Tech Refactored

S2E16 - The Supply Chain and Your Dinner Table

November 18, 2021 Nebraska Governance and Technology Center Season 2 Episode 16
Tech Refactored
S2E16 - The Supply Chain and Your Dinner Table
Show Notes Transcript

Earlier this fall we released the TR/∂T (of the moment) episode ‘Supply Chain Shortages and the Cost of Building Fiber Networks,’ but one trip to the grocery store or the gas station and it’s clear: fiber and broadband aren’t the only industry being impacted. On this episode we welcome Erkut Sönmez, an associate professor of supply chain management and analytics at the University of Nebraska and one of our center’s Faculty Fellows to discuss problems that arise with the development of new business models and technologies across industries and in agriculture.

Disclaimer: This transcript is auto-generated and has not been thoroughly reviewed for completeness or accuracy. 

[00:00:00] Gus Herwitz: This is Tech Refactored. I'm your host, Gus Herwitz, the Menard Director of the Nebraska Governance and Technology Center at the University of Nebraska. This is the latest in the Just in Time series of episodes that we call TRDT. Shout out to the math fans who appreciate our fleeting calculus, humor. everyone else happily Googling about differentials. These episodes are short and informal explorations into timely issues. Today we are joined by Erkut Sönmez. Erkut is an associate professor of supply chain management and analytics at the University of Nebraska's College of Business, and he also happens to be one of our center's faculty fellows.

In his research, Dr. Sönmez [00:01:00] studies capacity management problems that arise in the development of new business models or technologies with specific applications in industries, including food and energy supply chains and banking, and other service operations. His current research focuses on food waste and precision agriculture.

Given the state of the world in the last, uh, six to 12 months, it's no surprise that we're talking about supply chain issues. T welcome to the. 

[00:01:26] Erkut Sönmez: All right. Thank you guys, and I'm glad to be here and joining to you. 

[00:01:30] Gus Herwitz: So let, let's just jump right into supply chain issues. People are noticing that, uh, they can't get goods as quickly or as easily as they're used to.

And sometimes you go to the grocery store and your, your favorite snack just isn't there in the broad, uh, scope. Uh, can you help us set the stage and explain what's going. 

[00:01:50] Erkut Sönmez: Yeah, so in several products, in several industries, we have been experiencing shortages, less variety of products. So we are [00:02:00] finding products yet, but we are experiencing less variety of it.

We are seeing longer lead times, especially for the companies who are producing now, It is becoming more difficult for them to find the products. On top of that, that shipping time for them increased significantly. We see higher price. And we have been experiencing difficult congestion for the supply chains of several, uh, different industries.

The ports are congested. It is more difficult to find a truck to move your stuff. Uh, it is more difficult to bring inventory from overseas and even you can achieve that. It is becoming much more difficult to find space to store. 

[00:02:43] Gus Herwitz: So I, I think you're kind of echoing a sentiment that's been in the news this past week that supply chains are really quite complicated.

Um, there are a lot of moving parts here and, uh, it's hard to understand how all these pieces, uh, fit together. We've heard this [00:03:00] term crunch or a supply chain crunch. Can you explain what, uh, that particular ID means.

[00:03:06] Erkut Sönmez: Sure. Actually, uh, we also discuss it as like supply chain disruptions. Supply chain is basically a, a network of companies that take a part or a role in bringing a product that we use to the end customer to us, right?

So there are several different companies connected in a very complex manner to each other. And these companies, some of them produce stuff, some of. Transport the materials and some of these companies provide storage services and basically how much items, you know, how many items per unit time these supply chains can provide to customers.

Depends on it is VOUS link, which we call the bottleneck. Uh, so this bottleneck point can be the capacity at the production, or it can be the capacity state, the transportation or the storage and a supply chain cannot. [00:04:00] Provide more products than it is bottleneck capacity. Uh, so even you may have extra capacity on different parts of the supply chain, that wouldn't really mean anything for us because a supply chain is as strong or as much, uh, productive as it is bottleneck for, It's like a chain, basically, where the chain is as strong as it is weakest.

Right. Uh, so, and then what we are seeing is the current structures of the supply chains are actually, uh, not suitable, or these supply chains are not designed for handling the level of demand variability and the demand shocks that we have been experiencing, experiencing in today's environment. For that reasons, these supply chains are failing.

