When a crisis hits, having the right advanced analytics to react to supply chain disruptions in food and beverage is your best defense.
Supply chain disruptions in food and beverage (F&B) are many and varied: volatile commodity prices; safety and quality issues; high demand uncertainty and seasonality; constant promotional activity; perishability; frequent new product and brand extension introductions; exacting distribution requirements; complex manufacturing constraints; legal and regulatory restrictions, and fickle consumer tastes.
In fact, here’s an excellent blog post listing the challenges and the foundational elements – people, process and technology – needed to build a strong and resilient supply chain in F&B. Drilling down, you’ll learn that demand planning, inventory, replenishment, manufacturing and Sales and Operations Planning (S&OP) capabilities are the building blocks of supply chain planning excellence.
In the context of more normal times, we might use this space to talk about the planning and operational improvements available to F&B companies if they implement pre-built analytics solutions to manage, for example:
- Sales and operations planning (S&OP)
- Production efficiency
- Predictive maintenance
- Labor scheduling
- Demand planning
- Inventory and freight optimization
- Traceability and compliance
But these aren’t normal times, so let’s change the game, the tone, the degree of urgency. Let’s consider COVID-19, the Black Swan event that ended all Black Swan events – rare, highly impactful and, in hindsight, believed to be predictable.
Quickly Changing Tack
Imagine the following scenario: your boss arrives in your office and instead of saying, “Hey, let’s put advanced analytics on the supply chain improvement strategic roadmap,” she says, “The Board just met to talk about near-term steps we should take in response to the pandemic. Where can we see meaningful results in the next five business days?”
Where would you start?
First, you must assess your organization’s strengths and weaknesses. If your business has yet to embrace advanced analytics as a component of superior people, process and solutions, there is a silver lining. It will never be easier to convince company leaders that a resilient supply chain is critical. Begin by creating an advanced analytics roadmap. In short, don’t waste a good crisis. Here are five ways to get you started towards managing supply chain disruptions in food and beverage.
5 Ways to Focus Your Analysis
If your company has an advanced analytics practice in place, let the exploration begin. Comprehensive and configurable dashboards will help you see the potential for positive change across your entire supply chain. Remember, you have five days to make a meaningful impact. Here are some suggestions to help focus your analysis.
1. First, know how your supply chain data influences your company’s financial performance. For example, if you know which suppliers are cash-constrained, you may have an opportunity to alter the discounting structure in your favor.
2. Second – and this one is cultural – it’s a good time to tell analysts that for now there are no bad ideas. That said, your guidance should make it clear that reallocation of existing resources is preferred to numerous what-if exercises and lengthy trials, and that now is not the time to be developing new analytical capabilities.
3. Speaking of reallocation, consider what it meant for your business as retail food demand reached unprecedented levels and spot shortages occurred. People weren’t necessarily eating more food; they were just eating it at home.
Think about modeling the impact of diverting some products from certain vendors to others. Under the overarching goal of increasing consumer touchpoints, food destined for corporate and university cafeterias, cruise lines, airlines and restaurants could instead be sent to grocery stores, retailers and even direct-to-consumer. Maybe it’s time to revisit and revitalize the 10 least meaningful outlets in your current supply chain. Whatever the case, make sure you close the loop on the modeling exercise by looking at what has happened, for example, as restaurants have re-opened with limited but gradually increasing capacity and demand signals begin to return to normal.
4. We are all familiar with the fact that consumers focused on the basics like bread, eggs, flour and toilet paper. This presents a perfect opportunity to simplify packaging and finally reduce SKUs, resulting in fewer set-ups. Some bakers have reported that they were once making 14 varieties of bread, and now they are making three.
5. Finally, while companies must be careful about dramatically increasing production, it could be interesting to examine the effect of a pivot. Advanced analytics and an AI-powered digital twin help you do this. We’ve all read about breweries and distilleries retooling to produce hand sanitizer and other F&B companies helping their customers shift from a dine-in to a take-out model.
Remember that all of you F&B supply chain planners have a distinct advantage: you’ve never known ‘normal’. Creativity, flexibility and resiliency are your normal. You’ve got this!
Traceability will be key in meeting consumer demands for sustainability.
The short version: if you can’t track the complete history of a product, including material and labor inputs, you can’t make an ironclad claim about its sustainability. There is no credible sustainability without comprehensive traceability. The latest twist: what’s always been an ethical issue is now a legal issue, too.
