The Friday Report: May 15th, 2020

USDA to Launch Farmers to Family Food Box Program to Feed the Hungry

Agriculture Secretary Sonny Perdue has initiated a part of the federal response to those suffering from COVID-19 outbreak food challenges.  The new $3 billion plan named “Farmers to Family Food Box Program” will distribute food to needy families.  The federal government will pay farmers to box the fresh produce, dairy and meat products, much of which may have had to be trashed due to supply chain disruptions and provide the boxed food to food banks.

Last week, the USDA outlined $1.2 billion in federal contracts for the program.  The Agriculture Department awarded multimillion dollar contracts to companies which lack experience in matching up food banks with surplus food products including perishables.  Numerous large produce companies which had expansive expertise in food distribution were passed over in favor of giving the business to a San Antonio Texas event planning company, a company that specializes in trade-related finance and another company which focuses on selling health and wellness items for travelers as well as other companies.  Part of the contract award criteria included strict adherence to the Federal Acquisition Regulation (FAR) and included criteria for supporting regional and local farmers.  Participation in the Farmers to Family Food Box Program requires that participants provide proper cold storage capacity, trucks and adhere to proper food safety practices to ensure food quality.

As part of the program, the federal government will purchase millions of pounds of produce and milk, excess perishable food products then package them in boxes that facilitate distribution to consumers.  The new USDA program will be spending $300 million a month for the food products that will go directly to nonprofit organizations and food banks.

Online Retailers Oppose 400 Percent Package Rate Increase Requested by White House

Known collectively as “The Package Coalition”, a group of online retailers has developed a strategy against the 400% percent rate increase requested by the Trump administration for the USPS.  The dramatic increase is anticipated to impact both small businesses and consumers, including those patients who receive prescription drugs via the United States mail service.

• Publishers Clearing House
• National Retail Federation
• Columbia Sportswear Company
• Frontgate
• And other online retailers

President Trump has previously announced that he will not allow the approval of any coronavirus stimulus which includes funding for the post office without an increase in postal rates.  The USPS Board of Governors has requested an infusion of $25 billion and is awaiting political backing on the issue.

U.S. Manufacturers Seek to Diversify and Eliminate “Single Point of Failure” Potential Risk

Over the past few years, American manufacturers have found increased motivation to diversify their suppliers beyond China.  With the launch of the 2018 tariffs and now the coronavirus outbreak, manufacturing companies have realized that it is time for action to reduce their dependence on China.

Focused on decreasing the risk inherent with of a “single point of failure”, U.S. manufacturers have stepped up their efforts to find alternatives and have found that the Chinese manufacturing capabilities and infrastructure are difficult to match.  “Single point of failure” can pose distinctive risks to supply chains such as the global auto industry experienced in 2011.  In that year, the highly concentrated Japanese supplier industry suffered from the consequences of the Tohoku earthquake and tsunami.

With the trade war against China, manufacturers had already determined that a new way forward was warranted but their efforts were thwarted by the COVID 19 outbreak.  Many manufacturers tried to develop alternative sourcing strategies for both tier 1 suppliers and contract manufacturers and even single sourced tier 2 parts suppliers.