To provide the demanded amount on a timely manner. So they are, they cannot provide as much as we want. Also, they cannot provide the products as quick as we use to get it. So this is the meaning of the [00:05:00] disruptions or the crunch supply chain Crunches 

[00:05:02] Gus Herwitz: you, I, you talk about there being a bottleneck, and that's the weakest link in the chain.

Mm-hmm. . Is what we're seeing a change in where that bottleneck is, or are there other things going on 

[00:05:15] Erkut Sönmez: today? Yeah, that's a great question because now the biggest challenge is finding the bottleneck. So we dunno, like every industry, so it is really understanding the supply chain. There are complex structures, so, uh, they're very much multilayered and interconnected.

Most of the companies don't even know the extent of their supply chains. They cannot draw a map of their supply chains, right? So companies know they may be first degree sub. The companies that they direct the source from, and they may even know some of them. The second degree of suppliers, which is the companies they suppliers supply from, but they don't know, Most companies don't know their third degree suppliers.

This is called supply chain visibility. And [00:06:00] currently the challenging, one of the challenging jobs is finding the bottlenecks, for example. Uh, when we follow news in the last couple of months, right? We have been seeing lots of blame on ports. Uh, and, you know, everybody's criticizing ports not working fast enough, so it looks like most of, And then when we talk with port managers, they're saying, No, we are working at the full capacity.

It is just the trucks are not picking up the cargo. So our storage area is full with cargo containers. It's the reason we are slowing down and when we talk. The transportation industry, we are saying that, or we cannot pick them up because there is not enough truck drivers, right? So it is, everything is interconnected.

So, uh, and supply chain, there can be more than one bottleneck stages. So to resolve these issues, we need to the first identify the bottleneck points and then direct our efforts to improve the bottleneck points because the supply chain capacity [00:07:00] will improve. If you can improve the bottleneck. 

[00:07:03] Gus Herwitz: So it's even possible, it sounds like that every single component in the supply chain could have Slack capacity, but if there's some coordination or a lack of understanding of where that slack capacity is at a given point in time.

Mm-hmm. , it might not be, it might rely unused. 

[00:07:21] Erkut Sönmez: Yeah, exactly. So also this is another, uh, good point. Like most of the supply chains are designed. In a way that there is not much slack capacity. So then we can start now talking a little bit about the supply chain, uh, strategy. Um, so there are two main or strategies that are on the, uh, opposite ends.

One of them is designing sub. Supply chains with the focus of efficiency, which we call the efficient supply chains. And on the other hand, we have the responsive supply chains, uh, or resilient supply chains, where the main focus is not really reducing the total cost of the supply chain. It is rather being more [00:08:00] flexible, designing the system, more flexible so when the demand changes, supply chain can respond to these changes.

So everybody would like to have a responsive supply chain, but it comes at a. Uh, so you need to have lots of extra inventory. You need to have extra cap, extra capacity meetings. You need to have extra machines, extra trucks that you may not be using all the time. They are sting idle. They will be really employed whenever you really need them, when the demand is more than what it used to be, right?

Uh, so for that reason, Up to this point, the focus was on price competition. Most of the products, especially the products that were supplied overseas, are sourced using supply chains that are focusing on efficiency or cost. So these supply chains do not have much extra slack. We can use right now when demand exceeds our expectations.

[00:08:59] Gus Herwitz: So [00:09:00] let's turn specifically to the ag sector. What, uh, supply chain challenges are we seeing in particular facing Ag? 

[00:09:08] Erkut Sönmez: The problems in the food supply chains or agriculture supply chains are actually more apparent compared to the other supply chains, as there are two reasons for that. One, cause these problems were, There even before a pandemic.

So we have been having, uh, very similar concerns on food supply chains even before. The disruptions that we have been experiencing today. The second thing is food supply chains are really designed on efficiency and, and they are comparatively less flexible compared to the other types of supply chains or other industry supply chains.

Uh, so what we are seeing today, Uh, so is a function of the problems that we have been experiencing earlier. So the pandemic or [00:10:00] covid, or the current situ just really amplified these existing problems. For that reason, the situation in agri agriculture or food supply chains are much more significant.

