Are Your Supply Chains Prepared for Riots?
Last August, SI pointed out that food costs are still spiking and asked if you were ready for the risks. At the time, food riot fears were on the rise around the globe, including in developed countries like Japan, Canada, and the UK, where riots DID take place.
Well, it looks like the risks are coming back again. A recent article in The Financial Express that notes that the supply chain of essential items faces disruption in Dhaka, Bangladesh, as the supply chain was shutdown for 48 hours countrywide earlier this week amid fresh fears of commodity price hikes. Truck owners in rural and suburban areas refused to drive due to fear of vandalism and arson before, during, and even after strike hours.
As a result of the strike, poor people, and day labourers in particular, have been hit particularly hard – as per a front page article on the daily sun. The two day shutdown enforced by the Bangladesh National Party (BNP) (which is Bangladesh’s opposition political party to the governing Bangladesh Awami League) ended up paralyzing normal life as many people stayed inside due to panic triggered by hartal (strike) violence. As a result of the strike, the fears of price hikes have come to pass as the prices of essential commodities have risen.
It doesn’t look like this is a situation that’s going to end well. Especially since a recent article over on the Guardian has proclaimed that food riots are likely to become the new normal as a result of intensifying inequality, debt, climate change, and fossil fuel dependency. Since 2008, global food prices have been consistently higher than in preceding decades, despite wild fluctuations. This year, even with prices stabilizing, the food price index remains at 210 – which some experts believe is the threshold beyond which civil unrest becomes probable. Food riots are still a regular occurrence in Egypt, Tunisia, and Libya — and have been ongoing for over a year in some of these places.
What’s going to happen when prices rise again as a result of tight grain stocks from last year’s poor harvest (which was down 3% from the 2011 record harvest due to adverse weather conditions)? Of if rice yield, which has decreased 10% to 20% in key food-basket regions due to droughts exacerbated by global warming, keeps worsening?
Riots are coming across the globe. Is your supply chain ready?
Could You Run Your Supply Chain from Another Country for A Month?
A recent post over on the HBR Blog Network on why we’re relocating our HQ to Dubai for one month about Starwood’s one month move of their HQ to Dubai for one month brings up an interesting question:
Could you run your supply chain from another country for a month?
It’s an important question. Because if you can’t, you’re not prepared for a disaster. And given that the likelihood of a disaster shutting down your primary location is increasing as the number of natural disasters rise each year (thanks to global warming), you should be. While the risk of a disaster shutting down your Supply Management headquarters is likely small compared to the risk of a significant disruption impacting your supply chain (which is approaching 85% for many companies), the risk is there. And you have to be ready.
Furthermore, if you have the right supply management infrastructure, you should be just as capable of running your supply chain from another country as you are of running it from a temporary location fifty kilometres away. If you have a true visibility solution, you just need an internet connection and you know where everything is. If you have a good sourcing and procurement platform, you can source and order whatever you need from anywhere. And if you have a good e-payment solution, you don’t need to pick up a check from a PO Box. Good distributors have their own on-line visibility and transportation management systems, and all of your 3PL and Import/Export Brokers can be connected with an e-Document Management solution. Plus, if you truly are global, you should be able to set up quickly near a major supplier who wants to help you out in the local country to keep you as a major customer.
In other words, if you couldn’t pick up and temporarily relocate your Supply Management headquarters at a moment’s notice, you probably don’t have a modern Supply Management office running on a modern Supply Management platform. And you should. Especially since there might be no better way to really learn a major market that you are sourcing from.
Are Your Groceries Killing the Environment?
According to a recent article on Sustainable Brands on “sainsburys reduced supply chain footprint”, The Co-operative Group, Nestle, and Sainsbury’s say they will improve the sustainability of some of their products in response to research from the Product Sustainability Forum of WRAP (Waste & Resources Action Programme), an independent not-for-profit company funded by all four governments across the UK and the EU.
