When there's a glitch in the supply chain

Rod Slater was only eight years old when he became part of the meat supply chain in New Zealand. 

From his father’s butcher shop in Mt Albert, Auckland, he would head out on his bike with the meat parcels in the front basket to deliver to customers.  

The 75-year-old recently retired chief executive of Beef + Lamb New Zealand remembers his first delivery to a rest home when he had to crash his bike to stop it, and the meat came tumbling out. 

In those days the meat was wrapped in greaseproof then brown paper. 

“Sometimes the meat would bleed out through the brown paper,” says Slater, recalling another time he was delivering to a house when the family dog smelt the blood dripping through the wrapping. The package got soggier, the meat dropped out on the doorstep, the dog ate it and Slater scarpered. 

Times have changed with the supply chain says Slater, who took over his father’s butchery and later co-founded the Mad Butcher chain. For a start the meat is vacuum packed so there’s no leakage and it lasts longer. 

Processing meat for a mass market has become an increasingly sophisticated, high-tech game but remains heavily dependent on workers. 

“No robot can chop up a pig or lamb,” Slater says. 

He is talking to The Detail about the workings of today’s chain of meat supplies from “farm to fork” and how the Delta variant has become a game changer. Lockdown has again put the process under pressure, exacerbated by strict rules barring butchers and other small retailers from operating at Level 4. 

This was highlighted last week when a technical glitch left meat aisles at Countdown supermarkets empty. That problem with Countdown’s meat ordering system in the North Island has been fixed and supermarket meat shelves quickly restocked. 

The Detail approached both supermarket chains to get them to explain how their supply chains work but they said they were too busy. No surprise when hundreds of their workers have been forced to isolate, leading to store closures and worker shortages. 

And that is where the flaws in the links are, says Slater, who believes the chain outside Covid is robust.  Others spoken to say Covid has exposed risks throughout the supply chain and essential grocery items should be stocked up as part of the government’s National Reserves. 

In the case of meat supplies, the four-step process from farmer to processor to wholesaler to retailer sounds simple but industry players describe it as an incredibly complex “journey that has a number of actors”.  They say extended periods of lockdown start to rattle parts of the chain.  

Take the country’s 93 pig farmers who need to get their animals off the farm every week. When restaurants and butchers are closed in level 4 lockdown, the pigs cannot be shifted and the farms become crowded. The government had to step in during last year’s lockdown and buy the surplus pork. 

That’s the supply chain of just one product disrupted. Supermarkets stock 25,000 different items,  and each product has a range of components. Huge distribution centres and inventories are key parts and in times of risk they are put to the test. 

Sometimes it’s not the product that runs out, but the packaging. Last year during the lockdown baking craze, customer-sized bags of flour were emptied out from supermarkets. There was plenty of flour but no bags. 

“The actual supply chain is not very resilient,” says David Robb, Professor of Operations and Supply Chain Management at the University of Auckland.  

New Zealand has been hit hard by long shipping delays on imported goods but Robb points out that even home grown and processed products such as meat and dairy need imported ingredients to get them to market.  

“We are not self-sufficient, even in our primary industries,” he says. 

The plastic wrapping, or parts of it, are often imported, the ink on the writing on the packaging is imported, the vehicles, their many components, and the fuel are imported. 

“Most companies have multiple suppliers and these suppliers have multiple suppliers. They don’t know who the suppliers’ suppliers are.” 

Distribution centres are crucial, highlighted by last week’s breakdown in the meat ordering process at the Countdown’s centre in South Auckland that led to empty shelves. 

In Rod Slater’s early days as a butcher there was no distribution centre. 

In most cases, the animal would go from the farm to the stock sale where it was auctioned off to the butchers and trucked to the abattoir. Every butcher shop in Auckland had a hook number, says Slater. His was 31 and he owned all the animals on that hook.  

These days very few animals go through the stock sale. The farmer often has a contract to supply the meat companies that own the abattoirs. 

“They might say, we’re looking for 500 head, what have you got,” says Slater. 

They are trucked to the abattoir and broken into “primals” or boxes of rumps, topsides, sirloins. From there the meat company might sell to the wholesaler who then sells on to the retailer.  

But the two supermarket chains operate differently. 

The Woolworths-owned, Countdown group has its own stock agents who procure the beef and lamb from the farmers. The abattoirs do contract slaughtering for the supermarkets before the meat is sent to Countdown’s centralised cutting and packaging plant. 

Its rival,  Foodstuffs, the co-operative that owns the Pak’n’Save and New World chains, procures meat through multiple suppliers, such as Affco and ANZCO.  

Robb says the distribution centre has made groceries cheaper because it enables the retailers to keep inventories low, but there’s always a risk that it could be taken out by a strike, a tornado or covid. 

In the case of Foodstuffs, five distribution centres and five smaller depots serve the North Island stores and another three, with three depots, serve the South Island, with a perishables centre at Auckland airport.  Countdown has one national distribution centre in South Auckland. 

Most grocery products go through the distribution centres but high volume items like dairy, coke and bread go directly to the store from the supplier. 

Despite the double handling created by a distribution centre, Robb says it allows economies of scale and means stores can be replenished daily by truckloads of products. 

Inventories range from weeks to months depending on whether a product is perishable or in a can. New Zealand supermarkets keep inventories low to keep costs down. 

“There’s not a lot of redundancy,” says Robb. “We like to do things cheaply in New Zealand.” 

Robb’s colleague at the University of Auckland, Tava Olsen, who also teaches supply chain management, says the IT problem at Countdown’s processing centre shows up a weakness. 

When a processing centre is so big, a breakdown has a major impact. 

“Supply chains are set up to be cost efficient. It doesn’t take much of an increase in demand to clear out the supply chain,” says Olsen. 

She says the lean, just-in-time cost efficient model gets exposed in times like this.  

“We have tried to teach the disadvantage of Just in Time, and lean. Now more people are listening to us.” 

Olsen wants the government to take a careful look at national resilience including storing some food products, as well as medical and fuel stocks, as part of its national reserves. 

“If our borders close for goods as well as people, what would we be short on?” she asks. 

“We can’t entirely leave it to the market. Profit-driven companies are not charities. It is not their job to make sure New Zealand is set up in case of a disaster.” 

Robb goes further and suggests that if a new Kiwi Grocery chain is set up in competition to Foodstuffs and Woolworths, it could be required to “have a resilience of last resort”. 

The question is which grocery items are critically needed? Coffee? Chocolate? 

“When people are distressed they need comfort food,” says Robb. 

* This story has been amended. Although Foodstuffs did not want to be part of this story or answer our questions, the company has now contacted The Detail to clarify a point: 

Foodstuffs North Island operates five distribution centres and five smaller depots throughout North Island. 

Foodstuffs South Island operates three distribution centres in South Island, two in Hornby Christchurch and one in Dunedin, and three smaller depots. 

Our story has been changed to reflect this.