General Mills: disruptions 10 times worse than ever

MINNEAPOLIS — Supply chain issues at General Mills, Inc. have overlapped over the past two-plus years, said Jonathon J. Nudi, group vice president, North American Retail.

Mr. Nudi participated in a Q&A discussion about General Mills’ business on June 1 at the RBC Capital Markets Consumer and Retail Conference. The Q&A session was led by RBC Senior Consumer Analyst Sunil Modi.

“We are seeing 10 times more disruption in our supply chain from an ingredient perspective going into our plans than we have ever experienced before,” Mr. Nudi said. “And it gets really difficult because we can’t see them coming in a lot of cases. So a truck is supposed to show up with oil at our chilled pulp mill in Tennessee and doesn’t show up. So we have to close the line. Obviously this creates a lot of problems in terms of having the right amount of product and supply for our customers. And at the same time, it also leads to many additional costs. So we have thousands of these hardware disruptions every month now, and that’s something we’ve never seen before.

A tight labor market is a long-standing problem, compounded by COVID, which has precipitated global supply chain issues, Mr Nudi said. The ensuing war in Ukraine and the resulting material disruption created unprecedented challenges, he said.

The problem is not entirely related to the availability of General Mills’ main ingredient, grain. He said 90% of the company’s grain supply comes from North America.

“So availability really isn’t the issue for us,” he said. “We have the ingredients we need. It’s really the price, and it’s a world grain market. So we were impacted by that… Starch, frankly, is something that I hadn’t realized what we use in so many different products. It’s really been used as a processing aid and the starch has been restricted for over a year now, and that’s been a real challenge for us. Oil, a bit of an impact of what’s happening in Ukraine, has become a challenge from a supply perspective. Even beyond that, again, I’m learning all sorts of things that I didn’t know, but oil has to be shipped in specific trucks that are built to transport oil and have specially trained drivers to drive that truck. There is a shortage of these truckers right now.

General Mills revealed its supply chain struggles and how they affected the company’s baked foods, Totino’s hot snacks business and refrigerated dough. Conditions have improved, Mr. Nudi said.

“If you look at our shelf availability, we’re back where we need to be,” he said. “But then other things come up. The oil issue that I mentioned is a real challenge for us right now.

The challenges are getting the full attention of the management, Mr. Nudi said.

“I have a weekly control tower meeting where I meet with our team on the biggest issues we’re facing and really help to try to break down the barriers and do things differently than what we’ve been doing before” , did he declare. “So trying to build resilience back into the supply chain will help us from a sales perspective as well as improve stock levels and at the same time we hope to reduce some costs over time because all these disruptions are also very costly.”

Although General Mills has experienced challenges associated with COVID and the tight labor market, the difficulties have not primarily occurred at the facilities the company operates, Mr. Nudi said.

“(Our frontline workers showed up for work every day and continued to deliver products to our consumers who needed food and our products more than ever,” he said. “We haven’t lost a lot of that throughout the pandemic, obviously, like people had family issues or health issues, they were dealing with it, but they were coming back. And that’s partly because we have a long history with these employees, and we treat them well and they treat us great.

“The biggest ripple effect has really been that a lot of our suppliers have had real labor issues. And I think that’s led to a lot of these ingredient issues that I’ve also speak.

He added that the company’s fulfillment centers have had labor issues, but those have recently improved.