The Supply Chain
Lina M. Khan
Chair – FTC
Federal Trade Commission
Under Section 6(b) of the FTC Act, the agency is soliciting voluntary
comments from retailers, consumer goods suppliers,
wholesalers, and consumers regarding their views on how
supply chain issues are affecting competition in consumer goods markets.
Martha Montoya, CEO
December 9th, 2021
The Supply Chain – According to the FTC, “Supply chain disruptions are upending the provision and delivery of a wide array of goods, ranging from computer chips and medicines to meat and lumber.” Supply Chains?? Until Covid-19 came along, for the most part, consumers only had a vague idea of what the global supply chain was. They were thought of as perhaps having something to do with shipping. Consumers really had no idea where their goods came from, or where/how their goods travelled to get to their grocery stores. The phrase “supply chain” was simply not in their vocabulary.
When supermarket shelves emptied out, the general consumers’ belief was that there was simply a shortage of actual products. The reality was that there were plenty of goods to supply everyone, but they were sitting in a container at a port somewhere or rotting away in a field due to lack of farm labor. Or there may have simply been a shortage of pallets to carry the goods to market.
Multiple Causes - The supply chain disruptions that are leading to shortages of goods across the American economy are caused by multiple factors, including: the beginning of the Covid-19 pandemic caused pent-up demand for goods, shortages of workers in key industries (such as warehousing), shortages of truck drivers to get goods from ports to supermarket distributions centers, and even something as mundane as a shortage of pallets for transporting goods in palletized form. Today, the supply chain is more dynamic and volatile. The global supply chain, which formerly ran like clockwork, is now significantly more unpredictable and exposed to various risks.
Labor and Driver Shortages - Labor shortages are certainly a key factor in the supply chain slowdowns and disruptions. The Department of Labor informs us that almost 500,000 US workers quit their jobs in August alone. Economists speculate that this unusual rate is being driven by the demand for higher wages and better working conditions. Workers are increasing unwilling to work in unsafe conditions, for example, where the lack of vaccinations among co-workers leaves them exposed to Covid-19 in the workplace. Shortage of truck drivers is a parallel issue. The American Trucking Association reports that there is a shortage of 60,000 truck drivers and that the situation is getting worse. In addition, there is an acute shortage of warehouse workers. In July, the Department of Labor reported the warehouse industry had a record of 490,000 job openings.
Lack of Predictability - The major issue is that key managers throughout the supply chain can’t predict when or where bottlenecks will occur. To prevent such blockages in the future we will require better data for improved logistics forecasting. All players in the supply chain must be able to react quickly to prospective supply chain disruptions. Those supply chain managers who are effectively able to navigate this labyrinth of challenges are using data to assist them in more accurate demand planning in order to stay ahead of the curve.
Massive Data Needed - The best tool for managing the supply chain is data. Access to data is critical for effective decision-making. If you know how much produce is being shipped from a particular country on a particular date, then you can track it effectively and have the ability to optimize your planning. If you can track the ship’s progress as it makes its way to your country, you can more effectively plan for the arrival of that produce in the ship and for its prompt unloading and trucking to processing centers around the country. Unfortunately, many countries have a hodge-podge of manual and digital systems for managing their data. The result is that decision-making is thwarted and extremely sub-optimal due to incomplete data.
76 Key Variables - Agtools has identified 76 variables that underpin the global supply chain for perishable crops. These include such variables as: how much of a particular crop (e.g., pineapples) is grown in specific growing regions of a particular country; when those products are harvested; and what the means of transportation are to get the products to the shipping ports. Also included among these 76 variables are: historical weather patterns, prices of fuel, labor shortages, and labor unrest. Any one of these 76 variables can impact supply chains at anytime, anywhere in the world, and can lead to unforeseen supply disruptions.
Case Study – The following three paragraphs summarize a case study of how countries can move from having literally no access to data about their agricultural production, to having robust systems to manage the flow of agricultural goods, from the growing areas of their countries, into the flow of international commerce.
Data on Pineapples - For the past year, Agtools has worked with the government of a particular country that is a major exporter of pineapples and many other fruits. Because of its importance in world markets, Agtools wanted to gain access to this country’s data. Initially, upon contacting the government about accessing the data, country officials informed Agtools that there was no data about the country’s pineapple exports.
Inter-Agency Efforts – After months of further inquiries and prodding, Agtools was able to determine that the data exists and that it resided within a particular agency. After months of working with the agency and interested legislators, Agtools was able to convince and support agency officials using the Agtools platform and team to develop an API (applications programming interface) to enable access to, and management of, the country’s agriculture data. Eventually, the agency was able to establish a robust system. In addition, the agency created a portal that gives supply chain managers access to the country’s data on domestic production and markets, exports and imports, not only on pineapples, but on all food and agriculture commodities.
