Welcome to Procurement News, part of our ongoing aggregate news series covering recent supply chain headlines and trends pertinent to Chief Procurement Officers and other procurement leaders. Contact us with your news story here.
Biodiesel Levels Could Lead to Higher Inflation, Food Prices
The National Retail Federation recently announced that biodiesel levels set by the Environmental Protection Agency (EPA) are too high and will result in driving up inflation, leading to already high food prices. Processed foods that rely on food oils and crops like soybeans are the most likely affected.
According to David French, NRF’s senior vice president for government relations and executive director of NRF’s National Council of Chain Restaurants division, “For more than a year, we’ve alerted the EPA and the administration about the shortage of food oils, which is causing significant disruptions throughout the supply chain and raising food costs for consumers,” said French.
“Food manufacturers simply can’t get their hands on enough of these oils to make everyday foods from bread and buns to condiments and dressings, and the problem is even worse for small- and medium-size manufacturers.”
Per the NRF press release, the EPA set the Renewable Fuel Standard program’s biodiesel blending mandate for 2022 at 5.63 billion gallons, a 22 percent increase over 2020. The NRF asked the EPA in February to keep the biodiesel mandate at 2020’s 4.63 billion gallons temporarily to allow supplies of the oils to catch up with demand.
LEGO Group to Build U.S. Factory in Virginia
The LEGO Group announced its plans to invest more than $1 billion into a new factory in Chesterfield County, Virginia. Designed to operate as a carbon-neutral facility, the 1.7-million-square-foot factory will employ 1,760 people once completed. Its day-to-day energy needs will be 100-percent matched by renewable energy generated by an onsite solar park.
The Virginia factory serves as the LEGO Group’s seventh global facility and the second in the Americas. The company’s Monterrey, Mexico manufacturing site will be expanded and upgraded to meet growing demand for the company’s products.
According to Carsten Rasmussen, Chief Operations Officer for the LEGO Group, “Our factories are located close to our biggest markets which shortens the distance our products have to travel. This allows us to rapidly respond to changing consumer demand and helps manage our carbon footprint,” said Rasmussen.
“Our new factory in the U.S. and expanded capacity at our existing site in Mexico means we will be able to best support long-term growth in the Americas. We are fortunate to find a location where we can begin construction quickly and create temporary capacity in under two years.”
Groundbreaking for the new facility begins in the second half of 2022, with production beginning in the second half of 2025.
USDA Announces Framework for More Competitive, Resilient Food Supply Chain
In an effort to strengthen critical food supply chains and provide better access to markets for small- to mid-size producers, the U.S. Department of Agriculture (USDA) announced details for its Food System Transformation framework. According to the USDA, the announcement supports the Biden-Harris Administration’s broader work to strengthen critical supply chains as directed by Executive Order 14017 America’s Supply Chains.
The USDA provides the following four goals of its Food System Transformation framework:
- Building a more resilient food supply chain that provides more and better market options for consumers and producers while reducing carbon pollution. In order to be more resilient, the food system of the future needs to be more distributed and local. Having more capacity to gather, process, move and store food in different geographic areas of the country will provide more options for producers to create value-added products and sell locally, which will support new economic opportunities and job creation in rural communities.
- Creating a fairer food system that combats market dominance and helps producers and consumers gain more power in the marketplace by creating new, more and better local market options. Just 14 cents of the food dollar goes to producers on average — in large part because producers’ power in the marketplace has declined over the past 50 years with increased consolidation in the food system. Today, just a handful of companies dominate meat and poultry processing and just a few multi-national companies produce most brands and products on supermarket shelves.
- Making nutritious food more accessible and affordable for consumers. A family in the United States not having access to affordable, nutritious foods is unacceptable. Hard-pressed families may have limited food options and some communities have been underserved by grocery stores and food retailers, making it difficult to access healthy food. USDA is committed to ensuring every American family has access to affordable, nutritious foods.
- Emphasizing equity. For too long, rural communities, underserved communities, communities that experience persistent poverty, and the people who live there have been left behind. It is in these communities where most of our food comes from; where most of the water that we drink comes from; and where most of the energy we consume comes from. USDA’s Food System Transformation investments will create more economic opportunities for these communities and allow them to retain more of the food system dollar.
RRD Packaging Study Reveals Shifting Strategies
With several shocks to supply chains over the last two years, packaging decision-makers are now reevaluating and shifting their sourcing and operating strategies, according to an article from Printing Impressions regarding a recent study released by R.R. Donnelley & Sons Company (RRD).
The Unpackaging Reality Report explores how converging disruptive issues like supply chain volatility, inflation, labor shortages, and increasing sustainability pressures have impacted the industry, resulting in 90% of packagers changing how their packaging is sourced.
According to Lisa Pruett, president of Packaging, Labels and Forms, Retail Solutions at RRD, “There’s no disputing that rising costs, supply chain snares, and talent pinches have posed major challenges to the packaging industry, but that doesn’t mean this reality is all doom and gloom,” she said. “These challenges actually transformed the industry into a more innovative, agile, and environmentally-conscious sector. Organizations responded with diverse strategies as there is not a one-size-fits-all approach to tempering disruptions.”
Per the RRD study, which surveyed 300 U.S. packaging decision-makers, there are three key takeaways:
- Supply chain challenges lead to innovation. Due to market challenges, organizations were willing to explore sourcing and material packaging alternatives and solutions. For example, 62% diversified suppliers, while 42% outsourced manufacturing and fulfillment.
- E-commerce ignites packaging demand. The pandemic ushered in the rapid adoption of e-commerce, which created a sudden demand for packaging of online orders. For example, 57% of respondents experienced an increase in e-commerce orders in the past one to two years, resulting in 92% responding to an increase in packaging needs.
- Surprising strides in sustainability despite cost pressures. Despite market conditions, sustainability initiatives remained a priority with 94% agreeing that sustainability is a key consideration in packaging and label decisions. In fact, per the study, two-thirds of packaging professionals shifted to more sustainable packaging than what was used prior to the pandemic.
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