“If the ‘just in time’ model is failing everywhere because of both manufacturing and transport shortages, are we going to go back to earlier ways of trading or devise something new?”
Challenging subsidized inputs and artificial economies of scale.
“Helping shorter supply chains to survive and thrive will make our food system more resilient and sustainable.”
As the UK’s lockdown took effect, wholesalers, distributors and even farmers denied a market for their goods rapidly adopted new ways of trading, including home delivery and click-and-collect.
Supply lines are getting very insecure – and there are squabbles over what’s to blame.
The Express is annoyed at Ikea’s excuses:
The Guardian reports on comments that current shortages are not just ‘a flash in the pan’:
Interestingly, the Telegraph is quite upfront about the risks:
From supermarket supply chains to staffing bars and restaurants, the worker crunch is being felt across service-producing and goods-producing industries, including hospitality, construction and agriculture. These shortages have many causes: at the top of the list, a combination of Covid and Brexit has led to a drain of workers from Britain…
But having cut off so much “low-skilled” migration after Brexit (a term much more heavily in dispute since the “key workers” from the pandemic emerged), the Government is taking a big gamble that the UK has enough workers who aren’t just up to the jobs, but who want to do them. If the gamble goes awry, the price could be steep.
This was also looked at earlier on these news pages:
The Sun reports today that the government says “this will all be over by Christmas”:
But that’s not what the food industry is saying, as reported by the Mail:
The days when supermarket shoppers could expect to pick up whatever they want whenever they want are over, a food industry expert has warned – as he claimed the supply chain crisis will only get ‘worse’.
The stark message from Ian Wright, chief executive of the Food and Drink Federation, came as customers continued to share pictures of gaps on shelves and a farmer warned staff shortages were ‘killing small businesses’. Addressing the supply chain issues, Mr Wright said: ‘It’s going to get worse, and it’s not going to get better after getting worse any time soon.
Speaking to listeners at an event organised by the Institute for Government, he added: ‘The result of the labour shortages is that the just-in-time system that has sustained supermarkets, convenience stores and restaurants – so the food has arrived on shelf or in the kitchen, just when you need it – is no longer working. And I don’t think it will work again, I think we will see we are now in for permanent shortages.’
Industry figures have pinned the problems on a shortage of lorry drivers and food processing staff due to Brexit and Covid, which has seen foreign workers go home to be with their families and increased waiting times for receiving HGV licenses.
However, as a correspondent to these pages comments, there might be more interesting long-term developments:
Ian Wright has said that he thinks there will be ‘food shortages’, but are they really food shortages? If the ‘just in time’ model is failing everywhere because of both manufacturing and transport shortages, are we going to go back to earlier ways of trading or devise something new?
‘Just in time’ saves on storage costs at the retail end but it must increase store deliveries perhaps? I know that some big grocery stores get deliveries hourly. Should we be looking at larger daily deliveries by rail freight with lorries only used right at the end? Or will we go back to corner shops for essentials and get everything else delivered direct?
This throws up all sorts of key points.
Firstly, there is the ‘supply-push’ model of the economy as advanced by Alfred Chandler in the 1960s – which has become orthodoxy in how we get our stuff.
Here’s from a critique of this thinking:
The marketing “innovations” Chandler trumpeted in ‘Scale and Scope’ — in foods the techniques for “refining, distilling, milling, and processing” — were actually expedients for ameliorating the inefficiencies imposed by large-scale production and long-distance distribution: refined white flour, inferior in taste and nutrition to fresh-milled local flour, but which would keep for long-term storage; gas-ripened rubber tomatoes and other vegetables grown for transportability rather than taste; etc. The standard American diet of refined white flour, hydrogenated oils, and high fructose corn syrup is in large part Chandler’s legacy…
The question, then, is whether the current issues around the supply chain would be enough to challenge the junk food and junk products which is marketed at us.
An alternative model would be local food production (aka farm shops) and small localised distributors (aka the corner shop) But Big Food and the big supermarkets would not be very happy with that – and will tell us that we have to make do with empty shelves and less choice.
A second essential to the modern market is the way in which ‘economies of scale’ are massively subsidised, especially when it comes to transport infrastructure which makes the shifting of stuff so convenient – for the larger, as opposed to the local, suppliers/manufacturers/farmers that is.
The drive to literally drive everywhere without hindrance has destroyed local business – as driven by “the major automotive and oil companies lobbies who wanted highways everywhere”:
Building roads is a free ride for big business, again at the expense of the local:
Corporate capitalism is built on subsidized inputs, and profitable in large part because of them. It achieved growth in the 20th century through the extensive addition of subsidized inputs, like subsidized fossil fuels and large tracts of cheap land previously preempted (stolen) by the state, rather than the intensive approach of using existing inputs more efficiently.
A basic law of economics is that when you subsidize an input, people tend to use more of it. And businesses will tend to substitute that artificially cheap input for other inputs. The distorted price system gives an artificial advantage to firms most heavily dependent on that input. For example, subsidies to long-distance shipping infrastructure tend to benefit the firms with the largest market areas and the largest-scale production facilities shipping their output the furthest distance. It makes them artificially competitive against smaller, more localized — and more efficient — forms of production. It creates artificial economies of scale at levels where they would otherwise have leveled off, leading to an economy of artificially large firms serving centralized markets.
And thirdly, returning to the theme of long supply lines which have necessitated having foods with longer ‘shelf lives’, there is the supportive plastics industry which says we need a wrapping around a cucumber to keep it ‘fresh’ without suggesting that we could do without all the plastic packaging if we had locally-grown cucumbers and put up with ‘seasonal shortages’:
So, what are the alternatives to long supply chains which can’t be relied on?
A lot of thought has been going into this of late:
The Soil Association thinks this presents an opportunity:
Helping shorter supply chains to survive and thrive will make our food system more resilient and sustainable. The fragility of longer supply chains has been highlighted by COVID 19 and the ongoing climate emergency. Finding ways to source local and sustainable food – like organic – is more important than ever.
Footprint, “the UK’s leading sustainability expert in the food and drink industry”, wonders whether shocks to the system can precipitate change:
The pandemic has spawned a resurgence of interest in local food. But the economic drivers for centralised sourcing and distribution remain strong.
In the middle of lockdown, isolating at home in Kent due to a sniffling toddler and with supermarket delivery slots reserved for the vulnerable and those with a degree in computer science, I logged on to my laptop at 9pm and placed an order with my local butcher for some grocery essentials. Less than 12 hours later the delivery arrived on my doorstep: milk from the dairy farm just up the road, bacon smoked in the neighbouring village, freshly picked Kentish strawberries and raspberries.
It took the butcher’s shop a matter of weeks to build the capability to take orders online at the start of lockdown, the benefits of which will last for years to come. And it’s far from alone. As the UK’s lockdown took effect, wholesalers, distributors and even farmers denied a market for their goods rapidly adopted new ways of trading, including home delivery and click-and-collect. In a blog for the Local Trust, Sustain’s Maddie Guerlain wrote: “Local councils, community centres, schools, catering companies, volunteers, food partnerships or alliances, farms, hospitality staff and others have rallied together in record time to pivot to or develop new operations, health and safety protocols, supply chains and referral systems in order to ensure that no one is left without a safety net while in lockdown, whether due to medical or financial vulnerability.”
Finally, these news pages have been looking at some of the ideas above: