The disruption caused by COVID-19 has forced businesses to adopt new ways of operating. That transition hasn’t been comfortable or easy, but it’s made the value of the small-batch mindset that we use in lean apparent in sectors that haven’t considered it before.
In Your Kitchen Can Be as Well Stocked as Restaurants Now, the NYTimes points out that with the mass closure of restaurants around the country, restaurant supply companies, fishmongers, and farmers are now selling direct to consumers to make up for the loss of business:
Restaurant-supply companies that once sold fresh vegetables to chefs by the case now offer them in packages of 16, eight or four ounces. In San Francisco and Washington, D.C., fishmongers who once supplied only restaurants now send their trucks into residential neighborhoods. Midwestern farms that used to take chefs’ orders by phone sell their vegetables and cheeses in consumer-friendly quantities through online stores.
Consumers benefit by getting access to better (and more unusual) ingredients, sometimes at better prices than they’d be able to get in stores. But the benefit to producers and distributors goes beyond simply developing a new customer base and earning money during the pandemic. It turns out that the business model is actually better for producers and distributors as well.
Restaurants typically pay on 30 or 60 days terms, assuming they don’t go out of business first. And if they do, the inventory usually can’t be collected—mushrooms and peaches have a shorter shelf life than dishwashers and office furniture. That places a huge cash burden on the distributors and suppliers. But as the article notes,
Retail customers, though, have a peculiar habit of paying up front. This has proved to be a boon for some companies. “The cash flow model is incredible,” said Adrian Hoffman, an owner of Four Star Seafood in San Francisco. “Selling directly to consumers is almost a better business in that it spits out enough cash to pay off everything we owed.”
Obviously, selling direct to consumers necessitates the development of new, and often expensive, business capabilities. But clearly this kind of “small batch” approach it can be beneficial for producers, distributors, and consumers alike.
Just like diversifying a stock portfolio, combining the wholesale and retail approach—large scale and small batch sales—makes companies more resilient and more profitable in the long run. That, I think, is the challenge—and opportunity—for all of us.