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Posts Tagged ‘logistics’

Illogical logistics?

Ginsters is a large producer of pasties in Cornwall. Most of its ingredients come from Cornwall, but the pasties are sold throughout Britain. But, not surprisingly, they are also sold in Cornwall. In fact, there is a large Tesco virtually next door to the Ginsters’ pasty plant and, as you can imagine, it does a good trade in Ginsters’ pasties, pies and sandwiches. After all, they are a local product.

But are they delivered directly from the Ginsters’ factory? No they are not. In fact, they are sent by lorry to the Avonmouth distribution depot, some 125 miles away, only to be sent back again to the Tesco supermarket next door! So does it make economic sense to incur all the costs of transporting the pasties 250 miles only to end up virtually where they started?

It is a similar story with Rodda’s Cornish clotted cream. It is made with Cornish milk but is also sold nationwide. In this case it is transported some 340 miles to get to another Tesco supermarket virtually next door to the Rodda plant.

The following articles and podcast consider the logistics of manufactured food distribution, and ask whether private costs are the only thing that should be taken into account when judging the sense of the system.

Articles
From here to eternity: 340-mile journey for clotted cream made two miles away Guardian, Steven Morris (3/9/10)
Food miles row as pasties travel 250 miles to the supermarket next door This is Cornwall (30/8/10)
Supermarket food mileage ‘completely bonkers’ BBC Today Programme, Tim Lang (30/8/10)

Questions

  1. Why does Tesco’s distribution system for pasties, clotted cream and other products made in parts of the country away from large centres of population make sense in ‘conventional economic terms’?
  2. What economies of scale are there in pasty production and distribution?
  3. What externalities are involved in the distribution of Ginsters’ pasties?
  4. Consider the arguments for and against locating mass producers of food products nearer to the ‘centre of gravity’ of markets.
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