Compared to the other industries, this is the reason we are seeing more shortages in terms of the food supply chains. And so food supply chains are complex, multilayered, and they are less flexible. And then, so in a typical, uh, Food supply chain. We have farmers, silos processors, and then we have retailers or sometimes exports, sometimes imports, and then we have food banks, and then we have restaurants, you know, all parts of really the consumption items.

And in all of these, uh, stages, we are seeing problems for examples. Farmers are having significant problems in terms of their inputs. So there are significant shortages in terms of seed and fertilizers and plastic that they have been using, any kind of chemicals that they have been using because [00:11:00] these chemicals were actually, uh, produced by companies that have been sourcing internationally.

And then with the current container shortages, it has. Becoming more difficult for farmers, uh, to source these chemicals that they need. For example, fertilizer prices on average increase more than 35%. I have been reading news about like, it used to be one or two weeks to get fertilizers. Now it is more than four weeks a month to get the fertilizers.

Typically when you need a pesticide, you get it in a day, even less than a day. And now it takes weeks to get the pesticides and or fungus, uh, chemicals. And these are critical things because you need to use them immediately. If you are couple of days late using these pesticides, you will have a significant yield loss.

On the other hand, we have been seeing significant label shortages over the summer. Millions of pounds of fresh produce are left on fields. Um, [00:12:00] harvested. Just to perish. Uh, so we lose lots of fresh produce, nutritious produce that we grow, and then we cannot harvest them because there is not enough workforce.

And these problems are getting much more bigger with the issues on the, you know, H two A visas and, you know, immigrant workers, temporary workers, the availability, the, you know, having less and less workforce going into the agriculture. And also Covid brings lots of capacity reductions in terms of the workforce.

Um, more importantly, over this summer, especially for the crops like soybean and corn, we have been seeing, uh, significant delays for repairing the equipment. So farmers are using, you know, tractors, combines, and irrigation materials, and then it has been, Very much impossible to find spare parts. And truly there are strikes like there is, like John, there's a big strike going on right now with John Deere.

So [00:13:00] even before the strike it, you know, I have been reading cases where a farmer is waiting six months for a component, which they cannot source. And when they cannot source, they can, They try to find themselves a solution. And this is happening in the middle of the harvesting season if you cannot harvest on time, right?

If you are late on couple of weeks. So this lateness in harvest reduces your yield significantly. And now we also see, for example, problems like the current products or the equipment is really high tech. These are not like the ones that our grandfathers were using. Where, you know, if you are missing one part, you can easily produce or replace it with that, with other brands part, right?

So it was really interchangeable. But the current designs are such that they're all electronics. You need a circuit bolt, a chip that is only designed for your special equipment. And you know, if the factory is not producing it, you cannot really replace it within another chip. And we have been expedit.

For example, that [00:14:00] cheap crisis, right? So even the car, car companies are stopped manufacturing cars or they're just saying that we can manufacturing a car, but very basic without much electronics inside it. I, 

[00:14:12] Gus Herwitz: I'm hesitant to ask this question because I'm worried about what the answer is going to be. Um, I, I understand food is a, a somewhat important thing for humans to have on a reliable basis.

The food supply chain. You, uh, previously, uh, Supply chains can be designed to be efficient or resilient. Mm-hmm. is our food supply chain. Has it historically been designed more for efficiency and or resilience? More for 

[00:14:38] Erkut Sönmez: efficiency. Yep. So I mean, the profit margins are low, so we need economies of scale. So it was designed for efficiency and put, supply chains are designed for, uh, demand, for stable demand for the demand that that shouldn't vary that much.

[00:14:58] Gus Herwitz: So that, that's a fascinating [00:15:00] observation. Have the shocks that you were just describing, those sound like they're mostly on the supply side. Have there been demand side shocks, uh, as well they're creating problems or is it mostly, uh, on the inputs?

[00:15:11] Erkut Sönmez: Uh, Actually, I call it perfect storm because we are seeing the demand shocks and the supply shocks at the same time.

Uh, so I kind of like, it is like a vicious cycle where supply shocks creates demand shocks and demand shocks create more supply shocks, and it continues like that. So they are kind of like feeding each other. So, so let me go back. This is true for near all of the industries. So typically, you know, supply chains are designed for products which has a stable, especially the efficient supply chains are designed for product which has stable demand.