The Product Sustainability Forum just released
an initial assessment of the environmental impact of grocery products which collates information from more than 150 studies across more than 200 grocery products. The main finding, summarized in the executive summary on page 4, is that the production and sale of grocery products contribute between 21% and 33% to household consumption GHG emissions and approximately 24% to abiotic resource depletion impacts. Wow! (In English, abiotic resource depletion is the deletion of non-renewable resources such as fossil fuels, minerals, etc. One calculation for abiotic resource depletion is given in a Wiley publication on Polymers, the Environment, and Sustainable Development.) In fact, food and beverage products constitute eight of the top-ten product groups from an environmental impact perspective:
- Alcoholic Drinks
cider, lager, spirits, wine - Ambient
cereals; canned seafood, meat, veggies, soup, pasta, and noodles; pet food; chocolate; coffee; crisps; rice; sugar (confectionary); and processed snacks - Bakery
(sweet) biscuits; breads; cakes; pastries; - Dairy
butter; cheese; milk; cream; yogurt; - Fruit & Vegetables
bananas; onions; potatoes; tomatoes; - Meat, Fish, Poultry, Eggs
beef, deli, eggs, seafood, lamb, pork, poultry - Non-Alcoholic Drinks
carbonates; concentrates; juices - Chilled & Frozen
Veggie & Potato Products; Ice Cream & Frozen Deserts; Margarine; Pizza; Pre-packed Sandwiches; Ready Meals
The other two groups are:
- Household
dishwashing products, cleaning products, laundry detergents, paper products - Personal Care
batch and shower products, deodorants, nappies
What’s scary is that these “Top 50” comprise approximately 80% of all GHG emissions associated with producing, transporting, and retailing the grocery products in the UK and food and drink is 80% of these categories. So, at the current time with current practices, our groceries really are killing the environment and these 50 products are contributing up to 20% of all GHG emissions that are currently produced!
Where’s all that GHG coming from? The worst offenders, according to the initial study, are meat products (at 37.4% of grocery GHG) and dairy and eggs (at 17.3% of grocery GHG). Why? The production process for milk takes a lot of energy. It turns out that the median product embedded energy for liquid milk is 5.1 MJ/kg (Megajoules/kilogram), and at a sales volume of 5,186 Million kg / year, 26,400 TJ (Terrajoules) of energy is required to produce the milk consumed in the UK. Similarly, a lot of energy is required in the fresh poultry production cycle: 40.35 MJ/kg for a total UK market consumption of 17,600 TJ of energy. And, of course, most current methods of energy production emit copious amounts of GHG. And where meat is concerned, many animals produce methane gas, and some in copious quantities. There are other reasons, and some are contained in the report (and the rest of the reasons are in the studies surveyed by the report), but it’s the findings that are important. The current production and distribution methods for many of our staple foods are quite damaging to our environment, and the companies producing and distributing those staples have to shape up. It’s good to see that a few companies have said they will. Let’s hope they follow through.
So What Are You Doing For Your Drivers?
As per our post on Sunday, where truck drivers are concerned, working conditions are bad, getting worse, and you’re on the fast track to not being able to move 10% of your shipments on time as you’re going to be short 10% of the drivers you need within a decade unless you do something to change things.
So what can you do?
1. Make sure you do everything you can to give drivers good working conditions.
According to this post by Peter Moore over on Logistics Management, some distribution centres force drivers to stand in a 10-foot painted circle on the floor near the loading docks while the trailer is being loaded. No restroom, no cell phone signal, and no chair. Are you serious? People charged with crimes get treated better.
2. Make sure your carrier does what they can to give drivers good working conditions.
The carrier should pay them better than average, minimize waiting time by always using dropped trailers for TL, optimize routes to minimize partial loads and stops, and make sure all long haul truckers on routes without an adequate number of safe rest stops have sleeper cabs. In addition, routes should always be planned to ensure that legislative limits are not breached, which will give the driver adequate rest.
3. Make sure the drivers have good medical coverage and care.
Drivers should have a schedule that gives them at least one weekday off a month to schedule a regular doctor’s check-up and should have a plan that allows them to visit a doctor whenever they need to. (In US terms, this means that they should have PPO or POS coverage.)
4. Make sure you support any effort to prevent rest stop closures.
More rest stops are needed. We’re at 90% capacity every night and things are only going to get worse. Support any effort to not only prevent more closures, but to (re)open more rest stops to make trucking safer for all drivers.
And while all of this may not be enough to make a driving career attractive to younger drivers, it should at least stem the surging turnover and buy us the time we need to come up with a better solution.