As people everywhere cancel events and flower orders, the ripples reach into Dutch auction halls and Kenyan rose fields. A delayed wedding is hardly a disaster during a pandemic that’s killing 1000’s of people daily. But in greenhouses from Ecuador and Colombia to Kenya, growers were already stacking roses in compost heaps. Within days of the lockdown orders in the U.S. and Europe, demand for stems evaporated.
The crash of the $8.5 billion global flower trade shows how quickly and distinctively the coronavirus is disrupting supply chains, reports Businessweek (April 20, 2020). The flower trade is a miracle of modern capitalism. A chain of cold storage starts with stems being picked in far-flung places, then packed into refrigerated trucks, driven to refrigerated planes, and flown to Amsterdam to be auctioned off. They’re then repacked into more cold trucks and planes and delivered to supermarkets, florists, and bridal bouquets across Asia, Europe, and the U.S. within a day.
The auctions are run by a cooperative, Royal FloraHolland, whose site handles the bulk of the global trade out of a Dutch concrete warehouse which is larger than 75 soccer fields– one of the biggest buildings in Europe. The blooms are sold under the traditional Dutch auction system, in which prices start high then tick lower as a clock counts down. The first buyer to pounce wins. The average day sees more than 100,000 transactions.
Before the pandemic, 42 cargo flights arrived each week from Kenya, whose climate allows roses to grow year-round. That nation ships about $1 billion worth of flowers a year, making it Europe’s biggest supplier. More than 150,000 people toil on Kenyan flower farms. The work is grueling, with long shifts in steamy greenhouses, and laborers earn as little as $70 a month.
Classroom discussion questions:
- In Ch. 2 of your Heizer/Render/Munson OM text, we see that companies achieve competitive advantage in one of 3 ways. Which best describes the flower industry?
- How does this supply chain (discussed in Ch. 11 on p. 446) differ from a typical manufacturing one?
