Rethinking Agribusiness and Apple Inc.’s Supply Chains in a Changing Global Landscape

On August 12, the Center for Responsible Supply Chain Management at Arizona State University’s W. P. Carey School of Business and the Institute for Environmental and Social Sustainability at Indiana University’s Kelley School of Business co-organized the second webinar in the series “Rewriting the Rules: Global Trade, Sustainability, and Supply Chain Research.”

In the first segment, two distinguished guests, Timothy Richards, the Morrison Endowed Chair of Agribusiness at ASU’s W.P. Carey School of Business, and Doug Baker, Vice President of Industry Relations at FMI (The Food Industry Association), unpack what is at stake in food and agribusiness supply chains:

Climate Change: Heterogeneous Impacts on Global Yields
Climate change is fundamentally altering how food is grown worldwide, leading to heterogeneous impacts on agricultural yields globally. In the U.S., average yields are expected to be roughly 10% lower by mid-century, varying by crop. A crucial effect is the increased volatility of crop yields and prices globally. This creates a cascading effect for retailers and manufacturers, shifting them from “just-in-time” to “just-in-case” inventory systems, leading to higher costs due to carrying multiple sources of supply. Innovations like vertical farming are emerging but are not a complete solution due to high energy demands and limited crop diversity.

Farm Labor Shortages and Rising Costs
The agri-food sector faces persistent farm labor shortages: the H-2A temporary agricultural worker visa program has seen an explosion in usage since the mid-2010s, providing nearly 400,000 workers annually. This labor shortage has led to wage increases, directly contributing to consumer food price inflation as labor accounts for roughly 60% of costs in labor-intensive crops. Retailers face higher commodity prices and rising labor costs within their own operations, driving efforts to reduce expenses through means like self-checkouts, despite potential public criticism. If costs continue to rise, smaller and independent grocers may go out of business.

Tariffs and Trade: A Shifting Global Landscape
The U.S. agricultural trade balance is at a turning point, with our trade deficit accelerating as the U.S. produces less and imports more, losing export markets to other countries. For retailers, ambiguity in trade policies is often more challenging than the tariffs themselves, though the USMCA has provided some stability. It is becoming harder to conduct agriculture in the U.S. due to factors such as labor costs, regulatory burdens, water costs, pests, urban encroachment, and land costs. The idea of friend-shoring is gaining traction, particularly in packaging and manufacturing, as companies explore ways to avoid tariffs, though protectionist activities can have a pernicious effect by shielding inefficient industries and potentially reducing long-term productivity.

Food Waste: A Global Imperative for Efficiency and Sustainability
Over $300 billion worth of edible food wasted annually. This waste also squanders 20% of fresh water and 300 million barrels of oil annually, and if food waste were a country, it would be the third-largest source of greenhouse gas emissions, behind China and U.S.  The food industry association (FMI) recommends re-framing food waste as “merchandise loss” to emphasize its commercial impact. Innovations are emerging such as Flashfood and Too Good To Go, which connect consumers to discounted surplus food, and R4, which directs surplus produce to consumers in need, including SNAP users. Companies like Imperfect Foods and Misfit Markets buy imperfect or excess produce directly from farms, demonstrating significant economic opportunity in reusing waste. Retailers also contribute by donating two-thirds of the food used by U.S. food banks, a win-win that reduces waste and food insecurity while offering tax savings and avoided tipping fees (waste disposal fees).

GLP-1s: Reshaping Food Consumption and Retail Strategy
The emergence of GLP-1 drugs (like Ozempic and Wegovy) for weight loss is poised to create a sea change in how people consume food and how the industry responds. GLP-1 users tend to shift consumption toward healthier options like vegetables, fruits, and healthy fats, and away from fried foods, sweets, and snacks. Food manufacturers and retailers are responding by reformulating products and introducing GLP-1-friendly product lines. This trend could indirectly impact non-users in the same household if the primary cook is on GLP-1s. While smaller portion sizes might reduce food waste and obesity, they could also lead to a reduction in overall retail volume as GLP-1 users consume fewer calories per day, potentially impacting food growth and agricultural intensification. For retailers, there’s a silver lining as the categories favored by GLP-1 users (fruits, vegetables, fish, meat) are typically their highest-margin items. This trend, combined with state-based SNAP reform efforts pushing beneficiaries towards healthier food choices, could lead to a broader shift toward healthy food consumption, potentially changing store formats and leading to convenience and dollar stores adapting to offer healthier assortments.

 

In the second segment, Doug Guthrie, Professor of Global Leadership and China, Executive Director of China Initiatives at ASU’s Thunderbird School of Global Management, brings a rare combination of academic depth and executive experience, having spent much of his career studying Chinese political economy, global strategy, and organizational development. Notably, he also served as a Senior Director at Apple in Shanghai, where he led Apple University’s efforts to shape leadership and organizational learning in the region.

Apple’s supply chain strategy, significantly shaped by Tim Cook’s operational genius starting around 2001, established an amazingly innovative and profitable global network deeply embedded in China. Cook built relationships with 1,600 Chinese suppliers, fostering industrial clusters around thousands of iPhone components and modules, leading to Apple controlling about 30% of the smartphone market share but taking 92% of the profits at one point.  Apple’s supply chain managers transferred extensive tacit knowledge to Chinese suppliers, helping them scale up to world-class manufacturing standards. Suppliers often accepted thin margins because of Apple’s volume, prestige, and the value of knowledge. The complexity of these manufacturing supply chains, built over decades, means Apple is “married to China,” and the idea of easily reproducing production in places like Chennai or Texas is not feasible and would take decades to rebuild efficiently. Currently, Apple navigates U.S.-China geopolitical tensions, tariffs, and trade wars by operating under the principle of shareholder value, with Tim Cook aiming to comply with the current administration’s demands while ensuring continued operation in China. However, this tension also carries risks, as Chinese consumers’ perception of American products like iPhones could be negatively affected, potentially leading to a decline in demand if local alternatives, whose capabilities have improved due to knowledge spillover, are seen as comparable.

The webinar is co-hosted by Karen Donohue, a professor at ASU’s W. P. Carey School of Business, and Owen Wu, a professor at IU’s Kelley School of Business.

Find the webinar slides here.

Click here for the first webinar in the series “Rewriting the Rules: Global Trade, Sustainability, and Supply Chain Research.”