Friday, March 4, 2011

Is making our food supply chain smarter a smart way to spend our money?

I've been watching a lot of TED talks lately and it's not uncommon for there to be a sponsor ad either at the beginning or end of the video. Consequently, I've seen the following ad about making our food supply chain smarter quite a few times.

At first, I was impressed by the coolness of the technology. If we're losing 25% of our food to spoilage in transit, it seems reasonable to use technology to improve the situation. If we could decrease the spoilage, then maybe we could feed more people. I could certainly hear my mother's voice chastising me about letting food go to waste. Besides, working on our food chain would be much more interesting and socially relevant than working on software for a bank, or (shudder) a weapons system.

But then, I had the opportunity to see the ad again... and again... and a few more times. And then it dawned on me... If we're losing 30% of our food in transit, then isn't the problem the transit? Maybe we shouldn't be transporting our food quite so far, then less of it would spoil. Maybe the problem is that we live in cities and are so divorced from our food production systems. Locavores have already recognized this problem and are working on it. Others, including Michelle Obama, are planting on urban vegetable gardens to promote healthy eating.

These ideas crystallized when I saw the following infographic from Good magazine.

According to the USDA, farmers are receiving less than $0.16 out of every dollar that we spend on food. The rest goes to "marketing," which is not advertising, but rather "the entire system that links farms to consumers, including transportation, processing, and distribution." Good's food editor, Nicola Twilley, goes on to write, "In other words, the infographic above means that we spend five times as much on getting our food from farm to table as we do on actually growing it."

So, the ad on making our food supply chain smarter is actually advocating more money in the marketing side of food production. Is this cool? Not so much.


Anonymous said...

If we're spending so much on the farm to the table, then isn't that just what IBM is saying needs to be done better/cheaper/smarter? Cut the cost -time, wastage, fuel costs, etc. from the transit and storage and distribution, and that 84% of money spent is reduced.

Benevolentprof said...

IBM's stated goal is to make food smarter, so that it arrive at the table fresher. The implication is that we are going to save money, because the loss due to spoilage is going down. But adding intelligence can only increase overhead in other areas, such as putting bar codes on food. Will this be a net gain for us as consumers or for farmers?

Historically, computerization has resulted in tiny productivity gains, if any. As other industries became computerized, it has been hard to find hard evidence that computers saved money or helped organizations be more productive. Most of the gains have come through process re-engineering, for example, replacing tellers with ATMs or reducing the number of people involved in handling and shipping an order.

There's nothing in this equation that gets more of the money to the farmers. As companies in the supply chain become more profitable, I don't see them passing on savings to us or the farmers.

Besides, the 84% is not just spent on transportation. Much of this proportion is spent on processing, like turning potatoes into french fries or tomatoes into pizza. For instance, there is about 20 cents worth of wheat in a $4 box of breakfast cereal.

It seems to me that both farmers and consumers will benefit by cutting out more of the supply chain, rather than taking an existing supply chain and making it smarter.