Happily, this means that greenwashing will soon be circling the drain. Based on the term “whitewashing,” greenwashing means “to make stakeholders believe that your company is doing more to protect the environment than it really is.” Greenwashing came about as unscrupulous businesses grappled with the advent of “conscious consumerism” or “consumers with a conscience.” In other words, greenwashing exists because green sells. A large body of research bears this out. For example, a Nielson poll found that 66% of adult consumers are willing to pay more for eco-friendly products and 50% of purchasing decisions are influenced by sustainability claims.
Faced with this rising demand for eco-friendly products and environmentally ethical business practices, some bad actors decided to greenwash because it’s less expensive than implementing the real thing. Sometimes greenwashing is subtle, sometimes it’s brazen, as we’ll see below.
According to Mark Burstein, executive vice president and industry principal at Logility, decades of conversation on sustainability has been 99 percent greenwashing. Burstein is wary of any claim that isn’t backed by data including visibility of the full chain of custody.
Greenwashing dates back to the ‘60s, when the nuclear power industry was trying to counter the claims made by the anti-nuclear movement. Greenwashing usually takes the form of one of the Seven Sins of Greenwashing, reproduced here:
- Hidden trade-off: Defining something as “green” by a narrow definition that ignores other environmental impacts. For example, a packaging innovation that reduces the use of black plastic at the expense of an increase in the rate of deforestation.
- No proof: Claims are not easily confirmed or are not verified by third-party certifications.
- Vagueness: Broad, insubstantial, or convoluted claims. These include statements like ‘new and improved’, ‘made with recycled materials’, ‘eco-friendly’, and ‘non-toxic’, with no further specificity.
- Irrelevance: Claims may be truthful but unrelated to the product or company.
How have they gotten away with it? Well, in a few of the more egregious cases, they haven’t. But let’s look at Ben & Jerry’s — by the way, a company that has done much admirable work in the areas of fair trade, sustainability and non-GMO standards — to illustrate a couple of points:
- This stuff is complicated; and
- Most consumers care up to the point where — you guessed it — the stuff gets complicated.
On the Ben & Jerry’s public website, we see the company acknowledging that the details surrounding non-GMO supply chain compliance are intricate, replete with arcane language, bewildering regulations, and exceptions that appear to be at cross purposes. Therefore, not everyone will want to forge ahead and truly understand the complexities.
For Ben & Jerry’s, claims related to non-GMO compliance require tracing animal feed sources and ingredients obtained from fermentation and processing aids or enzymes, potential comingling of GMO and non-GMO ingredients at any point in the supply chain, and any variances issued. And that’s a very abridged version of the company’s traceability requirements. Sustainability tracking is equally complex.
In the past, trust — even misplaced trust — was enough, but now we’re entering an era of “don’t trust and do verify.” Which brings us to the reckoning. To explore this, let’s shift our industry focus from dairy to denim.
Changing the Way Materials Are Sourced
On January 13, 2021 the United States Customs and Border Protection expanded the blanket Withhold Release Order (WRO) initially issued on December 2, 2020 and will detain all shipments containing cotton and cotton products originating from the Xinjiang Uyghur Autonomous Region (XUAR) and now includes tomato products. This potentially affects cotton products from countries other than China that use Chinese cotton inputs such as cotton fabric. Britain also announced they will tighten laws on imports linked to XUAR human rights abuses.
These announcements from both sides of the Atlantic highlight the urgency with which companies must act to ensure their products are not stopped at the border. According to the US Customs and Border Protection, the importer of record is responsible for proving its products do not contain any material, in whole or part, sourced from XUAR.
“My interpretation of it is any cotton product coming from any country has the potential to be detained unless you can show proof of admissibility that it wasn’t using Chinese cotton or inputs from that region,” Burstein said. As we’ve said before, this is a guilty until proven innocent stance with huge financial implications, a case where one bad apple does indeed spoil the whole bunch.
If suspected and unable to show verifiable proof, the importer has three options:
- Take the products out of the US market and export them somewhere else.
- Destroy the merchandise.
- Abandon the merchandise.
Meeting Consumer Expectations
The latest developments from the United Kingdom and United States show there is strong action being taken to change the way materials are sourced. Now, it is up to supply chain leaders to ensure they can prove through a digital thread they are in compliance across every link in their complex, global supply chain.
