When the pandemic removes our favourite products from the supermarket shelves, we realize that just-in-time, complex global supply chains are vulnerable, and some of us jump to hasty conclusions. The global system would obviously be crazy and ineffective, and we should return to “normal”: local small-scale farms and plants producing for local needs. Always on the lookout for populist opportunities, some politicians reactivate the dusty concept of sovereignty and promise a future that looks furiously like the past (and the recipe for the great depression, with echoes of the Smoot-Hawley Act).
Unfortunately, local supply chains are unlikely to feed mega-cities, where people increasingly live, and take care of our sophisticated needs. Urban customers rely on large-scale supply and cannot deal with thousands of vans coming from the countryside. Small and even large countries are unable to produce the variety of products that today’s customers are used to. Trying to evade these simple truths quickly leads to nonsense. Yes, you can produce tomatoes or lemons in northern Europe or Canada anytime, instead of importing them from other places where they tend to grow. All you have to do is to build greenhouses heated with (imported) fossil fuels and flooded with artificial light.
Japan, for instance, has relentlessly insisted on putting rice out of trade treaties, in order to keep it Japanese whatever the price. Put simply, it could afford to pay dearly for it, long after the whole Japanese economy was hooked not on food but oil, uranium, and exports. Trying to replicate locally the performance of large-scale supply chains mechanically results in higher prices, narrower offerings, and a total lack of flexibility.
Interestingly, as the trend in industrial companies is large scale automation, rather than manual labour in small units, and machines are immune to COVID-19 (though not to other viruses, this is not this article’s topic, but it is a big one too…), the damage might not be where we think it is. Whether they are in China or the US or Spain, farms, or plants with lots of workers are closing during a pandemic.
Such closures in meat-addicted America made it consider the unthinkable: possibly going out of burgers. With a stable and large supply of cheap labour, US industrial companies do not necessarily have to automate as much as in other places. In the European Union, where labour costs are higher, similar plants can keep on working with a few technicians monitoring huge, automated workshops.
Changes that were already taking place could then accelerate. With no access to low-cost labour and local supply, Japan is focusing on smart factories, which have the world’s highest number of robots and the relevant resilience. The US, where manual labour is the only option for many immigrants, minority workers and poor people, is more vulnerable, adding another challenge to its economic leadership (and forcing it out of the lockdown in precarious conditions).
Thus, eventually the solutions to global disruptions might come not from romantic local policies, but from more resilient global supply chains (through automation, more diversified sources, better interconnections). If today’s supply chains are disrupted, it is not because they are unable to deal with a pandemic, but because they never had to. Now that this risk is a reality, expect procurement and logistics managers, insurers, traders and boards to make the adjustments.
They will do it, and they will not wait for governments to tell them how to. A few years ago, realizing that the food supply might be affected by endangered pollinating insects, Walmart started to work on robotic bees. This might an awfully wrong way to solve the problem, but you can count on business to step in when societies struggle with issues.