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.”

Walmart collaborated with Environmental Defense Fund (EDF) to develop this approach that looks at the supply chain on a global scale.

The program to reduce GHGs has three main components:

• Selection—Walmart will focus on the product categories with the highest embedded carbon. This is defined as the amount of life cycle GHG emissions per unit multiplied by the amount the company sells. To find the embedded carbon, the ASC reviewed the GHG emissions associated with all Walmart product categories. This approach ensures the project team focuses on the categories that have the greatest opportunity for reductions. Reductions can come from any part of a product’s life cycle.
• Action—For a project to be included as part of this goal, it must reduce GHGs from a product in either the sourcing of raw materials, manufacturing, transportation, customer use or end-of-life disposal. Walmart must demonstrate it had direct influence on the reduction and show how that reduction would not have occurred without Walmart’s participation.
• Assessment—Suppliers and Walmart will jointly account for the reductions. ClearCarbon will perform a quality assurance review of those claims to ensure methodology, completeness and calculations are correct. When the claims meet the quality assurance check, PricewaterhouseCoopers will assess under consulting standards whether the defined procedures were followed consistently to quantify the reduction claim.

Hannaford Brothers has received an award for its master data initiative. The Scarborough, ME-based supermarket retailer was honored with the Gold Award by the Information Integrity Coalition (IIC) for its Systems Enhancement for Global Access (SEGA) program.

Infosys Technologies was Hannaford’s IT services provider for the solution.

SEGA is Hannaford’s vision for around-the-clock global access of its systems and applications which include forecasting and perpetual inventory management solutions. The five-year master data management program created a foundation for improving the company’s ability to quickly make category decisions that helped it identify, respond and capture market opportunities.

“Infosys has been our integral partner on this program and have provided end-to-end business and process engineering services including product evaluation and even selection of the platform for the Automated Retail Replenishment solution. This scalable platform will be the foundation for the Delhaize Group U.S. Supply Chain Master Network,” says Anant Ahlwalia, vice president of DG US Supply Chain Technology.

The data model was implemented across Hannaford’s entire supply chain including merchandising, retail and distribution systems to provide perpetual inventory management, demand planning and forecasting.

Hannaford operates 171 stores in Maine, Massachusetts, New Hampshire, New York and Vermont.

A recent survey on facility sustainability shows that more companies are prone to putting down greener roots these days.

Techniques such as designing a building so that it significantly reduces the amount of water needed for operation—or locating a site so that it does not disturb any nearby wetlands, soil or streams—are being utilized by more companies, according to the Facility Sustainability Survey Report by Tompkins Supply Chain Consortium, Raleigh, NC. 

In addition, more companies are installing systems to allow them to capture waste water for reuse.

“While businesses are still seeking to achieve an acceptable ROI for their green building initiatives, they are also beginning to show a greater general concern for the environment,” says Bruce Tompkins, executive director of Tompkins Supply Chain Consortium and author of the report. “Decisions are still being made based on the bottom line, but this general concern shows that companies are increasing their triple bottom line—benefiting three elements: people, planet and profit.”

Data from the report shows that 65 percent of the respondents always locate their site away from floodplains, prime farmland, habitats for endangered or threatened species, and wetlands. And 67 percent always eliminate all pollution from the building to control erosion, runoff to storm sewers or local waterways, and dust generation.

Another finding shows how advancements in controls technology have led to greatly increased efficiencies in buildings and facilities. Controls for HVAC, lighting, CO2 and other systems are now being managed with total building systems to optimize the comfort and safety of occupants and minimize energy, water and emissions.

The Grocery Manufacturers of America (GMA) is partnering with the Packaging Machinery Manufacturers Institute (PMMI) and co-locating the first ever Manufacturing Excellence Conference during this fall’s PACK EXPO International.

The Manufacturing Excellence Conference will deliver two days of education on topics including product safety, sustainability and operational reliability. The event will be held Monday, November 1 and Tuesday, November 2, as part of the four-day PACK EXPO International tradeshow being held October 31—-November 3, 2010 in Chicago at McCormick Place.

United Natural Foods Inc. plans to adopt hydrogen fuel cell technology to power the lift truck fleet at its Sarasota, FL distribution center, with a targeted completion date in June 2010.

The company will add 29 new hydrogen fuel cell-powered lift trucks, to its fleet, and 36 existing lift trucks will be retrofitted to hydrogen fuel cell technology.

“We consider environmental stewardship an essential component in every facet of our business. This hydrogen fuel cell project is further proof of UNFI’s leadership as an environmentally-conscious organization by advancing the use and development of alternative-fuel technologies,” commented Steve Spinner president and CEO of the Providence, RI-based company.

As part of the Sarasota initiative to replace lead acid batteries and their associated charging equipment with hydrogen fuel cells, UNFI has partnered with a number of companies to implement the roll-out, including Plug Power Inc., Air Products and Chemicals Inc. and Abel Womack Inc.

A hydrogen fuel cell produces energy by combining hydrogen and oxygen in an electrochemical reaction that yields electricity, heat and water. Hydrogen is non-toxic, non-poisonous, the lightest of all gases and the most abundant element in the universe. By converting UNFI’s Sarasota lift truck fleet to hydrogen fuel cells, the company expects carbon emissions will be reduced by approximately 132 metric tons annually, an amount equivalent to the annual emissions of 35 automobiles.

“Hydrogen fuel cells provide greater productivity and lower operating costs and will be an important component of a clean energy future,” says Tom Dziki, senior vice president of sustainable development. “Once implemented, this fuel cell project is expected to create annual energy savings of approximately 640,000 kilowatt hours.”