With their fragile life cycles, fresh foods create unique supply chain challenges. Foods such as fruits, vegetables and meats need to be nurtured to ensure they remain intact and in good quality. This includes the time that this precious cargo spends moving through the links of the supply chain—the most critical time for all fresh foods.
Yet many companies fail to put enough focus on their fresh food supply chains, resulting in inferior products and frustrated customers. Better understanding of today’s challenges and implementing a supply chain transformation strategy is the solution.
Current Challenges On The Table
When buying, making, moving, storing or selling fresh foods, there are always potential hazards due to the delicate nature of the products and the careful handling required. Being prepared for the potential challenges and obstacles that may occur from the time the food is produced until it reaches the final consumer can make or break a fresh food product. Challenges in today’s marketplace include:
Seasonal supply and demand: Floods, droughts, wars, etc., can create supply issues.
Food sanitation: Sanitary practices start with the growers and move through the supply chain to the consumer.
Food security: Better traceable and effective product recall is needed. Issues on international supply from other countries/country of origin labeling are of high concern.
Perishability: Once in the distribution system, some foods have shorter shelf lives and require special packaging and handling, while others stay fresh longer with minimal intervention.
Product quality: Although fresh food goes through complex processes such as respiration before it reaches the final consumer, it is still expected to be in good condition.
Organic or natural trends: Although a higher degree of standardization around the terms “organic” and “natural” is needed, these products typically by their nature have shorter shelf lives and require more careful handling to arrive with quality intact.
Water resources: Severe water shortages in different areas of the country are significantly limiting sourcing options throughout the fresh chain—potentially requiring different handling and transportation practices as regional options disappear.
Immigration Customs Enforcement (ICE): The new U.S. administration may have an effect on the labor force, which is mainly immigrant.
Pursuit of alternative energy sources: With items such as corn, which is used to make ethanol, this can be a major cost driver.
But just knowing the challenges is not enough—seeking and implementing the latest best practices will help your fresh food supply chain be more efficient and lucrative. In order to determine how the business can be transformed for profitable growth, begin by conducting a complete value-based assessment of your current fresh food business to deepen your knowledge about market/consumer preferences and industry trends and strategies. To assess and transform your fresh food supply chain, here are five steps for success.
The Five Step Transformation Process
Step I: Determine and understand your changing consumer preferences. Conduct market research for your business, review the findings and translate the results into actionable choices and initiatives.
Step II: Assess your current company decision rules, practices and controls. Begin by identifying and assessing your company’s current fresh food business practices for demand forecasting, sourcing, buying, merchandising, logistics, inventory planning and replenishment, stocking, obsolescence, and costing and margin analysis.
Employ a value-chain assessment methodology that enables you to identify, assess and determine every relevant task and sub-task that drives the complete value chain. Then, note the primary practices, decision rules and control points for each process. In effect, this will report the current state of your fresh food business.
Step III: Assess current industry situations, trends and initiatives. Next, identify and assess the current industry situation, trends, and initiatives toward fresh foods. Note the value-chain players and trading partners—from farm to checkout—and how the flow of goods, information, cash and work takes place, assessing the major value chains that lead to supermarkets or similar retail formats. This assessment should include the most applicable metrics for the value chain: cost, time and quality.
Step IV: Evaluate your practices against industry leaders. Now, seek best practices and analyze the relevant findings for the program. Make sure that performance data on your fresh food business is available and in the form to compare and contrast against the best in the industry. This will help you identify gaps and determine opportunities for improvement. Look at the criteria available and value streams of cost, time, and quality, and note the gaps and their value.
Step V: Determine your initiatives, value and implementation program. Finally, construct a plan for prioritized initiatives. Employ several methods such as shareholder value framework, business case methods and other balanced scorecard measures to determine ROI, payback and time to value ratio. Be sure to gain consensus on the right initiatives and their value, and determine timing, responsibilities and other implementation needs. With group buy-in and feedback, initiatives are usually more readily and successfully implemented.
If you get stuck anywhere in the five-step process, seek expert help. This will allow you to learn from their current and recent foods experiences and industry knowledge, which will also help you make the best decisions or even expedite the outcome.
A Healthier Bottom Line
In a fresh food supply chain, taking the time to do things right the first time can save headaches in the long run. By using this process and implementing the above steps, you will gain a clearer direction for your fresh food business. And your investments—time and money—will also be paid back many times over. With a more efficient supply chain, you can achieve profitable growth and overcome the special challenges faced by the fresh food industry.
Simonson is a partner with Tompkins Associates, Raleigh, NC. For more information, go to www.tompkinsinc.com.