Bob Gates, GE Intelligent Platforms’ global technical manager, emphasizes the risk mitigation aspect of implementing these types of technology tools.
“During the 1970s, when the auto industry had a recall, it meant half a million cars had to be recalled. Now, they’re able to send you an email and let you know that your car is one of 80,000. When it comes to the food business, they’ve started to do the same thing, and it’s all being driven by risk mitigation. Sure, customer satisfaction gets a boost and quality is improved too, but the really big part is risk mitigation.”
Avoiding a recall obviously saves a company a lot of money, but it also goes a long way in protecting a brand. “If you get your brand out there for the wrong reasons, then you’ve just done more damage to your brand than you could have possibly done in 10 years trying to build it, due to one unfortunate incident,” says Gates.
Turning the discussion back to China, and the country’s ability to attract foreign manufacturers based solely on the country’s abundance of cheap labor, Robinson offers a different perspective.
“Sure it can make economic sense to catch shrimp off the coast of Oregon or Newfoundland and have it packed and frozen by somebody in China or Taiwan, but what we’ve seen lately is that companies are starting realize the cost advantages aren’t as great as they thought for a bunch of reasons,” he says.
For starters, “Companies haven’t done all they can internally to make the best use of operational and continuous improvement tools that they have, and then combine them with some of the data that may have been siloed in a quality or risk management system. Companies are using our solutions to break down walls between their systems. They’re realizing that if they repurpose some of their quality or food safety data that teaches them about significant losses of material, significant losses of capacity, and they address those losses, they discover that China may not be that great. In other words, they can bring operations back home [to the U.S.] and they can avoid having to outsource a certain class or category of ingredients or packaging material.
“We have a customer in the diversified food business who’s told us that they’ve been able to reduce their material loss by 4 to 6 percent and improve their first-pass quality by 15 percent—those are the kinds of numbers that change your cost equation and make it possible for you to keep decent paying jobs in developed economies instead of always chasing the cheapest labor,” Robinson says.
U.S. food sector getting up to speed
According to David Mader, principal solutions consultant at Manhattan Associates, while the food sector has generally been behind other verticals like electronics and apparel in some aspects of supply chain management, the sector is quickly getting up to speed.
Not surprisingly, the Food Safety Modernization Act (FSMA) is a major driver.
“We’re seeing more grocers, foodservice companies, and wholesalers really start to look at how they’re getting product and the data that they’re getting with it,” says Mader. “Companies are looking for more visibility throughout their supply chain and they want information as quickly as possible, all the way down to the case level. And, if there’s a recall, they want to know where they need to go in the supply chain to correct that issue.”
In addition, more companies in the food sector are adopting product flow models that allow them to pull time and cost out of the supply chain, he says.
“Grocers have really never done that before,” Mader explains. “There are only a handful of them that are moving towards more of a flow model. But, those that are can cut days out of the process by circumventing the traditional steps of receiving inventory, stocking it, pulling it back down and putting it on a truck for delivery.”
The flow model works in tandem with Manhattan Associates’ Total Cost to Serve application, which takes into consideration inbound landed costs, DC costs, outbound shipping costs, and inventory carrying costs, which can literally provide companies with “the ‘total cost to serve’ a single box of strawberries to the end consumer,” explains Mader.