Hyperbolic Headlines Will Not Improve Food Supply Chains
By: Yossi Sheffi
Tags: Thought Leadership, MIT, Covid 19, Supply Chain, Food Supply Chain

Hyperbolic Headlines Will Not Improve Food Supply Chains

Contrary to the media’s apocalyptic assessment, the COVID-19 crisis has not broken America’s food supply chain and the product shortages experienced by consumers are temporary blips. As is often the case, looking behind the headlines will reveal the real situation — and problems that genuinely need to be addressed.

Waves of fearmongering during a pandemic

As I explain in my blog post Their Finest Hour — Supply Chain Professionals Bring It, media outlets know that “fear sells” and are portraying a false picture of a food supply chain that is in a state of collapse. In reality, the nation’s food supply is robust and despite the momentous changes in demand caused by the pandemic, food is reaching supermarkets and online distributors. Some retailers have introduced rationing — but to prevent hoarding and excess buying and not because they fear that supplies will dry up. Moreover, doomsday articles such as Bloomberg’s recent piece about food rationing actually encourage the hoarding that retailers are trying to curtail.

At times, the warnings are more focused. “Egg prices are skyrocketing because of coronavirus panic shopping” claimed CNN Business on March 25, 2020, along with a much-repeated video of empty store shelves. And the USN&WR announced on April 6, 2020, “Coronavirus-fueled panic buying cleared the shelves of eggs. What’s next for egg markets?” Again, creating a wave of panic buying. No systemic egg shortage materialized. Yet the media continued.

Last month saw a wave of scary headlines regarding a meat shortage as a result of the closure of several beef and hog processing plants. For example, On April 29, 2020, The Boston Globe warned its readers: “Coming to a grocery store near you: meat shortages.” Yet the articles and TV reports fail to mention that the US exports 27% of its pork production, 30% of its turkey, 13% of its beef, and 18% of its poultry. The nation is the fourth largest exporter of meat in the world after Brazil, India, and Australia. America produces more than enough food to feed its population. The pandemic has strained supplies, but the US food supply chain has risen to the challenge. Warehousing, distribution, and transportation operators are working overtime under difficult conditions to keep food products flowing.

The over-the-top headlines are the result of sloppy journalism and the competition for readership and clicks. These commercial considerations have replaced the kind of smart reporting that provides context and tells the story accurately and without bias.

The real picture of supply chain shortages

Some headlines — such as those that refer to farmers plowing under-ripe crops, dumping milk, and euthanizing animals — are heart-achingly justified.

Each one of these phenomena has a different underlying cause. The demand for fresh produce collapsed following the closure of universities, industrial campuses, and restaurants. By and large, it was replaced with a demand for comfort food, canned goods, and other foodstuffs that can keep for a long time. This shift resulted in the destruction of fresh produce. The spilled milk was the result of the disappearance of demand from schools and restaurants, which was not replaced to any large degree by home demand. The meat scare was the result of the temporary closure of several large meat processing plants, but the shortage eased within days.

Despite the magnitude of these changes in demand, supply chains have risen to the challenge. And the challenge was substantial. Supermarket shelves require different product unit and shipping sizes, packaging and labeling than institutions. Food manufacturers had to use existing suppliers, and quickly put in place the machinery and processes required to supply this vastly different market. Furthermore, not only was there no time to procure and install new machinery, but it was also difficult to justify the capital expenditures when factories and suppliers did not know the duration of the new demand pattern.

Other issues raised by the pandemic

In supply chain circles the ability to adapt quickly to new demands is often referred to as agility. What can we learn from the pandemic that could increase the agility of national food supply chains?

In a recent NPR interview, Tom Colicchio, a founder of the Independent Restaurant Coalition and owner of five restaurants, argues that the government can help make food supply chains more agile. Part of the national pandemic playbook should plan to rapidly adapt to new demand patterns, but according to Colicchio, the US Department of Agriculture does not have the capacity to help orchestrate such a shift. For example, he suggests that restaurants could be repurposed as food preparation and distribution hubs in locales, thus enabling food that would otherwise be discarded to be distributed to consumers.

Another issue spotlighted by the pandemic is a concentration of capacity in food supply chains. For example, as The Economist reported recently, half of America’s poultry market — the largest in the world — is controlled by just four firms. While these market behemoths have the resources to compete effectively and capture economies of scale, such concentrations may make the supply chain less resilient. A common practice to build resiliency is second sourcing; maintaining alternative sources of supply that can step in when primary suppliers are disrupted. However, establishing such a “shadow” supplier network is far from trivial, especially in highly regulated markets. In the US poultry supply chain, back-up meat processors are few and far between, so the supply chain is reliant on the continued health of just a few players.

The role of migrant labor in America’s food supply chains has become much more contentious over recent years, and the pandemic has underscored our ambivalent attitude towards these workers. Finding enough migrant labor was a challenge for many farms before COVID-19. Now, issues such as protecting workers against infection have compounded the problem.

Some issues are beyond the control of companies in America’s food supply chain. Examples are the impact of the China/US trade war, and trade restrictions imposed by governments as they react to the pandemic crisis with bans on food exports. The shockwaves from such actions force companies to reconfigure their supply chains on the fly.

Focus on fixing real logistics problems

It bears repeating that America’s food supply chains are not broken. Indeed, they have shown a remarkable capacity to roll with adversity and maintain supply lines in the midst of a global pandemic. Still, the coronavirus has highlighted weak links in food supply chains that we can reinforce — providing we don’t get distracted by alarmist headlines.