Not much variability, like, let me give you an example. Just thinking about hands up right before pandemic, how much variability. Demand [00:16:00] for hands up, for example, in Lincoln, right? So the population is not suddenly getting much bigger and like people were washing their hands with the same frs, right? There wasn't a significant increase.

Uh, but what we see after pandemic is, uh, first there is a significant increase in demand. Okay. On the, on the demand that we see that is for food as well. I mean, demand for food has been increasing significantly even before, uh, pandemic. And then there are several projections, like by very near future, the food demand will increase by 70%.

So basically we need to produce 70% more food, and our resources are limited. And actually we are losing these resources. Water becomes less scarce, like, uh, wild fires are endangering, or the climate change is endangering the farming areas, farming that, that we have. So, uh, when we look at the demand, especially after pandemic, uh, before [00:17:00] pandemic, we were spending like 70% of our money on services

and about in US 30% of our money on goods. Okay. So, and then there's a significant degrees just at the pandemic, but after that we start spending more money on goods, but we still don't spend as much money on services. So we are not going to, uh, you know, going out holidays or movies, theater, there's not as much.

So this unspent money goes to goods. So now we are actually consuming, Okay. On top of that, the way we shop or we, we buy changed, we increased the variability of our buying behavior. Before pandemic, we were going to a grocery store and every time I go to grocery store, I was buying one pack of paper towels.

But when then now I go to grocery. And hearing all these kind of like sub life shortages [00:18:00] and having a toddler at home, right? So when I see paper towels, I just buy four packs of paper towels. Right in case, right? So I also do stockpiling. This is called panic buying, right? And the reason I'm doing that is because I'm affected by these supply chain shortages or supply shortages, supply shock.

And now what happens is, instead of buying in a very stable manner every week, one pack. One pack, one pack. Now I buy one time, four pack. And then don't buy. Don't buy, don't buy. So instead of 1, 1 1, it is now 4 0 0, which is high variability. So these supply chains are not designed to handle that kind of variability.

So now there is an increase in demand. There is also increase in variability, okay? Which is really crunching these supply chains. These supply chains don't have that much power to host that much Vari. 

[00:18:56] Gus Herwitz: And I expect, uh, that there is some [00:19:00] endogeneity here. Consumers respond to the availability or lack of availability.

So if you have these bursts of availability, when you see the product on the shelves, you have an incentive to hoard even more of it, which further exacerbates it turns into a feedback loop. 

[00:19:15] Erkut Sönmez: Exactly, Exactly. So that kind of behavior and that kind of behavior also. So all of these supply chains based on, you know, like artificial intelligence or advanced forecasting techniques, uh, to estimate the demand.

But one common main assumption of all the forecasting techniques is that in the future, Consumers will behave the same manner that they have been behaving in the past. Okay. So, and if you don't have that valid assumption, the forecasting methods will really fail big. Right. And we are in an era where, Consumers are not behaving as they used to behave a year ago.

For that reason, uh, supply chains [00:20:00] lost their forecasting or predicting power. So it is very difficult. So, for example, we don't know at this point whether the consumers will be still stockpiling next year, right? So there is a significant increase in online sales. And nobody, not any industry expert can certainly tell me that Whether there will be a decrease in online sales once we are over covid or will people still shop online as much as now they are doing, or will, will we see a decrease or.

It's gonna stay the same level in the future for the online sales. Now everybody starts buying everything online. Even the, you know, the elderly population. We don't know how the demand will be in the future. We don't know whether the customers will be still stockpiling or not. 

[00:20:47] Gus Herwitz: Well, I know what my demand is right now.

We need to, uh, take a brief break, um, and I'm going to run out and stockpile some, uh, consumer staples. Uh, we will be back in a moment to continue our discussion and, uh, [00:21:00] look to the future and ask whether or not it says bleak as I fear it may be.

[00:21:09] Lysandra Marquez: Hi listeners. I'm Lysandra Marquez

[00:21:10] Elsbeth Magilton: And I'm  Elsbeth Magilton, and we're the producers of Tech Refactored.

