Grocery Food Supply Chain, Risks and Survival

November 29, 2010, by Ken Jorgustin

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the-food-supply-chain


I read a very good article today touching on the food supply chain and its fragility due to over-active efficiencies, much of which rings true with me.

Among other things, the article promotes the idea of growing ones own survival garden to augment ones own food supply, namely using the square-foot-gardening technique (something I will be trying in the Spring, rather than my traditional type garden).

More striking however, and something that I have been keenly aware of for some time, is the underlying excessive demand for efficiency which places undue risks on the systems that supply and distribute our food.

Rather than repeating words that I’ve posted before, it is refreshing to read the words of others who realize the same risks.

Here is an excerpt from the article, written by Giordano Bruno at Neithercorp Press,

Survive Anything! Chapter 2: Food Crisis

The problem of storage and backstock is widespread in the U.S. and the culprit is actually one which we have been trained to admire; efficiency. It is because of the over-application of efficiency in grocery models and in the freight sector that most outlets carry little to no backstock in goods. Instead, they order goods as quickly as they sell out, refilling shelves on a product by product basis. This means that in most grocers, what you see on the shelf, is all that they have. The speed of trucking deliveries makes this business model possible, but its operation suffers from a seriously fatal flaw…

Grocery stores may seem like a bounty of goods at first glance, but if freight shipments shut down, or even slowed, those aisles would empty within the span of a few days. Many households in America operate on the same faulty “efficiency”. They rely on the weekly trip to the grocer to maintain the pantry while also attempting to save money by reducing backstock. It’s a frayed rope holding up too much weight, a completely inflexible system that cannot withstand any deviation from the set routine. One unexpected disaster could render the entire food and agriculture distribution network immobile.

Many grocery chains also function on a line of credit from banks while operating at a loss. Profits are poured directly into the liabilities the companies incur from loans and then more money is borrowed to continue ordering goods. Some stores in the chain (flagship stores) usually bring in enough money to cover the red ink of the other branches, however, what if banks were to cut off credit completely to a grocery chain? Or maybe ALL grocery chains? The cycle of debt, to sales, to profit, to debt, becomes disrupted. Any stores that rely solely on credit to stay open for business would immediately lose the ability to bring in new stock. Again, we are faced with empty shelves in less than a week.

This scenario is entirely possible in the U.S. today, especially in the event that big banks institute capital retention in order to protect themselves from a further collapse of investment markets. Banks have already restricted loans to consumers down to the bare minimum. A restriction of loans to the business sector in the near future is not that far fetched.

Read the article in its entirety here, Survive Anything! Chapter 2: Food Crisis




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