has increased thanks to supply chain disruption. Labor and packaging costs have also gone up. Gas prices have affected the cost of fertilizer as well.

A fresh approach

There is still some uncertainty over what all this might mean. While the mill is seeing out an existing electricity contract, they could be faced with higher bills once that is over.

Wheat is a commodity and Stoate said the price of grain has been affected by speculation and volatility. Even when the spot price goes down, it can take time for the impact to be felt by those who have bought in advance.

Before the pandemic, changing shopping habits meant that fewer loaves were being sold. The industry is in transition as businesses like Cooper's Bakehouse and Stoate & Sons try to adjust to changes, challenges and opportunities.

“I like to think we are an affordable luxury," Stoate said. “It's like a cup of coffee in a coffee shop — it's expensive, but it gives you that feelgood factor."

It remains to be seen if people will continue to splash out on these little things while tightening their belts on larger items. Cooper's Bakehouse and Stoate & Sons will be hoping that they do.

How location technology can tackle supply chain challenges
About 82% of delivery companies still use manual processes in their supply chain
Most fleets use some form of digital tracking – eg, driver hours of service – but this information often lives in silos
Only about 23% use their data for forecasting
More efficient routing from tools such as HERE Tour Planning can boost driver productivity for fleets
Location technology can also reduce fleet management costs by up to 20% and acts as a unifying link between disparate pieces of information
To build a more predictive supply chain, diagnose areas of improvement, identify gaps and silos, and consider the wider tech stack
Read the full eBook "The predictive supply chain evolution"