[00:21:15] Lysandra Marquez: We hope you're enjoying this episode of our show. One of our favorite things about being producers of Tech Refactored is coming up with episode ideas and meeting all our amazing guests. We especially love it when we get audience suggestions.

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Now, back to this episode of Tech Refactored. [00:22:00] 

[00:22:01] Gus Herwitz: We are coming back now speaking about, uh, supply chains and current disruptions, uh, in those supply chains with er cut sun here at the University of Nebraska. Er, I want to start by asking why markets themselves aren't a solution to the supply chain. Uh, issues. I could imagine that if supply chains in a given market are operating extremely efficiently, It's foreseeable that there will be market disruptions.

Why doesn't that create an opportunity for some firm to have a more resilient but less efficient supply chain to plan ahead and get ready to, uh, make a killing in the market when there is a disruption? 

[00:22:44] Erkut Sönmez: So first of all, building supply chains are strategic decisions, and these are long term decisions. So you cannot really build a resilient supply chain, you know, in a month or sometimes in a year.

So resilient supply chains means [00:23:00] having extra capacity. Resilient supply chain means having a port with two more unloading docks, right? So that extra two unloading docks to build may take years to. Or resilient supply chain means that not sourcing everything from one factory located in China because of cost advantage, but maybe source half of it from China and 30% from China and 20% from Mexico.

But the problem is finding the right supplier globally. That can produce at the right quality a challenging task. Uh, so for that reason, building these supply chains or adding flexibility or adding resilience to your supply chain takes significant investment and it requires significant time. So that will be some time that you need until you build these supply chains and it's gonna take [00:24:00] significant investment and you don't know whether you are gonna need that resiliency maybe two years later. Right? So now it is the investment decision. Do we wanna risk that machine investment for the flexibility that you may not need in the future? 

[00:24:14] Gus Herwitz: So I'm imagining in my mind every financial advisor out there yelling, diversify, diversify, diversify.

You have to have a diversified portfolio on the one hand. And Paul Krogman on the other hand, uh, with his Nobel trade work, arguing that, uh, uh, geographic specialization in markets is efficient and makes it all, makes us all better off. Um, and it, it seems like these two ideas are, uh, uh, really directly in conflict.

You, you can't have resiliency and EF. 

[00:24:44] Erkut Sönmez: So these, there is a trade off between them. Yeah. Correctly. So this is the reason different companies, we see different companies with different strategies. This is what we actually teach in class to our students too. Like know your strong suit, like you cannot be good at in everything, right?

So there are, for example, four dimensions that [00:25:00] you can be good at in like quality speed. Flexibility or variety and price, and you cannot be good at all ofta. So pick your weapon, pick your order winner, and then you will be serving to the customers in that region. For example, there are some customers who are placing importance on the price for that reason.

I'm just thinking about, for example, customers who choose to shop from Costco, right? And. So they are not looking that much available to their prior to us on the price. If they cannot find the product they're looking for, they will wait couple of more weeks until they get the product. And for them, the priorities price versus the customers who are shopping for maybe convenience stores, like for them, they want to pay extra for the convenience or for the availability.

So for that reason, they are competing for different segments of the market. 

[00:25:56] Gus Herwitz: So one, one of the things that we are seeing in [00:26:00] terms of consumer impacts right now is obviously, um, inflation. Lots of discussion about consumer pricing, consumer prices for all sorts of products going up and debate about how long that's going to continue be to be the case.

I'm not going to ask you to, uh, anticipate when inflation's going to stop increasing, but, uh, I, I will ask you. What are the long term effects, uh, that consumers are going to feel? Uh, what do you think that they're going to be? How five years from now, two years from now, 10 years from now? Do you think supply chains and consumer markets might look different based upon the things that we're seeing and feeling today?

[00:26:39] Erkut Sönmez: So there are, you know, two parts of this question. Like the first part. So it is all about speculation. So what I say is really my speculations, right? So in the short term, I don't expect these issues to be resolved because as I, you know, mentioned earlier, supply chain decisions, long-term decisions. So it's not like tomorrow [00:27:00] morning you can find another factory that can produce for you or you cannot find one more ship they can, you can use to bring product.

