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Supply Chain Issues in the News: Formula Scarcity

By Avetta Marketing
June 01, 2022
4 minutes
Two people silhouetted against a blue sky between an office building and construction equipment.

As companies around the world continue to grapple with post-pandemic operational challenges, staffing issues and product shortages have become more frequent. Yet, there’s one shelf that’s been particularly empty lately: baby formula. 

Since mid-April, a nationwide formula shortage has rocked retailers and left parents scrambling. Initially, the issue could be traced to one major baby food manufacturer, Abbott Nutrition. In February 2022, the U.S. Food and Drug Administration (FDA) shut down Abbott’s Michigan-based production plant and recalled three brands of its powdered infant formulas, following reports of potential bacterial infections, including Salmonella. 

In response, other formula manufacturers tried to pick up the slack. They now claim to be working at peak capacity, but it still isn’t enough. As of April, roughly one-third of all formula products were out of stock at 20 major U.S. retailers.  

While standard formula is difficult to come by, it’s even more challenging for parents who need specialty formula to address their baby’s health or feeding needs.  

In response, they’re turning to their local and online communities, inquiring about formula availability on social media and even driving to neighboring states when they get a hot lead. In the meantime, Abbott is working alongside the FDA to re-open its Michigan plant and resume operations.  

While it’s easy to categorize this news story as one of many pandemic-induced frustrations, it goes deeper than that. The formula crisis illustrates the need for companies to have agile supply chains that can scale up as required to meet customer demand. For many, this means expanding and diversifying their supplier networks so that if one touchpoint shuts down, the entire assembly line doesn’t collapse.  

This is especially true in the food and beverage (F&B) sector. Highly concentrated and even more competitive, market leaders vie against one another based on price. This means they must be highly efficient, following lean operating models that don’t allow for costly, excessive stock. When demand suddenly spikes as in this case, they’re left without adequate inventory to compensate for it.  

While Abbott’s closure certainly had detrimental effects, it wasn’t the sole problem that led to this supply chain crisis. For months, formula manufacturers have experienced difficulties in procuring basic ingredients, such as cow’s milk. They’ve also faced labor shortages, as well as product and packaging scarcities. The sudden loss of a key contributor was the push that the dominoes needed to totally crumble.  

While parents, manufacturers, and retailers look for ways to survive in the meantime, savvy manufacturers can take a cue from this dilemma. Fortify and diversify your supply chains now, so you can be prepared for a similar emergency tomorrow.  

Avetta can give you the tools to vet new and existing suppliers, ensuring they’re following safety and compliance measures at every turn. This makes it easy to add new contractors to your network, so you can expand with confidence. 

One of our recent partners, Deciem, reported a 32% increase in contractor count within the first month of solution implementation. You can learn more about their story in this case study. To join their ranks and see results of your own, reach out to our team of consultants today.   

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