Topics on COVID-19 pandemic analysis can tend to be cumbersome, yet it’s still important to consider how the industry can build a more resilient supply chain.
Spoiler alert, technology is the answer.
The fact is that the pandemic exposed the food ecosystem vulnerabilities of one up, one back of the food supply chain. During the pandemic, there was no “real” food shortage in the United States, but there was a visibility challenge consumers switched from the restaurant to grocery supply chain. This was not an easy cross over between the distribution channels. According to the National Restaurant Association, in 2019, 52% of the dollar spend of the consumer was in restaurants vs. grocery.
Let that settle in a bit… in a matter of a couple weeks in March 2020, over 50% of a food channel in the entire nation was completely shut down. If you are in the food supply chain in any way, you were considered “essential” by the government to keep those supply chains moving. The challenge is that nearly half of the food was sitting in packed warehouses and on storage trailers destined for export or for a restaurant channel where nothing was moving. What we had was a visibility challenge and the inability to change quickly to respond to the dynamics of the time.
Not wanting to hear about pandemic supply chain issues, then consider other pressing food supply chain challenges. According to a recent food industry operational and financial report, labor and inventory control continue to be major challenges within the food distribution community. Food shippers face increased competition with age-old operational challenges such as inaccurate inventory, shrinkage, food waste, incomplete deliveries, delivery rejections, quality discounts, and counterfeit products — and must absorb the increased cost associated with each. Such unnecessary waste increases business costs and reduces profit margins. Technologies used in the current distribution centers weren’t built for the modern era, which calls for fast, accurate, detailed, real-time information. Many companies still use antiquated manual processes — including handwritten documents, spreadsheets, email, and phone calls — to share information about products internally and externally with partners. These processes are time-consuming, inefficient, and prone to error — wasting money and labor every day.
The impact of using 50-year-old technology like the barcode within the food supply chain with warehouse management systems (WMS) and enterprise resource planning (ERP) systems that don’t communicate have enormous associated costs. Organizations report out data such as:
· USDA reports 40% of our food is wasted.
· GMA reports the average recall cost is $10 million.
· PEW survey reports 55% of consumers will stop purchasing products that are under recall.
· Bloomberg reports food fraud costs are $40 billion annually; and
· Oceana reports one-third of seafood is mislabeled.
We have landed with the same problems pre-pandemic, so is there any encouraging developments?
Yes, many companies are exploring new technologies within their business strategies. We have entered the era of digital convergence, which is an important step to increase the resiliency of the supply chain and provide transparency to the supply chain. Companies can now cost effectively capture case level product Key Data Elements (KDEs) and Critical Tracking Events (CTEs) within the four walls with the capability to extend along the entire supply chain to provide financial and food safety benefits.
The foundational principles are simple - Mark • Digitize • Utilize - and can be used repeatedly across the entire supply chain. Once product is marked, it can then be digitized with a unique birth certificate to be shared within the facility and along the supply chain in a permissioned platform to provide benefits to reduce operational cost. This visibility allows food supply chain stakeholders to provide real-time inventory data and product status to drive out cost and provide consumer confidence in the supply chain. The 3 Ts of the supply chain - Transparency * Traceability* TrustTM – can pay dividends to each stakeholder to reduce operational cost and deliver safe food to the consumer.
Consumers highly desire farm-to-fork product information and businesses rely on trust and smooth handoffs between trading partners, from the farm to food shippers to retailers to the consumer. Leveraging existing technologies as the foundation, food supply chain stakeholders have a means of sharing KDEs and CTEs for enhanced visibility and improved efficiencies that include real-time temperature monitoring. Today, companies can digitize the entire ecosystem, making collaboration with trading partners easier thereby delivering mutual benefits across WMS and ERP systems that do not traditionally communicate with one another. Workers can scan a tag without having line of sight, eliminating the need to scan individual cases. This provides the ability to efficiently capturing KDEs and CTEs electronically within the warehouse, and then transport and provide real-time digital receipt upon shipment’s acceptance.
One example is Radio Frequency Identification (RFID). It’s the same technology used in retail to track apparel or set off the alarm when you walk out the door of a retail store and they request to check your receipt. The ability to digitize products in the supply chain to work in a touchless environment (don’t need line of sight) to deliver transparency from origin to destination will deliver value by providing real-time actionable data on CTEs, temperature visibility, inventory counts and more that will reduce costs, increase operational efficiency, lower costs associated with recalls, positively impact financial bottom line and build resiliency in the food supply chain to meet the next national crisis.
No matter your role or position in the food supply chain, you are now commissioned to get with leadership or business channel partners to explore opportunities on how the business can take advantage of today’s digitalization technology to drive out operational cost and achieve supply chain visibility. The velocity for which food must travel through the supply chain from farm to fork can be dizzying but can be done with technology.
Commodities on the Food Traceability List under FDA’s FSMA 204 Rule will be mandatory to capture KDEs and CTEs and retain the data for 2 years and produced within 24 hours of request. The time is now to get started.