Supplying the nation with food is the most critical of functions, but one that comes with layer upon layer of complexity. In many ways, the supply chain of supermarkets and independent merchants is similar to those of any other retailer. Suppliers are spread around the country and the globe, and driven by customer demand for local, independent products, retailers must work with small, local farmers as well as with large multi-national suppliers.
However, two key factors exist that make the food supply chain more complex. The first is that every product, albeit to varying degrees, is a time bomb. From the second it’s picked, caught or made, it has a finite lifespan. Seasonal trends can have a similar impact on fashion or fast moving consumer goods supply chains, but at least last season’s coats can go on the sale rack. Out of date milk cannot be dealt with in the same way, so it must be made available to the customer as quickly as possible. The result is a far more expansive supply chain network that becomes difficult to manage efficiently.
The second factor is regulatory compliance. With the Food Safety Modernization Act (FSMA) demanding compliance down to the finest detail, farmers, manufacturers and retailers must have very strict tracking processes in place.
Stopping the rot – getting produce to the customer on time
The clock starts ticking the second a pea is picked, a potato pulled or a fish netted. The customer demands the freshest food, which means getting produce from farmer to retailer to customer within ever decreasing time frames.
Greater speed of delivery does not come from simply trying to do things faster, it also comes from creating a more agile supply chain. Farmers need to be able to get goods into the supply chain right away, which requires easy-to-use labeling, scanning and shipping devices to ensure that products are accurately logged and enter the supply chain quickly and efficiently.
It’s then the responsibility of the retailer to create the best transport route to the store shelf. This can only be achieved by gaining an understanding of stores’ and customers’ requirements and the ability to make quick decisions on what produce goes where.
Matching store or customer need with stock availability is a fundamental skill of good retailing, but having to make those decisions in time frames of minutes, or hours at most, is one of the defining characteristics that make the food supply chain different from others.
Retailers have responded to these demands and put in place multiple distribution centers close to the source. This ensures that produce is fresh when it hits the shelves, but also creates a new challenge: managing it. To achieve this, it’s essential for operations managers to have clear visibility of all products, all the time.
Fresh food, rubber stamped
One of the reasons that the ability to monitor across all of these sites from a single interface is important is regulatory compliance. Goods must be tracked from farm to customer to ensure quality of produce on the shelves. This puts responsibility on farmers and manufacturers to time stamp and label all goods appropriately, but also means that the more visibility retailers have of the transit of these goods, the better. This means knowing exactly where products are, when and for how long – including when they’re in the back of a refrigerated vehicle, in a warehouse or on a shelf.
The reason that this is growing in importance from a commercial standpoint is that retailers are committing to print the source of their produce on every packet.
Online shopping highlights supply chain weaknesses
In the rapidly changing retail environment, supply chain inefficiencies will be exacerbated by the continued growth of online shopping and home delivery. The importance of removing those inefficiencies is demonstrated by a number of recent research, including a Bain study indicating that online grocery shoppers end up buying more frequently and spending more money in each transaction as they come to rely on the service over time.
Many food home delivery services are going through a major transition as critical mass approaches – consolidating picking into dedicated distribution centers away from low volume store-based operations. However, while the enthusiasm to address these new challenges is important, recent high profile failures highlight the risks of investing in too much costly, fixed, inflexible automation. To achieve the goals of a multi-channel enterprise, agility is a higher priority than optimization to solve today’s problems in such a fast moving sector.
Some of the characteristics of agility in the supply chain include being able to cross stock over between different distribution lines, as well as adjusting supply chain processes in real-time to adapt to changing circumstances and requirements.
There are several key considerations for the food supply chain that will ensure that this multi-channel challenge is met and overcome with a profitable outcome. The first is to have a single Order Management system. If this can’t be easily achieved, an integration technology that can at least aggregate information from multiple systems to give a single view of each channel is essential. Without this, the supply chain will slow down and the capability to ship the most appropriate stock does not exist.
Unifying processes to gain visibility of the entire supply chain is essential. As many deliveries – for example for bread and milk – have to go direct to store from the manufacturer, coordinating the entire delivery cycle requires the integration of an extensive web of manufacturers, delivery vehicles and stores’ own stock management systems.
Eric Lamphier joined Manhattan Associates in 1997 and is currently the senior director of product management for Manhattan’s Warehouse Management for Open Systems (WMOS) solution. Lamphier has worked in various roles in Manhattan’s Professional Services Organization, supporting and overseeing the design and implementation of Warehouse Management solutions for customers across target verticals. He earned a Bachelor of Science degree in chemical engineering and an MBA from Clarkson University.