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Supply Chain
By LARA L. SOWINSKI
otwithstanding the increased movement by consumers and grocers alike to buy local, the food chain is becoming progressively more globalized for most countries around the world. This globalization has created a range of opportunities and risks.
aggressively eyeing new markets with millions of potential consumers. Conversely, a far reaching and more complex supply chain is prone to risks brought about by regulatory and nontariff barriers, disruptions due to natural disaster, political upheaval and economic instability, rising oil prices and its effect on food production and transportation, and the dynamic and unrelenting variations in consumer demands and desires.
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them have access to capital again for their production facilities, he says. In a further illustration of how risk can unleash a ripple effect throughout a global supply chain, Moyle notes: Of all the commodities in world trade, food becomes the most political. Thats because you have farm subsidies in many countries, you have arguments over genetically modified foods, and so on. And, a lot of the revolutions that started last year were started over food shortages. Dictators stay in power when everyones being fed, but people take to the streets when they get hungry. In an interview with PBS NewsHour last September, Rami Zurayk, an agronomy professor at the American University of Beirut explained, I think that the prices of food mobilized people, he said, referring to the political uprising in the Middle East and North Africa. If you look at Tunisia, for example, you see that the Tunisian uprising started in the rural area, where many small farmers live and are just looking for a means to support themselves and their families, he said. It was a young, college educated, but unemployed Tunisian named Mohamed Bouazizi who was selling fruit and vegetables in the street without a license and that set himself on fire after he was confronted by authorities, which many consider the genesis of the Arab Spring.
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Apple exports account for approximately 27 percent of the annual volume of U.S. fresh apple production and as much as 40 percent of the total crop value.
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the food supply chain, this truism is spot on. Of course, while technology tools that boost visibility and transparency are the first step in keeping regulators off your back, acknowledges Sean Robinson, global industry manager, food and beverage, for GE Intelligent Platforms, the more evolved companies also view transparency as a competitive weapon. Although a host of Chinese companies have been implicated in recent years for infractions that have hurt the credibility of their products in foreign markets, the mindset of that countrys government and food companies has begun to change, Robinson says. Simply put, Theyre trying to be a better trading partner, he explains. It makes more sense to offer a clearer path to ingredients, packaging, and other critical information of interest to foreign buyers, while at the same time avoiding inspectors tromping through their factories on a regular basis. Robinson describes GE Intelligent Platforms solutions as the backbone for data in the factory. The solutions make it possible to tie in lots of different categories of information, he says, all of which contribute to very robust traceability, capability, and risk management. But, it also delivers the kinds of analytics that allow companies to look for process inefficiencies, equipment inefficiencies, or other breakdowns that are causing excessive losses of materials. For example, A quality manager can quickly see the ingredients that went into a product and immediately see whether a critical process like
cooking temperatures or mix rates were where they should have been. Whereas a continuous improvement manager, using the same backbone, is going to be provided with the data surrounding what happened inside that oven, that are going to be what he needs to know in order to tune the oven so that the right amount of natural gas is getting burned and the oven is operating more efficiently. Robinson adds, Weve also got very particular pieces that make it possible to integrate both inbound data from a supplier, as well as push data up to an enterprise system or to an external system. That way, a major candy manufacturer can take inbound supplier data from its chocolate or peanut providers, for instance, and tweak the way they run their own factories so that they know the best way to re-melt that chocolate to get a properly tempered coat or the best way to re-blanch or roast peanuts to ensure theyre not carrying any salmonella further down the supply network. Bob Gates, GE Intelligent Platforms global technical manager, emphasizes the risk mitigation aspect of implementing these types of technology tools. During the 1970s, when the auto industry had a recall, it meant half a million cars had to be recalled. Now, theyre able to send you an email and let you know that your car is one of 80,000. When it comes to the food business, theyve started to do the same thing, and its all being driven by risk mitigation. Sure, customer satisfaction gets a boost and quality is improved too, but the really big part is risk mitigation. Avoiding a recall obviously saves a company a lot of money, but it also goes a long way in protecting a brand. If you get your brand out there for the wrong reasons, then youve just done more damage to your brand than you could have possibly done in 10 years trying to build it, due to one unfortunate incident, says Gates. Turning the discussion back to China, and the countrys ability to attract foreign manufacturers based solely on the countrys abundance of cheap labor, Robinson offers a different perspective. Sure it can make economic sense to catch shrimp off the coast of Oregon or Newfoundland and have it packed and frozen by somebody in China or Taiwan, but what weve seen lately is that companies are starting realize the cost advantages arent as great as they thought for a bunch of reasons, he says. For starters, Companies havent done all they can internally to make the best use of operational and continuous improvement tools that they have, and then combine them with some of the data that may have been siloed in a quality or risk management system. Companies are using our solutions to break down walls between their systems. Theyre realizing that if they repurpose some of their quality or food safety data that teaches them about significant losses of material, significant losses of capacity, and they address those losses, they discover that China may not be that great. In other words, they can bring operations back home [to the U.S.] and they can avoid having to outsource a certain class or category of ingredients or packaging material. We have a customer in the diversified food business whos told us that theyve been able to reduce their material loss by 4 to 6 percent and improve their first-pass quality by 15 percentthose are the kinds of numbers that change your cost equation and make it possible for you to keep decent paying jobs in developed economies instead of always chasing the cheapest labor, Robinson says.
