Innovations in supply chain management provide detailed data that translates to fresher produce and profitability
Today’s grocers are taking a closer look at improving efficiencies and setting new standards in supply chain management — particularly with produce — where every second counts in the journey from farm to store to table.
And while building a high-functioning supply chain management system requires time, money and other resources, the potential return on investment is compelling, to say the least.
“Statistical evidence continues to mount, suggesting companies with well-run supply chains continue to outperform other companies,” notes the Council of Supply Chain Management Professionals, in Lombard, Illinois The council points to a study by Boston-based Bain & Co., which found that companies employing sophisticated supply chain methods experienced 12 times greater profit than companies with unsophisticated methods.
Gartner Inc., an information technology research and advisory company in Stamford, Conn., ranks the world’s leading supply chain practitioners each year. In 2013, the Gartner Supply Chain Top 25 list of companies that define “demand-driven leadership” included the powerhouses Apple, Amazon, McDonald’s and Walmart.
“At leading companies in diverse industries, the supply chain organisation is no longer narrowly focussed on driving efficiencies and cost cutting; it sees itself — and is seen by its CEO — as a growth enabler,” assert the Gartner analysts.
Gartner also identified top trends among the supply chain leaders, including advanced decision-making capabilities, enabling smarter growth and promoting inspiration-based talent management (the sort that invests teams in a meaningful and sustainable vision).
Simply Better Supply Chains
“The pace of change and the uncertainty of how markets will evolve has made it increasingly important for companies to be aware of the supply chains they participate in and to understand the roles that they play,” notes Michael Hugos, author of Essentials of Supply Chain Management, the best-selling supply chain book worldwide since 2004, according to Amazon.
“Those companies that learn how to build and participate in strong supply chains will have a substantial competitive advantage in their markets,” Hugos adds.
But while the produce supply chain has become increasingly complex, overly complicated supply chain management programs aren’t the secret to success, cautions Hugos, who is also the Chicago-based managing principal of SCM Globe, a startup focussed on online supply chain design and simulation.
Hugos believes simpler technology that allows players to set and achieve goals, that provides total transparency to all involved, and that compensates everyone for their endeavors is the name of the game — literally.
“When I look at the future of supply chains for produce, I think of a massively multiplayer online role-playing game (MMORPG) like World of Warcraft,” says Hugos, acknowledging that the notion may be surprising at first.
“With MMOs like World of Warcraft or Eve Online, you have hundreds of thousands of people around the globe playing simultaneously, and forming groups with different skills to complete complex tasks. How is that any different than people cooperating in a complex supply chain?” he asks.
“These games work because everyone can see what’s going on, everyone has a role to play and everyone has a stake in the outcome,” he continues. “I think it’s a model that has a lot to offer in supply chain management, where people and companies each have their own individual objectives, and yet all need to cooperate on more than an arm’s-length level.”
SCM Globe has created an educational tool based conceptually on these online games that simulates complex supply chain scenarios. The tool is currently launching in universities such as MIT and Virginia Tech, and Hugos anticipates that commercial applications will roll out as early as this summer.
Local Drivers
The surge in demand for locally grown produce has also fueled the need for a modernised approach to supply chain management, according to Hugos, who notes, “Grocers are used to dealing with big companies, but now they are also talking to family farmers.”
Small local farmers typically don’t have the resources to invest in complicated IT. To link small sellers with supermarket buyers requires technology that’s accessible to smaller growers, such as tablets, smartphones or laptops, observes Hugos.
Hugos envisions the near future of supply chain management operating with the same far-reaching collaboration of a complex online game. “The restructuring of the food supply chain that’s going on right now necessitates this change,” he says. “To make it work, everyone involved needs to A, see what’s going on; B, have the freedom to act; and C, have a stake in outcome.”
Supply chain technology that allows farmers to see at a glance where the demand is for the produce they grow, and for supermarkets to see who has what to sell in real time is what free markets are all about, maintains Hugos: “People actually like to cooperate and collaborate. It’s human nature. We want to be part of something larger than ourselves.”