Data Visibility - As a result of these efforts by Agtools, supply chain managers throughout the world now have transparent access to the country’s data on pineapples, as well as all other fruit and vegetables. This is a good example of what many countries need to do to develop IT and data systems that capture essential information about their fruit and vegetable cultivation and their exports. This visibility will contribute greatly to the ability of supply chain industry leaders to see and understand the flows of products headed for their countries, and to manage their supply chains in a manner that enables them to anticipate blockages and to solve them before disruptions occur.
US Leadership - Since the US is the primary destination for worldwide trade, we must take a leadership role in solving the supply chain disruptions. This can start with the kinds of actions the Biden Administrations has already taken, such as having the major US marine ports, like LA and Long Beach, operate 24/7, instead of 9-to-5 and only on weekdays. This alone increased port processing capacity threefold. Beyond that, the US needs to invest heavily in its supply chain infrastructure. The US is on the verge of doing this with hundreds of billions of dollars slated for improvements of marine ports, airports, roads, bridges, and so forth throughout the country through the recently enacted $1 Trillion Infrastructure Bill.
International Collaboration - Thereafter, the US needs to collaborate with the appropriate entities on the international scene, such as the United Nations and the G-7 nations, to identify and address key supply chain issues throughout the world. One of the key areas where infrastructure buildup is needed is IT systems. Every country needs to develop or improve its IT and telecommunications infrastructure for data systems tracking for all of its agricultural products, so that international supply chain industry leaders can see exactly what products are produced, when they are harvested, when they are shipped, etc.
New Paradigms for LDCs – Early in the evolution of today’s elaborate supply chains, it was thought that Less-Developed Countries (LDCs) would greatly benefit from participation in international trade. Unfortunately, that has not turned out to be the case. In fact, LDC participation in trade has declined since the 2008 economic crisis. Small companies in LDCs tend to perform more menial tasks in supply chains.
While some LDCs have experienced success, the overall impact on economic development has been disappointing. As IMD authors Lehmann and Cordon* say in their recent article: “LDC firms tend to perform low value-added and labor-intensive tasks in supply chains in primary industries (extractive and agro-based), low-tech industries (textiles and apparel), processing industries (food and beverage), and entry-level services. Here, we mainly consider the agri-food and apparel value chains, which are buyer-driven, fragmented and geographically distributed.” While some LCDs have experience success, the overall impact of economic development has been disappointing.
Greater availability of data can help a great deal in improving the participation of LDCs in supply chains. IT and telecommunications infrastructure will provide data access to all parties, including worldwide market behaviors to LDCs to make smarter supply chain decisions. Data can tell growers, for example, where they can get the most effective prices for their goods. While the highest prices for their goods may be in the US and European countries, the most effective prices may be in their own back yards. Agtools’ data analytics platform repeatedly shows that the most effective prices are most often in the growers’ own back yard, not in countries 2,500 miles away.
Small growers in LDCs can greatly reduce transportation costs by selling locally. Preparation & transportation costs (e.g., packaging, etc.) are greatly reduced. Need for costly refrigerated transport is eliminated. Transit times are greatly reduced, resulting in fewer price mark-downs, or rejections driven by lack of product freshness. Greater access to data can help LDCs in all industries participate more effectively in trade and have a greater focus on regional trade, as opposed to costlier, and riskier, worldwide trade.
Establish Systems – The US needs to lead the way with respect to encouraging countries to invest in the key elements of IT infrastructure – physical and technological -
needed to improve the supply chain. This includes each country’s data capture and management systems. It takes resources to establish databases of the agricultural products produced by countries throughout the world. It takes resources to establish APIs and IT management systems to track all the data daily. It takes resources to set up portals to track all agriculture exports in a manner that is available to supply chain managers around the world.
UN Standing Committee - We suggest that the United Nations create, with support and leadership of the US, a Supply Chain Standing Committee to address supply chain issues because supply chain disruptions are a serious and long-term problem for all nations. The Committee should work to expose the need for all nations - especially developing nations - to invest time and resources on the physical, technological, and IT infrastructure needed to contribute positively to the effective management of supply chains worldwide.
We at Agtools stand ready to support any committee established to analyze supply chain issues and help with the identification of the types of data and information systems needed for effective supply chain management.
*Fabrice Lehmann and Professor Carlos Cordon – Business Supply Chains Strategies Are Evolving, Can Poor Countries Benefit? – October, 2020 - IMD Business School – Lausanne Switzerland