In Defense of Efficiency, By Todd Thurman, SwineTex Consulting Services

133

US Pork Production Efficiency 1989 to 2019

Over the last several months, efficiency has all of a sudden gotten a bad reputation. As global supply chains broke down around the world in the wake of the Covid-19 pandemic, people started to lament the inflexibility of the system. The new buzz word is “resiliency” and, not unreasonably, it is often seen as the opposite of efficiency. While it might not be popular right now, I think efficiency needs some defenders and I’m volunteering to step up.

First, let’s define efficiency. This might be a little harder than you’d expect. There are actually a lot of definitions of efficiency and many of them describe relative efficiency as opposed to absolute efficiency. For our purposes, we’ll use this definition, one of several provided by the Cambridge Dictionary: A situation in which a person, company, factor, etc. uses resources such as time, materials, or labor well, without wasting any.

So, efficiency is really about reducing or eliminating wasted resources. The global pork industry generally and the US pork industry specifically, have become very efficient over the years. We produce more pork every year with the same or even less inputs. In 1999, we produced 8.8 Million MT of pork in the US. By 2019, that number was 12.5 Million MT and we had almost 300,000 FEWER sows. Our supply chains are designed to deliver exactly what’s needed exactly when it’s needed to avoid the need for unnecessary amounts of storage space. Our country and indeed the world, have benefited from the extraordinarily efficient systems we’ve built.

Then came Covid-19. The entire world basically shut down over the course of just a few weeks in response to the pandemic. The disruptions and abrupt changes to supply and demand of many products caused major problems for companies producing and selling a variety of products. Some found their products were no longer needed. Some found their products were needed much more. Some found that regardless of demand, they weren’t able to produce much of anything because workers were sick or the government shut down businesses.

These disruptions affected virtually every industry in some capacity but none more notably than the food industry. If there’s no bicycles available or if you have to wait a few extra months for the new iPhone, it’s not the end of world, but people can’t wait a few weeks let alone months, for food. The headlines were shocking…”The Food System is Broken” and “Will We Have Enough Food?”. Somehow, the industry managed, through hard work and selfless dedication, to continue to meet demands for food but the call for change was almost instant.

The call was for better “resiliency”. Back to our friends from Cambridge for a quick definition: Resilient: Able to return quickly to a previous good condition after problems. In our industry, people pointed to Europe that has a system of smaller and more regional meat processing facilities as examples of systems with better resiliency. Indeed, Europe’s system did have less issues than the US system although they certainly weren’t immune. Some even took the opportunity to advocate for local, small-scale production as a way forward.

The problem with these alternatives is that they are less efficient. Larger meat processing plants are more efficient uses of resources. Larger, professionally managed farms are generally more efficient than smaller farms. We benefit from these efficiencies in small ways every day. Americans spend a smaller percentage of our disposable income on food than anywhere else in the world. That makes food more accessible to those at all income levels and frees up money to be spent on other things that fuel our consumer economy. These advantages are small and incremental but they add up fast and result in real money, real impact for real people. These efficiencies also mean that US agriculture products are very competitive on global markets. Any time the US enters a market, it’s guaranteed that the Europeans will start complaining. Anytime the US is denied access to a market, the Europeans celebrate. Our competitiveness on global markets has been a huge win for US Ag producers.

Not only are these advantages significant, they exist almost all the time with very few if any disadvantages. We suffered from a lack of resiliency during a period lasting a few months. The event that triggered this was a pandemic that was the worst in 100 years. The 99 years that we didn’t have a pandemic, these efficient system were a huge win. Are we going to have these pandemics more often in the future? Maybe…possibly…probably? The reality is though that we can’t ignore the huge advantages that efficient systems offer us in normal times, especially when normal is the vast majority of time even if it doesn’t seem like it right now.

This is not to say that we shouldn’t look for opportunities to improve resiliency, we absolutely should. My suggestion, however, is that we try to minimize the solutions that simply trade efficiency for resiliency. Some of that will be necessary, but those solutions should be implemented only in very strategic circumstances. For example, during the early stages of the ASF outbreak in China, those of us in the pork industry became well aware of our reliance on China to supply certain ingredients necessary to formulate diets. For us to be almost entirely reliant on a single country for those strategically important ingredients, especially when it’s a country with which we have an often tense relationship, is…not wise. In cases like this, we should absolutely look to repatriate a significant amount of this production capacity or at least relocate it to a country where we have a close and stable relationship.

So, how can we improve resiliency without compromising on efficiency? There’s really only two ways. One is innovation and the other is planning and I think we should invest heavily in both. On the meat processing side and to a lesser extent on the farm side, we should be looking to invest in automation to reduce our reliance on human workers. Even before Covid-19 was an issue, our biggest limitation in the packing industry capacity was labor.

I think we are ready for a new wave of automation that will drastically reduce the manpower necessary to run these plants and make it easier to protect the remaining employees. The key is to develop smart automation that utilizes artificial intelligence (what I call “the other AI”) and machine learning to adjust to the variation inherent in products of a biological system. We should also invest heavily in innovation in packaging that would allow us to quickly and efficiently adjust package sizes in case of changes in demand. This will likely require a higher upfront investment, but the flexibility it provides would be worth it. Similar opportunities exist at the farm level. Existing and emerging technology is able to replace many activities we rely on people for. Not only does less people result in less problems with staffing farms, technology is often better at those jobs than humans.

Finally, we need to do a better job of planning for unforeseen events. I realize that is a bit of a strange statement as unforeseen events are well, unforeseen. We can, however, develop a culture of planning for unexpected circumstances. Planning for ASF prepared us in many ways for responding to the Covid-19 disruptions. Companies that had thought through mass euthanization and disposal had a huge advantage over those that hadn’t. Certainly, we didn’t expect to be euthanizing perfectly healthy animals, but the processes were similar. There was also much discussion on the ASF planning around limited animal movements. This lead some companies to think through what they would do if trucks couldn’t move. Again, nobody expected that the trucks wouldn’t be moving because there was nowhere to take them, but the fundamental issue is the same. Those companies that had thought through strategies to slow down growth rates and look for alternative places for pigs to go had a very valuable head start when the Covid-19 issues started arising.

Crises are always great opportunities to reflect on the way you’ve done things in the past and think about how things could or should be different in the future. It is important, however, to not let the crisis cloud our thinking. It is entirely prudent to look for ways to improve resiliency but to completely give up on efficiency in the process would be an unfortunate mistake. The disadvantages of our efficient supply chains have been on full display during this pandemic but the advantages are real and if we ignore them, we’ll regret it.

About the Author: Todd Thurman is an International Swine Management Consultant and Founder of SwineTex Consulting Services, LLC. SwineTex is a US-Based provider of consulting and training services to the global pork industry. To learn more about SwineTex Consulting Services, send an email to info@swinetex.com or visit the website at www.swinetex.com.

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here