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Not surprisingly, the Food Safety Modernization Act (FSMA) is a major driver. Were seeing more grocers, foodservice companies, and wholesalers really start to look at how theyre getting product and the data that theyre getting with it, says Mader. Companies are looking for more visibility throughout their supply chain and they want information as quickly as possible, all the way down to the case level. And, if theres a recall, they want to know where they need to go in the supply chain to correct that issue. In addition, more companies in the food sector are adopting product flow models that allow them to pull time and cost out of the supply chain, he says. Grocers have really never done that before, Mader explains. There are only a handful of them that are moving towards more of a flow model. But, those that are can cut days out of the process by circumventing the traditional steps of receiving inventory, stocking it, pulling it back down and putting it on a truck for delivery. The flow model works in tandem with Manhattan Associates Total Cost to Serve application, which takes into consideration inbound landed costs, DC costs, outbound shipping costs, and inventory carrying costs, which can literally provide companies with the total cost to serve a single box of strawberries to the end consumer, explains Mader. Keeping the supply chain fresh is definitely a growing trend, notes Kristin Wall, retail industry strategy manager at Manhattan Associates. She also sees more interest in the industry for local produce and organic produce. Not only is locally sourced produce attractive to consumers, but sourcing grapes from California or South Florida rather than Chile, for instance, equates to fresher produce on the shelves for a longer period of time, and quicker and cheaper transportation costs, too. Meanwhile, mass retailers continue to expand their presence in the food sector, says Wall. Target is redesigning their stores, pulling in more fresh produce and grocery items. Walmart has been doing the same thing. Theyre both really starting to hone in on the grocery market. And for Walmart, the concept isnt contained to the U.S. alone. Since the companys first international forayto Mexico in 1991Walmart has expanded into 25 more countries. Currently, the companys international division is one of the fastest growing parts of their overall operations.
report from the United Nations Food and Agriculture Organization (FAO), released in late November, warns that a reduction of viable land and water resources is putting worldwide food production at risk. According to the FAO, Widespread degradation and deepening scarcity of land and water resources have placed a number of key food production systems around the globe at risk, posing a profound challenge to the task of feeding a world population expected to reach 9 billion people by 2050. The report, entitled State of the Worlds Land and Water Resources for Food and Agriculture (SOLAW), states that although the past 50 years have been marked with a notable increase in food production, in too many places, achievements have been associated with management practices that have degraded the land and water systems upon which food production depends. Currently, a number of those systems face the risk of progressive breakdown of their productive capacity under a combination of excessive demographic pressure and unsustainable agriculture use and practices, the report states. And, this is happening in every region around the world. As one would expect, competition for viable land and water resources will become pervasive, pitting urban and industrial users against one another as well as within the agricultural sector between livestock, staple crops, non-food crop, and biofuel production. Developing countries are most threatened, the report says, because quality land, soil nutrients, and water are least abundant. At the same time, Water scarcity is growing and salinization and pollution of groundwater and degradation of water bodies and water-related ecosystems are rising, the report says. Large inland water bodies are under pressure from a combination of reduced inows and higher nutrient loading the excessive build up of nutrients like nitrogen and phosphorus. Many rivers do not reach their natural end points and wetlands are disappearing. Furthermore, In key cereal producing areas around the world, intensive groundwater withdrawals are drawing down aquifer storage and removing the accessible groundwater buffers that rural communities have come to rely on. Because of the dependence of many key food production systems on groundwater, declining aquifer levels and continued abstraction of non-renewable groundwater present a growing risk to local and global food production. As for the recommendations, the report emphasizes that, Improving the efciency of water use by agriculture will be key. Most irrigation systems across the world perform below their capacity. A combination of improved irrigation scheme management, investment in local knowledge and modern technology, knowledge development and training can increase water-use efciency.
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