Over the past couple of years, the whole business of getting in your groceries has been transformed from a mundane chore to a highly emotionally-charged business. Rightly or wrongly, the environmental lobby has seized on the food sector as the prime example of what is wrong with the consumer society, whether it”s food miles, ”excessive” packaging or food waste.
The immediate result has been a plethora of ”green policies” by retailers and many of their suppliers – there is scarcely a supermarket website now without one. Learned conferences agonise over the right sort of packaging for your avocado pears, while analysts try and work out what exactly is the carbon footprint of a papaya fruit airfreighted from the tropics to Cradley Heath.
However, what all this activity has mainly done is to highlight that none of these issues are straightforward. Cutting out packaging might increase food waste, for instance. Reducing food miles might send the fertiliser bill rocketing because crops are grown in places with less warmth and sunshine.
But meanwhile, food retailers are just as concerned about maximising on-shelf availability, while their suppliers still worry about their margins.
But perhaps the problems lie fundamentally with us. Is food simply too cheap? Consumers might have to start getting used to food prices going up again. As Nestle UK”s business services and supply chain director Chris Tyas told the Institute of Grocery Distribution (IGD) conference in London on 6th November, grain, milk and energy prices have all been going up lately, and there is also potentially increased competition for food crops from biofuels.
”Excessive” packaging has become public enemy number one in the eyes of many food consumers, as the IGD”s London conference on packaging reduction and optimisation on 31 October was told. So just get rid of the packaging. Unfortunately, it”s not so easy, pointed out Northern Foods chief executive, Stefan Barden. ”Just imagine what would happen if you tried to take half a dozen profiteroles home with you in a paper bag,” he said.
The public has become fixated with packaging waste, but this is only a small proportion of the total amount of material a typical western country trashes every year.
Carbon footprints and excess packaging are intertwined in the public mind, but it”s a complicated area. Plastic packaging might be less easy to recycle than glass, and of course it”s made from a non-renewable raw material, crude oil, but on the other hand it is lighter so produces less carbon – and energy – in transportation.
And while consumers may say in surveys that they want to see less packaging on food, does that always translate into buying behaviour? As Tesco category director Alisdair James told the same conference, while consumers may say lighter is better, how would a plastic wine bottle go down at a posh dinner party? What about all the fancy packaging we consumers positively demand on Christmas and Easter presents?
Disjointed thinking is also the enemy of true greenness. David Hogg, industry marketing manager at supply chain software vendor, Sterling Commerce, says that manufacturers and retailers really must crack the collaboration issue if they are to make true progress. There is a danger that companies, in the rush to start green initiatives, end up creating a maze of conflicting requirements that bewilder the poor food supplier and end up being less ecologically sound than what went before. ”What if a potato farmer ends up with different returnable plastic trays for Tesco, M&S, Asda and so on?”
Could technology have a part to play in greening our groceries? After all, if we can get the right food in the right quantities at the right time, there might be less wasted food, and possibly fewer food miles. There are those who champion radically new ways of doing things like RFID and who are convinced that the industry is now on the verge or a major breakthough, such as David Lyon, EPC global business manager, who argues that most, if not all, technological barriers to commercial adoption of RFID have been overcome.
”The other key development is that Metro Group (the German-based international retailer) has now mandated its supplier base to tag cases and the technology will be rolling out across its whole network of DCs [see feature on page 26]. In my opinion, we”ve reached a tipping point – there could be a significant upturn in the take-up of the technology.”
He adds that it”s unlikely that a large retailer like Metro would be doing this if there wasn”t a sound business case.
GS1 UK also opened an EPCglobal RFID Test Centre that will allow pilot projects to be carried out under realistic conditions. ”I hope that will encourage other retailers and also help dispel some of the myths about RFID.”
A lot of work has been going into global data synchronisation lately, as companies – including the major grocers – move to ”clean up” the data in their supply chains. This is currently quite an obstacle to supply chain efficiency, both from an information and physical point of view. ”For instance, if dimensions are wrong, it might lead to inefficient use of vehicles or goods not fitting on shelves.”
Many of the inaccuracies have their roots in the paper processes used by supermarkets to, for example, introduce new product lines.
On the other hand, Tom Williams, chief operations officer at BT”s specialist Auto ID RFID arm is not so sure about tipping points, although RFID is beginning to find real world applications, including in the grocery supply chain. BT Auto ID has, for instance, worked with major UK food retailer Marks & Spencer on putting tags on returnable food trays. ”This is the area where we see the biggest growth at the moment,” he says. As well as tagging the asset, it is also possible to ”associate” the tray with what is loaded into it, and to know where it comes in or out of the tray.
It may not be quite the ”big picture” that many see for RFID, but keeping control of reusable packaging is a worthy aim in itself. Reusable units may be the darling of the green movement at the moment, but they do have their problems. For instance, unlike disposable packaging, the immediate supply is usually finite. Moreover, food producers often tend to squirrel them away in anticipation of a big rush in orders – so RFID is very useful in analysing where they are and also in analysing how they are moving through the supply chain.
But what about wider use of RFID? ”No one has yet proven the benefit of tagging at item level for supply chain reasons,” ”There is a danger that companies, in the rush to start green initiatives, end up creating a maze of conflicting requirements that bewilder the poor food supplier.”says Williams. ”It all comes down to the business benefit.” Williams concludes: ”I think RFID tags will eventually replace bar codes, but it could take 15 to 20 years.”
