UPFRONT Food miles and fashion

How far did the various elements of your breakfast have to travel before they arrived in your bowl this morning?
It’s the sort of question that increasingly exercises the minds of those whose goods are stretched ever further out along the increasingly clogged supply arteries of our global marketplace. In the UK these days, people are thinking more about the implications of ‘food miles’ – and how sustainable they are, says visiting expert on supply chain management.
Michael Christopher, director of Cranfield Centre for Logistics and Supply Chain Management, was here to present symposium on “managing the global supply chain in an era of uncertainty“.
“It’s about how all of us today are part of much longer global pipelines. We’ve outsourced, gone global and things that were once done locally are now done hundreds of miles away and we take that for granted.”
But it makes our supply lines more vulnerable not just to one-off disruptions but increasing costs – such as fuel or pollution levies. This raises some interesting questions around whether they’re sustainable long term, says Christopher.
“While the cost of making things has never been cheaper, the cost of moving them around has never been as high – and it’s getting higher. So what are the long-term implications of that for how and where we make things?”
Over the past few decades the trend has been toward concentrating manufacture in bigger facilities. One extreme example, says Christopher, is Pringles crisps. Found in hotel mini-bars around the world, they are all produced from just two factories in North America and Belgium.
“Sure you get the economies of scale in such mega-factories but is that sustainable long-term? Well no …
“I can see time not so far away when we will need much more local manufacturing in plants that are smaller and more flexible because the cost balance of moving things for shorter distances will have changed. You don’t need Nobel prize in economics to see that because the trends are already there.”
What has changed partly as result of outsourcing is that supply-line dependencies are much greater, making companies more vulnerable to partner failures. Plus, longer supply lines tend to inhibit flexibility and customer responsiveness.
Christopher cites Spanish clothing retailer Zara as providing successful new supply chain model. Where other clothing companies have increasingly outsourced manufacture to low-wage economies, Zara operates “fast-fashion” service by centralising its design, production and distribution functions and using relatively small localised manufacturing workshops mainly in Spain and Turkey. These days the company supplies close to 700 shops in 50 countries, says Christopher.
“They’ve just become Europe’s number-one clothing retailer. It’s very successful business model that has short supply chains because the whole strategy is based on rapid change. They can change the entire merchandise in all of their stores about 20 times year. That’s unbelievable.”
The same model, he says, could usefully apply to any short lifecycle product.
“There’s no difference between Zara and Dell, for instance. Both operate in market that has fast changing product cycle. You can’t afford long supply pipelines or you go out of business.”
So just where does that leave countries like New Zealand whose geographic distance from markets makes its supply lines bit hard to shorten?
“Good question. In that case the supply chain efficiency becomes even more important because it’s about agility and responsiveness. Differentiation is increasingly going to come through the way you serve your customers.”
The major challenges facing all supply chain managers are threefold, says Christopher. Ensuring supply chains are resilient (eg, if major supplier falls over, is there backup?) is one. The second has to do with market responsiveness and ensuring the fashion for lean supply lines doesn’t compromise customer service (focus on being agile rather than just lean).
“The third one, which is of concern to every company, is that we still don’t have very good collaborative working relationships. There’s lot of talk about partnerships and collaborative planning but if you look around, there are not many examples of companies that have that sort of relationship with their suppliers or distributors. It tends to be more arms’ length.”