Supply Scan

News and Trends From Across the Food Supply Chain

In a year of volatility and recession, reducing costs and capital and improving customer responsiveness has assumed an even greater significance for grocery manufacturers, according to a study conducted by IBM for the Grocery Manufacturers of America (GMA).

“The respondents felt like they were doing a good job—they were generally positive about the impact of their initiatives to decrease costs and improve efficiency within their organizations,” said Karen Butner, global SCM lead, institute for business value and business solutions portfolio, IBM Global Business Services.

Butner presented the results of the GMA 2010 Logistics Benchmark Survey Report at the Supply Chain Conference held by the GMA-FMI Trading Partner Alliance (TPA), held in Phoenix last month.

The good news is that logistics costs as a percentage of sales have decreased, while order value has increased. However, the cost of the use of pallets is skyrocketing, reported Butner. “The cost of pallets has gone up 42 percent since 2004.”

Since the survey was last conducted two years ago, Butner said there’s been improvement in many areas, including service levels, case fill rates, order size and shipment size. Areas needing improvement include order fill rates, customer satisfaction and perfect order.

Other key findings of the survey include:

• Freight costs continue to climb up from 11 percent from 2008 (from $1.92 per mile in 2008 to $2.05 per mile in 2010), while fuel prices dropped during the same time period;
• The trend toward using intermodal transportation continues, in part due to rail seeing a 5.8 percent price reduction in 2009 coupled with an increase in intermodal service options and reliability;
• Significant improvements have been made in inventory days of supply (45 days in 2008 vs. 36.4 days in 2010), however, aggressive goals remain. The 2012 goal is 30.3 days;
• Forecast errors have decreased across the board and improved forecast accuracy may be attributed to sales and planning and actual vs. trend analysis;
• Outsourcing of transportation and warehousing is still executed extensively with extremely high effectiveness ratios;
• IT investments are centered on service, integration and information visibility, with electronic invoicing/EDI, transportation management systems, warehouse management systems, pallet guidelines and advanced ship notices as the top five technologies being implemented;
• Respondents have invested on average $70,000 annually in supply chain initiatives—mainly to deal with government compliance.

The study will be available online at

Walmart has set a goal to eliminate 20 million metric tons of greenhouse gas (GHG) emissions from its global supply chain by the end of 2015. This represents one and a half times the company’s estimated global carbon footprint growth over the next five years and is the equivalent of taking more than 3.8 million cars off the road for a year.

“Energy efficiency and carbon reduction are central issues in the world today,” says Mike Duke, president and CEO of the Bentonville, AR-based company. “We’ve been working to make a difference in these areas, both in our own footprint and our supply chain. We know that we have an opportunity to do more and the capacity to do more.”

The footprint of Walmart’s global supply chain is many times larger than its operational footprint and represents a more impactful opportunity to reduce emissions.

“Like everything we do at Walmart, this commitment ends up coming down to our customers,” Duke adds. “Reducing carbon in the life cycle of our products will often mean reducing energy use. That will mean greater efficiency and, with the rising cost of energy, lower costs, making our business stronger and more competitive. And, as we help our suppliers reduce their energy use, costs and carbon footprint, we’ll be helping our customers do the same thing.”

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