Creating a Healthier, Stronger Supply Chain
The recent closure of meatpacking factories across the country has shined a white-hot spotlight on the fragility and unhealthiness of the food supply chain in the U.S. But COVID-19 is also straining the supply chains of numerous other industries, and many companies are now carefully rethinking supply chain logistics. These companies are seeking to taking advantage of the upheaval wrought by COVID-19 to reinvent their supply chains — for everything from toilet paper to pharmaceuticals to food — to reduce risk and enhance resilience.
Addressing Risk
In “Reducing Risk in Your Global Supply Chain,” the authors write that corporations must work quickly to improve and secure their supply chains: “Optimizing the supply chain from a risk, cost, cash, quality and growth perspective will help secure supplier relationships, prevent supply bottlenecks, and ensure [that a] company is operating both legally and ethically.
In some cases, businesses are looking at shortening their supply chains by developing a more regional approach to logistics. This is not a new idea. In recent years, academics and researchers have argued that simply supersizing production facilities, concentrated in one location, increases risk in the supply and offers diminishing efficiency returns.
The pandemic has shown supply chains grow more fragile — not resilient — as corporations depend on single, massive production facilities or suppliers, in the name of economies of scale, instead of using a number of smaller, regional sources. As production facilities scale up in size, they can also cause collateral environmental damage through increased energy demand, greenhouse gas emissions, and water usage. In some places, these strains on the environment can translate into deforestation, destruction of natural habitat for animals, and unhealthy water and air pollution.
Benefiting Animals
A supporter of compassionate investing, Karner Blue Capital believes that sustainable supply chains protect the environment from degradation and improve animal welfare. In selecting companies for our client portfolios, we therefore prefer to invest in companies that are working to create more resilient, ethical, and healthy supply chains. The following list provides a representative sample of these companies:
Sprouts Farmers Market is retooling its supply chain by creating new distribution centers to cut the maximum distance to its stores in half — from 500 miles to 250 miles.
H&M, the world’s second-largest fashion retailer, has begun opening up its sustainability-focused global supply chain to other companies to promote environmental responsibility.
Fashion brand Zara manages its own design, production, and distribution facilities, using vertical integration to increase efficiency and reduce waste and impact.
Levi Strauss & Co. focuses on real-time inventory management to match supply with demand, reducing waste and unnecessary production.
Karner Blue Capital’s proprietary research process seeks to identify companies that preserve biodiversity, promote environmental stewardship and advance animal welfare. We believe that corporations benefit from supply chain optimization that minimizes environmental and animal impacts by making them more competitive and resilient. More importantly, we believe that thoughtful supply chain design and management benefits all of Earth’s inhabitants.
DISCLOSURE: As of the date of this blog, Karner Blue Capital (“KBC”) held positions in Fortescue Metals Group, Ltd. on behalf of its clients. Securities issued by the companies identified or described in this blog do not represent all of the securities purchased, sold or recommended by KBC for its advisory clients, and readers should not assume that investments in the securities issued by the identified companies were or will be profitable. KBC and some of its partners may hold positions in certain securities issued by the companies identified in this blog in corporate and/or personal accounts. As fiduciaries, KBC prioritizes its clients’ interests above these corporate and personal accounts to avoid any conflict of interest in trading these commonly held securities.