For the past 15 years, the food industry has made a concerted effort to reduce inventory, increase response time, minimize errors and otherwise optimize performance. Have these efforts to streamline the supply chain paid off? What role has technology played?
Food Logistics recently posed these questions to a diverse group of industry executives to get their take on the technological progress that has been made, and what they foresee for the coming decade.
They represent a wide range of viewpoints, from executives who have led supply chain operations for major multinational conglomerates to a small, boutique manufacturer of organic garlic products, as well as a large specialty foods wholesaler and a fasts-growing foodservice distributor.
Robert Nardone, currently an executive associate with consultant Tompkins Associates, has 35 years of operations management experience in the consumer products industry with companies like Unilever, Bestfoods, Nabisco Brands and Colgate Palmolive. He last served as vice president of supply chain integration for Unilever NA.
Brian Chossek is president of Seven Oaks Ranch, an integrated organic food company founded in 2003 that operates a 12.5-acre organic ranch, manufactures the Garlic Gold line of organic food products and operates ShangriLa Gourmet a natural foods cafe. Prior to launching Seven Oaks Ranch, Chossek actively consulted to a variety of companies, including start-ups and those undertaking reorganizations, serving in roles ranging from president to vice president of sales.
Chris Sieberg is vice president, transportation, inbound and outbound, for Tree of Life, a $1.2 billion distributor of natural, organic, specialty, ethnic and gourmet food products with 10 DCs serving the entire U.S. and Canada. Prior to joining Tree of Life, Sieberg filled a similar role with Maines Paper & Foodservice.
Jay Gavigan is vice president, IT director, with J. Kings Food Service, a Long Island, NY-based foodservice distributor that has more than doubled in sales since he joined the firm to overhaul its IT operations eight years ago.
What have been the food industry’s biggest successes in its efforts to streamline supply chain operations over the last 15 years? Where has your company achieved significant improvements?
Nardone: There there certainly have been incremental successes associated with business processes and technology related to operational transactions, that is, everything that takes place in the order-to-cash cycle, from order processing and inventory management to order status tracking and cash collection. Much of that is due to companies putting in their big, powerful ERP systems over the last decade or so, along with big improvements in warehouse management and transportation management systems, all of which have created operational and customer service improvements.
You can find some good indicators of that improvement. For example, an order cycle of five to six days used to be the norm. Now I believe the last statistic I saw was two to three days, and if you really want to secure a competitive advantage, it’s 24 hours.
Also, if you look closely at the last 15 years’ of data, you’ll find that inventories really have decreased. This can be hard to see for several reasons, but in aggregate, inventories are lower than they were 15 years ago, thanks to better planning and better inventory management. I know this is a sore point with a lot of manufacturers, because from their perspective inventory levels have remained flat or even gone up, in some cases because retailers have pushed inventory back to suppliers. But if you look at total inventory in the supply chain, and the fact that supply chains have lengthened with globalization, there really have been improvements.
By the same token, not everyone has seen the level of operational cost improvements they may have hoped for, but this is largely because of the huge increase in complexity compared to 15 or 20 years ago.