Supply Chain Blindness: When Your Food Supply Chain Functions But You Are Not Actually Seeing It.
It is not uncommon for us to turn our internal auto-pilot on for a variety of tasks. Take for instance when you are driving to work: you are not actually giving too much thought on the way there, because you know the route by heart. Now suppose a roadblock comes along! You are not using any GPS, since you don’t actually need it, and you cannot take your usual route. So, what do you do? Turn on any GPS system you have, it finds a route and the detour might take 15-20 minutes more than the time you usually take. Then, you may arrive late for work, miss an important meeting and have an unproductive day just because you did not foresee what was happening on your way to work and could have also prevented it from happening.
Supply chain works the exact same way. When it is in place and has been working for some time, you do not really have the incentive to improve it. It is working, so you do not want to change things since you may screw it up. Of course, you can upgrade it according to every new regulation (ex. end-to-end traceability from FSMA 204), but you do it in a least cost way: only what it is asked and nothing more. But then a salmonella contamination for lettuce occurs and the FDA asks for the entire history of your lettuce production between November, 2022 and January, 2023. According to FSMA 204, you have 24 hours to send it and you have 300 files on it. Your company sends it to the FDA all the 300 files, because they will sort it out. Great, the hot potato is on their hands now! But do you see where the issue happened, or how will you defend from erroneous charges?
Traceability: Past and Present of your Food
Food traceability is the ability to track a food item from the moment it is harvested, through to when it is consumed. By implementing systems and processes that allow for tracking of products throughout their lifecycle, companies can be better able to understand where food problems exist and take steps to improve their supply chain accordingly. Food traceability offers a means for companies to create a system that allows for greater transparency, accountability and control over the entire supply chain. Although health and safety regulations continue to increase in complexity, consumer expectations across industries demand transparency and want assurance that their food is safe. These events challenge the notion of a minimalistic approach to supply chain management. On an even brighter side, when traceability is used effectively, it can bring significant cost savings and an opportunity to effectively manage risk from all aspects of the business
Visibility: our unknown blindness
Food traceability is the ability to track a food item from the moment it is harvested, through to when it is consumed. By implementing systems and processes that allow for tracking of products throughout their lifecycle, companies can be better able to understand where food problems exist and take steps to improve their supply chain accordingly. Food traceability offers a means for companies to create a system that allows for greater transparency, accountability and control over the entire supply chain. Although health and safety regulations continue to increase in complexity, consumer expectations across industries demand transparency and want assurance that their food is safe. These events challenge the notion of a minimalistic approach to supply chain management. On an even brighter side, when traceability is used effectively, it can bring significant cost savings and an opportunity to effectively manage risk from all aspects of the business
Visibility: our unknown blindness
While traceability is essential for operational efficiency, to grasp its benefits fully, visibility is what a supply chain needs. Visibility refers to having a clear view of the food life cycle, while monitoring it and evaluating it from cultivation until it gets to the consumer. On simpler terms, visibility is fueled by traceability to provide real actionable insights! Proper visibility is desired to allow efficient and effective resource investments. For this reason, it is increasingly important for suppliers to track their supply chains and locations in order to obtain a complete understanding of their operational activities and the opportunities that exist in their respective industries. There are many benefits associated with visibility. It can provide insight into how certain activities affect costs, inventory, resources, and revenue while simultaneously offering the opportunity for optimization of these metrics via monitoring-based decision making.
Traceability and Visibility: a new supply chain order
Now, let’s come back to our previous example. But now our company is fully equipped with traceability and visibility tools. The database is streamlined and in less than 5 minutes you send the entire history to the FDA in only one simple file. The FDA notices that one lot from your production was potentially contaminated and issues a recall for that lot and adjacent to minimize any potential risks. But where were those other lots sent to? Easy, with a streamlined database process, you can pull it out in less than 1 minute! Recalls made easier, with less paperwork and faster action! Moreover, that is only one aspect of the Traceability and Visibility combo. By monitoring all the conditions the food was kept, you can know if there was any temperature excursion or even keep effective count of your returnable asset inventory! Also, you could have even prevented the usage of the compromised lot from happening. By fighting the supply chain status quo, we can make our life easier, the regulator’s and, ultimately, our consumers’.
More Facts, Less Theory
There are many issues that affect supply chain on a daily basis, with serious consequences if not dealt effectively and responsibly. We will present three important topics in food supply chain: (A) food waste; (B) logistics and theft; and (C) recall processes.
(A) Food Waste
In 2019, $285 billion (70% of entire food surplus) was represented by food waste in the U.S. (ReFED). The top three reasons for food waste in the supply chain are:
(a) Spoilage: caused by factors such as oxidation, excessive heat, moisture loss, and infestation;
(b) Order Mismatch: products that are not in demand during a specific period of time but could be at another time or in a different geographic location;
(c) Excess inventory: goods produced in greater quantities than what the market needs at a particular time or place. This can happen due to lack of demand or being unable to sell goods at a certain price.
(B) Logistics and Theft
In order to say that a supply chain is really working, you need to have a good logistics strategy in place. Otherwise, your exceptional product will not get where it needs to be, at the time and in the quality it needs to be. Also, as is in the case with many food products, they are transported in returnable assets, which are very costly, and also targeted by thieves for their recyclability. The American Bakers Association estimates that more than $10 million annually are spent on plastic trays replacement due to theft alone.
(C) Recall Processes
As we have discussed before, recall processes are very complex situations that demand time and effort to be effective. In many cases, food contamination investigation can take a couple months to be completed! Estimates account that direct costs to the food industry are at least $10 billion/year in the U.S. because of recalls. Moreover, if done incorrectly, some permanent costs arise for the brand such as sales and brand image impact. Not to mention the customers that could be sick or worse from contamination alone.
Traceability with Visibility to the Rescue
In conclusion, food traceability with visibility enables a comprehensive overview of the entire supply chain. Not only will we know where the food is in real time, but also the conditions in which it was kept. That enables companies to measure precisely the impact of every event in the supply chain and provide decision makers with enough information to create better business strategies. It’s all about making sure their ultimate customer – the consumer – is getting exactly what they want, with minimum risk to their health. Food waste can be minimized by the reduction of spoiled goods due to better monitoring; tray theft can be mitigated by real-time tracking; and month-long recall processes can be greatly shortened. So, given all the benefits that traceability with visibility provide, we invite you to bring Nazar in to help your company cure its supply chain blindness.
Finance & Analytics