Handling Recipe Changes

Technology runs deep in the food industry. The business and regulatory environment where chefs and food technologists work in has changed in the past 20 years: the database is now just as important as the spatula and industrial chefs now need not develop recipes in isolation. Food manufacturers can develop recipes that are easily scaled and cost-effectively reproduced and develop strong intellectual property rights for revenue in global markets.

To prevent quality issues and product recalls, mistakes are not to be tolerated when it comes to recording nutritional information, guideline daily amounts (GDAs) and allergen details. The full traceability of ingredients used in products is as critical as the information on ingredient compositions, and the likely interaction of certain ingredients.

Tweaking recipes

Product lifecycle management (PLM) solutions can be used to enable manufacturers develop recipes electronically and feed the information into production systems to create 'what if' scenarios. One such scenario is when a manufacturer is developing a new chocolate brand with a series of 'spin offs' or versions of the main product. As different ingredients are used to create various types of a new bar such as plain, fruit and caramel versions, information on the amounts of the ingredients used in the three recipes will need to be stored.

The sub-recipes for the three chocolate bars and the multiple processing levels involved would cause an interaction of the ingredients with the original recipe. It is needful to make modifications to the sub-recipes and address the regulatory and business impact of such changes. It would however be costly to have trial and error sessions on the recipes.

Based on the amount of ingredients used, manufacturers can use integrated PLM solutions to calculate the changes in nutrition, allergens, as well as cost, margin and supply risks for each recipe. To minimize time, cost and risk of manufacture, a general recipe or 'grecipe' can be used to evaluate the suitability of alternative recipes. This can be done without a sample recipe in the kitchen - if a caramel bar recipe is found to be expensive to produce due to the high cost of sugar, the staff can make the necessary changes to the recipe without having to commit to expensive production. PLM solutions can also be used to plan the workflow for managing the localization of profitable and compliant products to meet the regulations and product requirements in different markets.

They can help to 'reverse engineer' existing recipes in order to meet specific nutritional and other demands as they change. In the UK for example, there is a growing emphasis on lowering the amount of salt used in products. This has led manufacturers to evaluate the salt content in their existing products and recipes to create new products that meet such demand.

These solutions also help food technologists in the taste department. While computers can access the mouth feel or creaminess of products, PLM solutions can be used to create samples in the test kitchen for a reality check. With input from taste panels and customers, recipes can be fine-tuned for production.

Recipes can be automatically made available in an enterprise resource planning (ERP) production system. Following the confirmation of a pilot production, a scheduling system creates a production plan, which can be passed to the manufacturing execution system (MES), where the recipe 'hits' the machines, making seamless production easy.

www.infor.com

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The Right Fit

Segmentation enables companies to define supply chains based on customer requirements, which leads to lower cost and higher service levels.

BY LUC KREMERS, ICOGNITIVE

Food and beverage companies have seen a greater complexity in every link of their supply chain that involves distribution and retail channels, factories and raw material supply. Consumers who demand products that match their needs, tastes and lifestyles are also driving such complexity. This has led companies to encounter a wide range of variants and packaging types for a product, which makes it difficult for them to anticipate demand. This may result in unpredictable demand due to the production of short-lived seasonal products and short-term price promotions by retailers. Besides modern and general retail, distribution to markets is also becoming more complex with new channels such as convenience stores in Asia.

Retailers add complexity to the supply chain by raising their service expectations – the major ones are demanding delivery performance of over 98%. Supermarkets are under working capital pressures and are demanding reduced inventory levels, thus eroding the buffers that had traditionally protected against stock-outs.

Global manufacturing and sourcing have also contributed to supply chain complexity, as companies juggle the tradeoffs in global, regional and local production, the modes of transport and the challenges of sourcing from low-cost countries. For many, the social and environmental impact of these areas adds another layer of complexity in the supply chain.

And with these challenges, more companies are abandoning their one-size-fits-all model for a segmented supply chain strategy. For example, Unilever Thailand runs separate supply chain channels for its locally produced and imported goods. The company delivers locally produced goods from its main factory to stores in Thailand, while imported products and those manufactured by subcontractors enter a central distribution center before hitting the stores. This has led to reduced inventory levels and stock-outs in stores, and increased sales.

Besides improving service and reducing costs, a segmented supply chain allows a company’s business units to grow at varying rates. The company can offer a better response to fast-growing channels and product lines while providing better cost control in mature and stable segments. It can also understand the elements in the supply chain that matter the most to specific customers. Based on customer requirements, companies can design and run differentiated supply chains effectively.

