I saw a TV piece on the pet food contamination scandal in the US recently which affected many dogs and cats. It was interesting to note the initial confusion amongst consumers as the contamination affect many different brands across different price points and market positions. This is because like many other mass manufacture-based industries, the pet food sector sources its base products from relatively few manufacturers worldwide.
And then there was the recent worldwide recall of Sony-made lithium ion batteries used in laptops from “nearly every major laptop maker”. Thus a single incidence of contamination could potentially result in exploding laptops worldwide.
This is the result of our obsession with the never ending chase of cost reduction. With globalisation comes new opportunities for greater economies of scale, and cheaper labour to exploit. No surprise that more and more manufacturing will be done by fewer and fewer mega-factories.
So what do we lose as businesses continue to chase greater economies of scale?
Loss of real choice
Did you know the reason why widescreen LCD monitors are being pushed so hard at the moment? It turns out that it is more cost effective for manufacturers to make widescreen units than traditional 4:3 screens. Tie this in with the ubiquity of DVD movies in widescreen formats, and someone stands to make huge profits.
But it could mean it will be increasingly harder to find 4:3 screens. Which then limits your choice of laptop form factors. You get wide, or wide! You get dog food thickened with gluten, or with gluten!
If the one or two mega-manufacturers make everything in a given category, they can effectively dictate what we have available to us. And this will likely be influenced by whatever is cheapest for them to make, and that makes them the most profits. Where’s our choice in the matter?
How much difference is there really between the brands if all of the manufacturing is done by a few factories behind the scenes? Isn’t branding thus all smoke and mirrors?
What real value does the branding and advertising companies provide? Are they just hollow shells touting vapours and hype just to make another buck for themselves and their clients? What is the value in having multiple vendors, with their replicated resource-use, all selling essentially the samestuff?
Real differentiation is not possible when everyone sources the same product from the same one factory. Any differentiation must be “manufactured” via advertising, or the creation of really useful soft services through hard work and ingenuity. At current rates, a kick-arse advertising campaign is probably still the preferred short-term panacea than committing to developing really useful services. Unfortunately.
Stifling of innovation
When manufacturers rely on economies of scale to survive (because of price-based competition), there is little room to try bold new things. You cannot go from a new idea straight to the factory floor to stamp out billions of units overnight. No surprise manufacturers go with what makes them money in the immediate term. There is little impetus to do better. Bye bye innovation.
Why take the risk of being or doing different when we can just cut costs more and keep the revenue stream happening. This frees us to then go right back to sticking our heads in the sand (while the next great ad dangles from our fat backsides).
This situation also makes it hard to set up as a manufacturer, and much easier to set up as a middle entity. Thus we have a proliferation of businesses selling the same stuff from the same factory.
Threats to our safety and wellbeing
When there is a problem like a contaminated ingredient, or exploding batteries, it can ultimately affect our personal wellbeing.
Because such an incident often affects a plethora of different brands. this causes confusion in the marketplace. Remember consumers are trained to think in terms of brands and whole products, not parts or product constituents. This means we have to rely on the individual brands, the middle entities, to do the right thing in recalling their "products". What of the lesser known brands, or smaller resellers who could not afford to perform such recalls? Where does that leave consumers?
Let's not forget that product recalls cost millions and millions dollars. This has to be bad for businesses too. See the huge list of brands affected by the battery recall as an example.
So – what is to stop buyers from going directly to the factories? The concept of “cutting out the middle man” suddenly takes on a cataclysmic meaning.
- Given increasing awareness of fair trading, exploitation and environmental issues related to consumption and mass production, are we facing a massive shake-up of the whole system whereby many middle entities will simply become extinct?
- Is the web already making it easier for consumers to bypass the middle entities? And thereby accelerating their demise?
- What will replace these middle entities? Could this be where the new set of soft services come into play, services that are of real value to consumers and manufacturers alike?
- Think shopping services, linked in with birthday and anniversary reminder services, and personal assistants on demand services…
- What is the future of branding? Who will fulfil this role in the future? Will it be subsumed into the whole social trends thing, where consumers and communities create the “brands” as a by product of their innate interactions?
Oprah used her recent show on dogs to espouse the benefits of back-to-basics pet food, where you go get the raw material from the grocers and make your own. What a radical concept. Certainly there seems to be more people starting up businesses around the idea of homemade organic pet food. You get to know who made the food – wow!
So how does chlorine dioxide fit in to all this?
The supply chain problem caused by the limited number of mega-factories is further compounded by just-in-time inventory practices. Disrupt the manufacturer, and inventory quickly runs out. Disrupt both the manufacturer and the movement of inventory, and a product can disappear off the shelves quick smart.
So what you say. Who cares if your favourite ear buds are out of stock? Consider this: the city of Chicago has, at any one time, access to only seven days supply of chlorine used for water purification purposes.
Thanks to cost-saving JIT practices, should the chlorine supply be interrupted, Chicago will run out of drinking water in just seven days!
Now this is way scarier than pets getting ill from contaminated food.