Reading the 1st chapter of Chopra and Meindl’s “Supply Chain Management” book in preparation for the class last week reminded me about a short document that I had seen on the TV some time ago. It was about China’s change of diet and its increasing pressure on the global meat supply chain.
As China experiences better economic performance in recent years, its growing middle class is able to afford more luxurious choices on the dining table and in particular: beef. But the process of feeding 20% of the world’s population with only 8% of cultivable land will involve a large amount of trade agreements.
Thus, the Chinese government and trading firms initiated a global supply battle by out-bidding many other countries and caused the beef price to almost double within 6 months, from late 2014 to early 2015.
As a result:
- Japanese trading firms were forced to import cheaper cut of meat in order to keep supplying their customers with enough beef.
- Australia was quick to take advantage of the situation: many farms were switched from sheep to beef rearing to catch up with the surge of demand.
- On the other side of the supply chain, Brazil sold out more than 60 million acres for growing soybean – main feeding ingredient for the thriving beef farming industry.
And so, with this example you can some impressions of how the change in customer’s demand can set off great ripples throughout the supply chain.