The logic of segmentation

Supply chain segmentation discovers what matters the most to a particular customer segment and tailors the operations to deliver the goods and meet requirements, as not all customers have the same preferences for a particular level of service. For example, while flexibility in volume and supply chain responsiveness are important to temporary price discounts at the retail channels, such attributes are not critical to ‘everyday low price’ retailers. Similarly, quick time-to-market matters more to fashion-oriented, short-lifecycle products than long-lasting, core products.

Figure 1 shows a simple matrix of customer priority versus product demand behavior with six segments.

1. High-volume, low-variability demand: a company can design a cost-efficient supply chain – smooth production, minimized changeover and dedicated production lines – to drive costs down.

2. High-volume products with high variability: priority A and B customers may be offered a responsive service as the margin justifies the additional cost involved.

3. For the less profitable C customers, providing a limited menu of service options can help companies reduce variation.

4. Low volume, low-variability products can be supplied to high priority customers using a basic replenishment service.

5. Lower-priority customers should be offered a limited number of stock keeping units (SKUs).

6. The difficult segment of low-volume, high-variability products should best be offered only to high-value customers. A company may decide to offer high service levels if it can obtain other benefits such as access to test markets for new product launches. Rationalizing SKUs should be considered for B and C customers.

A 3-step approach

Companies who are adopting a segmented supply chain should adopt a three-step approach. Here are more details.

1. Identify drivers of supply chain complexity

Supply chain segmentation must be part of a corporate strategy and business context. One that is used to drive a greater market share in a high-growth industry would appear different from another that is geared for cost efficiencies in a declining or mature industry. Companies should uncover the underlying business dynamics that drive the supply chain’s complexity (see Figure 2).

Figure 2 lists the criteria for segmentation that can be narrowed down by filtering out the less important variables and combining inter-related ones. The company should finally have a list of operationally relevant criteria to either reduce costs or enhance customer satisfaction.

2. Design differentiated supply chain segments

Next, define the segments. While companies would often want to create many segments to reflect diverse needs, it can however be impossible to manage all. To successfully implement a segmentation strategy, there should be four to six segments for a reasonable match to the various customer and product requirements without introducing a high level of complexity. Each segment can include enough SKUs to represent sufficient revenue to justify the time and effort required for its implementation as a supply chain.

3. Implement processes for each segment

Finally, create a supply chain infrastructure for each segment. This can include having different organization structures, processes and business rules such as inventory policies and minimum order quantity or MOQ requirement.

While in some cases each segment can share the same organization and core process for ordering, production, logistics and sourcing, implementing the requirements of each segment is done through different business rules. Companies typically make changes to processes such as sales and operations planning (S&OP) process, production and distribution.

Conclusion

In the food and beverage industry, where the seasonality of supply and demand is often important, segmentation can result in inventory reductions of up to 20% and raising service levels for various customer segments.

It is not surprising therefore that even in the midst of an economic downturn, more companies are rethinking their supply chain organization, as they realize one size does not fit all their customers’ requirements.

www.icognitive.com

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Traceability from Field to Fork

Deploying the right traceability solutions can help companies achieve better inventory control, faster processing and a higher turnover of perishable items.

BY ANDREW TAY, PRESIDENT, ZEBRA TECHNOLOGIES ASIA PACIFIC

Food traceability has evolved tremendously since the 1930 Perishable Agricultural Commodities Act (PACA) that required the produce industry to provide documented accounts of transactions between buyers and sellers.

Today, more influences are making track and trace issues relevant to businesses and consumers. They include the 35th anniversary of the barcode (a key component in traceability solutions) and the introduction of the GS1 DataBar that contains serial numbers, lot numbers and expiration dates.

Traceability today

Even though the Food Safety Enhancement Act introduced in 2009 has called for tighter traceability regulations that may include unique identifiers and full electronic pedigrees, easy-to-implement barcoding technologies remain vital to growers for changing and updating their record-keeping methods.

Last year, a report from Health and Human Services found that 59% of the North American food facilities surveyed did not meet FDA’s requirements in maintaining records about their sources, recipients and transporters. This has contributed to the time it took to track the origins of foodborne illnesses.

With more label and scan points in a food grower’s operation and shipping, products can be easily traced throughout their lifespan. This provides a layer of protection should a foodborne illness were to occur, allowing growers to quickly review their records to determine if the compromised product came from their farms and to alert their partners if it was so. This can save lives in case of a severe foodborne illness outbreak while protecting the resources and reputation of businesses.

Traceability technologies can enhance supply chain efficiency. Important for consumers and businesses alike, deploying the right traceability solution can help them achieve better inventory control, faster processing and a higher turnover of perishable items.

Application

The produce industry is working to implement a common protocol called the Produce Traceability Initiative (PTI) to label products at the case level to trace them through the supply chain from retailers to farms. As a result, companies that grow, pack and ship fresh produce are to label the cases of products they pack.