Physical automation is gradually gaining ground, say Total Logistics partners Mike Oliver and Andy Keith. However, it does tend to be concentrated in areas where most of the traffic is full pallets, for example from the manufacturer into the retailer”s bulk store. More complex picking systems are comparatively rare, though they are gaining ground in continental Europe. ”In the UK, if the case for automation is marginal, they tend to go manual; in mainland Europe, they”ll go the other way.” Perhaps the experience of Sainsbury”s ”Fulfilment Factories” is casting a long shadow.
Perhaps RFID will work for some grocers, but not others. Food retailers do come in all shapes and sizes, exemplified by the British Co-op. Director of food retail logistics, Trevor Ashworth has no fewer than 3,000 outlets to reach – some of them on remote offshore islands. That compares with perhaps 300 for a volume grocer like Asda. The Co-op is in the process of reconfiguring its supply chain, both physically by replacing its existing distribution centres with something more modern, and also by replacing its existing warehouse management systems with one provided by Manhattan Associates.
When the programme is complete, the Co-op will be able to offer daily deliveries to all stores if required, apart from a few very remote ones. The Manhattan product appealed, says Ashworth, because ”it has enabled us to develop a new supply-chain concept, with mutli-tiered distribution, allowing any store to be served by a variety of routes.” That could be via an RDC an NDC or a local service centre, for example. In time, the Co-op hopes to add more functions, such as forecasting and replenishment.
Allen Scott, managing director of Manhattan Associates says that many retailers are making more sophisticated use of forecasting. ”They”re looking at till receipts on a two-hourly basis and the day is not that far away where they will achieve a truly joined up supply chain” – with ”intelligent” replenishment driven by near-real-time forecasting of demand.
More people are also now adopting a ”flow through” approach with information used to direct stock precisely and accurately to where it is most needed.
Supermarkets have been working on their supply chains for decades now, but there is always more to do, says IGD”s head of supply chain, Tarum Patel. He says: ”20 per cent of food chain cost is still non-value adding, and forecasting errors are still very large.” A lot of food is also rejected as defective.
One problem is the sheer complexity of the information, he says, producing, with a flourish at the IGD conference, a flow chart for cheese, which despite its seemingly bewildering data, is a relatively simple commodity, he says.
But work on collaboration between food producers and retailers could yield significant results. One major exercise involving red meat production had resulted in €3-4 million in inventory savings, he said.
Interestingly, Patel added, not only was the proportion of retailers” costs accounted for by the ”downstream” supply chain rising overall – from 3.5 to five per cent over the past ten years – but the disparity between the best and worst performing retailers was widening.
Tesco has sharpened up availability of products in its stores by improving the accuracy of stocking records. ”Since we launched the scheme, we”ve reduced errors down from 50 to 25 per cent,” supply director Tony Mitchell told the IGD grocery conference in London. Finding stock in a stockroom is still incredibly difficult, but Tesco”s solution to the problem was not some high-tech RFID technology – but through simple measures like making sure new stock was positioned in the right place on the shop floor.
Tesco has been doing a lot of work on forecasting, including trying to gauge the effect that weather has on demand for certain food. The retailer even hired a team of experts to model five years” weather data with its sales data.
Grocers and their suppliers know they have to collaborate more in future, but getting to that happy state is difficult. Andy Ellis, Asda”s supply chain director says he ”firmly believes” in the concept and that it will be vital if the two sides are to make a step change in availability.
Graeme Carter, customer logistics director at Procter & Gamble says that it is frustrating though, because he can see many opportunities to drive out costs, but ”the problem is, who”s going to pay for it?” However, there does seem to be a consensus between the two sides that they must learn to live together.
Leading global manufacturer Unilever is facing the problem of how to makes its products similar enough to get the benefits of scale, but at the same time satisfy ever increasing customer demands for customisation. Geoff Fulford, group logistics director says that the company”s approach is to treat its European warehouses as ”more than just a box” but places where customisation can take place.
Network collaborative solution
Logistics companies are the ”glue” that holds the disparate parts of the complex grocery supply chain together. Jeff Anderson, managing director, Wincanton Manufacturing, argues that logistics providers should be central to any coherent collaboration strategy. ”Up to now, a lot of thinking on collaboration between manufacturers and retailers has been “tactical”, but I see a need to move from that to more of a network collaborative solution.”
Retailers have until now encouraged manufacturers to try to put whole trailer-loads into their distribution systems but is that always the smartest solution, particularly for smaller manufacturers, asks Anderson. A better way of working might be an ”order well” that would allow a bigger picture of what is going on in the supply chain and allow smaller loads to be consolidated into larger ones – giving the best of both worlds.
Wincanton is already working on such a concept with a retailer in the UK and a number of manufacturers, and there is also an interesting concept involving Carrefour, Cadbury and Sara Lee that has been operating for a couple of years.
The model could be one way of helping smaller, local food manufacturers plug into a supermarket distribution system efficiently and it”s also very appealing to retailers wanting to show off their green credentials by cutting out empty running and excess food miles.
20 per cent of food chain cost is still non-value adding, and forecasting errors are still very large
TARUN PATEL , IGD
A lot of thinking on collaboration between manufacturers and retailers has been ”tactical” – we need network collaboration
JEFF ANDERSON, Wincanton
It”s frustrating. There are many opportunities to drive out costs, but ”the problem is, who”s going to pay for it?
GRAEME CARTER, Procter & Gamble