It's not. Very short term decision. It's not like hiring workers for a come for a fast food company easily. It's not that much simple. What I expect is this in terms of, you know, how I speculate on that one is in the last maybe five years, 10 years, we get used to a term that I call perfect orders, right?

So we get used to, uh, very high delivery speed, high availability, high variety. , Right. And then when I was growing up, I didn't have that much availability, okay? Even when I was doing my PhD for the textbook, it was okay for me to wait two weeks. Right. I was ordering a textbook and if I was getting it from Amazon in two weeks, that was, I was very happy.

And now if it is coming on the third day, I'm [00:28:00] really, you know, very close to writing a very bad review about that company. Right. We all get used to one or two day shipping. We get used to, uh, when I was growing, In my local retail store, there was only two types of sucker shirts that I can select from. Now I can buy any type of sucker shirt that I want from any part of the world.

It was very easy, right? So these are perfect orders, right? High variety, high availability, very quick responses. And this is something that we get really, you know, used in the last maybe five, 10 years. And my conjecture is we may, for some period of time, we may not have that much. Okay, so for example, we will not able to find 10 different types of doll houses next time you go to Walmart, Maybe two different types of doll houses for your daughter that you can pick from.

[00:28:53] Gus Herwitz: It's amazing to me, just thinking about from my perspective, I could be wrong about this, but the role of technology [00:29:00] in the tech industry in this area, Dell. The thing that made Dell such a major company in the, uh, late nineties into the early two thousands is their just in time delivery supply chain for business users.

And then the thing that made Amazon, Amazon was its focus on logistics and building out its supply chains. And that has, it probably didn't start with Dell, but it feels to me, uh, like that was really where just in time supply chains really started to explode and reshape the economy over the last 20 or 30 years.

Mm-hmm. , um, and business. Organize themselves around it. And that trickled down from businesses down to ordinary consumers. And, uh, we now, as consumers, you're exactly right, we're, we're used to these perfect orders. I, I, I'm wondering, do, is there a business cycle to supply chains? By which I mean, do we go through a period of.

Increasing efficiency, which creates fragile supply chains. And then [00:30:00] in response to that, there's some shock. And suddenly industry starts to say, Oh, we need to be more resilient in our supply chains for going efficiency. So we go through, uh, 10 years of more resilient supply chains, and then we, we have a period of peace and tranquility and stability, and companies go back to competing on efficiency for some period of time until there's another shock.

Is this. Cyclical phenomenon or is there some more stable equi? 

[00:30:27] Erkut Sönmez: Actually, so there is one, uh, misunderstanding, especially, you know, in the last couple of months in the media or also in the, you know, society. Like everybody starts blaming about just in time systems. And then just in time systems are seen as the systems which does not hold inventory, right?

So everybody understands from just in time is these are the systems that can deliver quickly and they don't have inventory for that reason. In times like that, because they were not holding inventory to become more e. Now they're broken. Actually, it is not. This is not just in [00:31:00] time systems. Yes, Just in time systems do not hold inventory, but instead they take other protection methods.

Like for example, they have extra suppliers. They design their suppliers in a very collaborative manner that if one of them goes down, the other can take less of it. Right. So they. Suitable for products or production environments where you have reliable transportation. Demand is very steady. So it is like, really these systems are not, uh, well implemented.

This is what we observe. So most of the companies focused too much on efficiency. They didn't implement just in time systems, in in, in the proper manner. And then now what we are gonna experience is, so I'm expecting these companies to revisit their supply chains and then, Kind of like try to figure out these bottlenecks, these, you know, weak points.

So there is a content, now we have been talking about supply chain stress tests. [00:32:00] Okay. Like, for example, in the finance industry, every year the banks do stress tests, uh, to, uh, see how strong they are. If. 20% of their account holders were trying to withdraw of their money or 5% of their loans are bad loans.

So there is this kind of stress tests, how strong the financial system to understand how strong the financial system is. So we will be seeing similar tests in the supply chains. Companies will try to figure out their weak points. And we try to improve these points, but this will not mean that they are gonna foregone efficient supply chains and everybody will start building flexible supply chains because, uh, flexible supply chains are for different types of demand or different types of products and efficient supply chains are for different types of products.

