Food Supply Chain Optimization

The phenomenon of lock-in is known by business academics, but few seem to realize how pervasive it is. It is understood to apply to customer-vendor relationships, but it is extensible to economic relationships of all kinds: when a relationship produces some kind of mutual benefit, both sides begin to depend on it. The cost of breaking or changing the relationship is allowed to rise, and they become locked in to it. Both parties engage in supply chain optimization, consciously or unconsciously. As they attempt to minimize their (perceived) costs and maximize their (perceived) benefits, some of the relationship’s benefits may erode.

My favorite example is the modern American food supply chain. In pre-modern times, successful delivery of food was an unsolved problem, leading to starvation and malnutrition. As supply chains grew, they succeeded in reducing (but not eliminating) these problems. In doing so, participants in the supply chain (farmers, transporters, and grocers) successfully pursued important optimizations, trading natural taste and nutritional value in favor of sweetness, appearance and shelf-life.

Unfortunately, the supply chain became optimized for the efficient delivery of sugar, which maximizes sweetness and has a long shelf-life. Indeed, sugar can now be gotten for free. In recent times, due to this optimization of the supply chain, obesity is an epidemic, and it is in fact difficult and expensive to find and purchase fruits, vegetables, and meats that have the same taste and complete nutrition as their pre-modern ancestors.

This article from NPR illustrates lock-in and food supply chain optimization.

Tags: Economics, Food

Created at: 31 August 2007 12:08 AM