In the wake of these growing concerns, Logility launched a digital supplychain traceability solution giving brand owners and retailers the tools to document the chain of custody from component origin to importer of record. With this solution, users can trace the chain of custody through all tiers in the supply chain in one digital thread while storing and managing all supporting documents related to every transaction between supply chain trading partners.
The digital thread compiles and organizes a chronological and verifiable account of importer of record back through every tier of the supply chain to the original raw material source. Transactions are validated at every tier using POs, invoices and packing lists. All these documents are rolled up to a certificate of compliance with complete chain of custody. This comprehensive genealogy is sent electronically for all shipments arriving in the US. This is what United States Customs and Border Protection will examine to determine compliance with relevant rules and regulations.
Outside of the potential legal issues, traceability will be key in meeting consumer demands for sustainability across all industries. Coming full circle, brands now have compliance tools that also help them prove to jaded customers that environmental and social responsibility programs are in place and supported by tangible evidence.
Furthermore, consumers will come to understand that these tools exist. While we’ll always have lazy consumers, and while the Ben & Jerry’s example proves that modern, global supply chains are inherently complex, we won’t always have companies hiding behind the lament that “full supply chain traceability is too hard…there are no technology solutions for it.”
Finally, it’s refreshing to note that some global brands are joining the call for comprehensive traceability solutions to validate their sustainability claims. Rather than bemoan the loss of greenwashing as a tactic (as some surely will), these companies are proactively assessing the market for advanced supply chain traceability solutions that support overarching CSR strategies. They have essentially aligned themselves with consumers and put technology providers on notice.
These solutions must measure and manage the full environmental impact of internal and external facilities, rate material producers and garment manufacturers’ environmental performance, extend the lifespan of products and even provide insights into how to improve recyclability of textile waste and unsold products.
Burstein sums it up nicely: “We’re going to have something good come out of this situation in Xinjiang. The runway where we get to true traceability. Because without traceability at each one of these nodes, no one can accurately tell you the environmental footprint of their supply chain.”
Logility is working with a leader in the distribution and logistics space that provides delivery to auto dealers for the dealers’ parts and services business.
This specialization allows them to be more efficient and knowledgeable about their customers and the specific parts they are delivering. Because these parts cannot be sold and services cannot be scheduled and performed until the parts are delivered, it is exceptionally important that they deliver on time and in full.
The problem this organization faced was knowing which routes were responsible for delayed deliveries and what was causing the delays. The company felt their routes and stopping points caused inefficiency, but they also wanted to forecast the impact of extraneous factors such as weather, road construction, and traffic patterns. With this information, they could adjust schedules to proactively service their customers, adjust delivery times, and gain greater efficiencies from their fleet. In addition, they wanted to incorporate the inventories from their parts suppliers and their geographic locations so they could minimize empty return-trip trucks and duplicate runs, as well as minimize the inventory that they had to keep on hand in their distribution centers while knowing which suppliers had what parts in stock.
With 10 distribution centers, each with over 100 routes, and each route with over 15 stops, this posed a significant logistics problem. Add to that over 2,500 parts from over 200 manufacturers and this became a significant supply chain opportunity. In addition, each truck itself – and there are over 1,000 of them – is a constant big data generator, capturing location, efficiency, speed, right turns, left turns, stop times and the length of each stop. How do you coordinate all this data against the business issue of on-time deliveries with the greatest efficiency?
The Logility Difference
Using Logility, they first aggregated their enterprise inventory and logistics data with two external data feeds. Then they created a series of operating metrics to be used by managers as well as KPIs for reporting to executives. An important feature of these reports was predictive metrics. These metrics, using Logility’s predictive modeling capabilities, identify routes with risk factors and suggest the likelihood of one or multiple delays in the near future (weeks). Lastly, they distribute these efficiency reports and interactive dashboards using the Logility® Digital Supply Chain Platform. An important feature of this approach was deploying mobile versions of each report for traveling executives.
Today, everyone from the CEO down to the route dispatcher at each distribution center knows where any issues are and what needs to be done to correct them. It also allows our customer to be much more proactive in dealing with both the delivery points and their suppliers. As orders and inventory stocks can be readily shared, increasing parts production efficiency at the manufacturer and delayed delivery points can be more readily notified so they can more effectively reschedule their work loads. First-year savings from reduced inventory and greater fleet efficiencies are estimated at over $3 million.
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