This the reason actually efficient supply chains are the reason that we can buy several products in a very reasonable price. [00:33:00] By not creating much waste or extra, extra capacity that we don't use. But sometimes we, at times like this, we may need it once in every maybe 50 years. So you would like to invest that much for, uh, a capacity or for a resource that you may need once in every maybe 10 years or 20.

[00:33:25] Gus Herwitz: So I've been completely selfish in this entire discussion because, uh, I just, uh, en enjoy the topic so much. I, I do want to take a moment to give you the last word and talk about your research, interesting projects or, uh, things that you're working on in this area, and anything that you'd like to share with our listeners about your, your work or your thinking about supply.

[00:33:48] Erkut Sönmez: Sure. One of the shortcomings of the food supply chains was especially the high food waste that we have been observing. For example, if you look at the food supply chains, about 30 to 40% of [00:34:00] the total food that we produce is lost along the food supply chains. So it is lost on the field. It is lost during transportation.

It is lost during storage or at the retail markets, or as consumers. Think about how much food we throw out. And food insecurity is a big problem in our society. The latest I check, I think the latest statistics was in 2020, about 35 million Americans are food insecure. And food insecurity means these are the households that may not have enough food to feed all the family members.

Like once a week or something like that. Right. So it is really striking for me that on one side we nearly waste one third or you know, half of the total food that we produce. On the other hand, we have like about 14 to 20% of our population that doesn't have enough food to. [00:35:00] And most of that food security comes from in terms of the fresh produce, it is affecting children a lot.

And when I look at, for example, the sources of food waste, one big source is on the farms. Like 6% of what we produce is not even picked up. From the farms. And why is that happening? Because of cosmetic blemishes. I'm adjusting about when you go to grocery stores, all thees are perfect in the same shape, same color, which mother nature doesn't produce them or that doesn't manufacture them in that manner.

And we are just leaving these ugly produce a bit weird shape or miscolored cause. Perfect edible, perfect nutritions on the field or we are using, because of lack of labor, we are using less of machinery. And this machinery, for example, in potato army leaving 2% of the potatoes on the field, this is their technological frontier.

Right? Uh, so I have been working on working with gleaning. Organizations [00:36:00] where there are several times farmers do not harvest because of economical reasons. Sometimes the labor cost is too much. Right? And so with my quarters, I have been working with cleaning organizations how to make cleaning operations more efficient so that we can recover more food from the fields to be distributed to the food insecure individuals.

And gleaning may be a new term for many of our listen. Uh, it is basically volunteer workers. I used to be one of them. Uh, so farmers call food banks or some greening organizations and then, Hey, I have these tomatoes or apples. I'm not gonna pick them up, come and pick them up, they are yours. And then this organization collects volunteers.

We go to the farm and then for a half a day we call like as much as we can. And then we. This produce. So it is totally, uh, volunteer labor. So volunteer labor is a challenging area to adjust capacity because we have [00:37:00] limited amount of it. Uh, so I have been working on this, uh, and I'm looking for more ways.

To re to more research, to do more research on food waste, to reduce the food, uh, ways along different stages of food supply chains. And also current, I working on precision agriculture, where I'm trying to modify the inventory management tools or theory that we have in supply chain management for managing water or for managing irrigation water for farmers.

So how iCare, how we can use. How I can create irrigation, prescription for the farmers that they can use to reduce their water waste and they can improve their economical return in terms of their irrigation decisions. Well, I. 

[00:37:53] Gus Herwitz: Am thrilled by all of this and, uh, sincerely hope that we have a chance to have you back to talk about some, uh, more of this [00:38:00] work because this is, uh, just so fascinating and so timely.

And, uh, again, supply chains. I, I, I love hidden infrastructure and supply chains. They're one of those hidden infrastructures that literally tie us all together, both economically and socially, and they, they. In so many ways, who we are as a country, as a society, as a people. Thank you. Uh, . We've been speaking with EZ of the, uh, University of Nebraska College of Business.

I've been your host, Gus Herwitz. Thank you listeners for joining us on this episode of Tech Refactored, which was one of our just in Time Tech Refactored DT episodes. If you want to learn more about what we're doing here at NGTC or submit an idea for a future episode, please go to our website at, or you can follow us on Twitter at UNL underscore NGTC.

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Until next time, keep those containers moving.