The experts at Gartner agree. Their advice: “Set aspirational goals and connect the dots between the work people do every day in supply chain and its contribution to the societies within which they live, building engaged supply chain talent that can lead business growth.”
Integration and Traceability
Collaboration and engaged talent were integral to a supply chain management case study by C.H. Robinson and Associated Grocers Inc. Working together, along with FoodLogiQ and LoBue Citrus, they created the produce industry’s first end-to-end, multiparty traceability route, through independent operational environments, from a grower all the way to a retailer, notes Gary York, Director of European sourcing at Eden Prairie, Minnesota-based C.H. Robinson.
“Integrated supply chain solutions, where logistics and information services are bundled together in order to provide a single uniform solution to the client, have changed the way that suppliers and receivers alike purchase and procure logistics services,” says York. “More and more companies are looking at their supply chain to drive out costs, improve efficiencies and provide a better product to the end consumer.
“Logistics providers that can provide an integrated solution, as well as the information technology to help their clients measure and improve services, are the ones that are gaining traction in the market today,” he continues. “Add in cold chain management, traceability and just-in-time distribution capabilities, and you have the tools you need to compete in today’s environment.”
The case study began with Mike Bove, VP of perishable procurement for Baton Rouge, La.-based Associated Grocers, looking to implement new Produce Traceability Initiative (PTI) capabilities. To enable Associated to trace produce back to the field, each produce case was labeled with a Global Trade Identification Number (GTIN), and each pallet with a Serial Shipping Container Code (SSCC) expanded bar code. All information was scanned and stored with the help of software from FoodLogiQ, in Durham, North Carolina.
On the supplier side, C.H. Robinson selected of Lindsay, California-based LoBue Citrus to participate in the pilot program. LoBue packs citrus for C.H. Robinson under the Tropicana label. To prepare for the pilot, Associated updated its warehouse management system (WMS) to ensure it recognised both voice and scanned information.
During the program, Associated found that while scanning every inbound and outbound case initially added steps, it soon created efficiencies. “We can now trace product from the field to specific slots inside the warehouse, and all the way forward to the stores in minutes,” says Bove.
The experts’ premise that success in supply chain management is realised when all parties are invested in the outcome was clearly in play here. “During the four-month pilot, each party incorporated PTI standards and took into account the needs of the other pilot stakeholders,” notes C.H. Robinson of the program, which Bove anticipates will lead to increases in gross profit and labor savings both at the wholesale and retail level.
Associated and C.H. Robinson are now working on data synchronisation so everyone in the supply chain has the same information about a product, the pallet ties, pictures of the product, and the right attributes of the product.
Packaging and Merchandising
The perishability of fruits and vegetables demands the most from produce supply chain management from the field straight through to the consumer’s table. In store, produce managers rely on many tools to deliver the freshest product, including effective merchandising solutions.
With produce supply chain efficiency in mind, IFCO Systems has launched a “Retail Ready” program that includes a range of accessories to promote fruits and vegetables. “Called Fresh Market Advantage, these solutions successfully combine the right recycled plastic container (RPC) design, efficient supply chain logistics and impactful retail merchandising support,” explains Dan Walsh, president of IFCO Systems North America, in Tampa, Florida.
“The Fresh Market Advantage merchandising solutions were developed in concert with leading North American retailers and growers to ensure requirements of the supply-and-demand sides of the industry are met with the ultimate goal of increasing fresh produce sales for RPC users,” adds Walsh.
In terms of the role of produce packaging in supply chain innovation, Walsh sees a continued focus on waste reduction and environmental sensitivity. “There is an ongoing move to optimize both the primary and secondary packaging — we saw it a few years ago very clearly in the bottled water industry, where companies reduced the primary packaging and eliminated cardboard from the case packs,” he recalls. “We see growers doing similar things with a variety of commodities now, and expect the trend to continue.”
Finally, when it comes to selling the freshest produce in town, Walsh offers the following tips to grocers: Maintain temperature/humidity levels consistent with keeping a long shelf life throughout the supply chain; request that shippers use packaging that ensures the least amount of product damage during the harvesting/storage/shipping process; and train and retrain store personnel on all elements of food quality and food safety.