One Zebra customer, Buona Foods from Landenberg, PA, is a packer and shipper of fresh white, brown, and exotic mushroom varieties for retail and wholesale/bulk sales under the Buona and private label brands. The company incorporated PTI case labeling into its pack line with minimal disruption to existing process using Zebra’s mobile handheld printers that were driven by TraceGains’ CaseTrace PTI software application.

The Zebra Model QL420 communicates with the TraceGains system via Bluetooth wireless communications. The portability of QL420 enables the pack line team to rapidly apply the labels as they pack each mushroom package into cases and then onto pallets, without causing any change in the process. In addition, Buona’s HAACP protocol requires sanitary wash down of the packing room after a production run, which the ruggedness and portability of the QL420 makes that easy to manage.

Zebra Technologies and TraceGains have also worked to combine barcode technology with the latest software programs designed to help streamline compliance requirements such as the PTI, harvest data collected in the field and validate the pack-out process.

By implementing suitable scanning and labeling systems, companies can potentially realize returns on investment (ROI) such as cost savings and reduced labor time. One TraceGains case study cites a customer who realized a full ROI six weeks after the implementation of a system, and year over year (YOY) revenue growth of 83%, because retail customers felt more secure in purchasing the goods. With disruptions in the supply chain occurring daily, shipment tracking, granular traceability, advanced business intelligence, and an easy interoperation with software systems are critical in safeguarding products, the bottom line, and the integrity and reputation of brands.

Where to start

Here are some tips on assessing the technology needs of growers who are looking to adopt traceability technologies. They will also help growers work towards being compliant to PTI standards.

1. Know your objectives for launching a traceability initiative. Do you want to provide the pedigree information to regulatory agencies and customers? Do you wish to improve your reputation, speed of delivery to your customers, and increase efficiencies in your supply chain? Objectives will guide the extent of your technology investment.

2. Establish your mobility requirements. Do you need to access existing software systems in the field? Is office-level access sufficient? Using the right technology could save your company costs and time.

3. Identify what you want to label. Will it be produce, cartons, cases or pallets? Start with the lowest level, financially feasible packaging such as cartons and cases.

4. Assess where you want to label. Will the labels be printed in the office and be brought to the field? Or will a mobile printer be used to print labels on demand in the field? This can determine the printer type (stationary or mobile) needed.

5. Evaluate label needs. Identify the demands such as the environment, weather and temperature that will be placed on the labels. What surfaces will the labels be placed on? Will they be affixed on food, cardboard boxes or cellophane wrappers?

6. Register your Global Trade Item Numbers (GTINs). A GTIN is a 14-digit number that helps in the case-level identification of the manufacturer for supply chain traceability. GTINs are required by the PTI and by 2012; GTINs must be read and stored in every inbound and outbound shipment.

7. Review the capability of the existing inventory management and financial software systems. Then, evaluate traceability software that can be easily integrated into your legacy systems.

Conclusion

Benefits abound upon the implementation of track and trace technologies in the supply chain. Food producers, manufacturers and distributors should not wait for legislations to be signed into law to implement a traceability solution. And those who have launched traceability initiatives have started to see ROIs such as lower costs in product recalls and labor, as well as improved product rotations and brand reputation.

www.zebra.com

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Tighter Links

Retail execution software solutions eliminate the weak link between demand and the supply chain as information flows seamlessly among stores and the company headquarters.

BY ANGELA LOVEGROVE, MD FOR ASIA PACIFIC, QUOFORE

After making significant investments in supply chain systems for multi-tier distribution system in Asia, food and beverage (F&B) manufacturers and suppliers are now focusing on the role their field representatives play in the value chain and how these representatives can meet the requirements of modern retail and general trade.

In today’s retail world, every part of the supply chain plays an integral role in the way products are brought to market and in maximizing sales. Companies have realized that retail execution technologies are critical to win at the ‘moment of truth’ – which is the last three feet in the supply chain – when a consumer enters a store or stands at the shelf ready to make a purchase. According to the 2007 AMR Research report entitled Shouldn’t you be minding the Store, companies that assume responsibility from the supply chain to the retail shelf can see a 2-15% improvement in sales.

The challenge for manufacturers and suppliers to win in stores today is to manage the retail shelves. And retail execution software solutions can help eliminate the weak link between demand and the supply chain as information flows seamlessly among stores and the company headquarters, providing insights that are required to address daily in-store challenges that can undermine success at the retail shelves.

Managing operations

Retail execution systems enable companies to manage and execute their field operations in stores. They include sales, merchandising, promotion and direct store delivery activities. Field representatives manage their day-to-day activities via a software application on their handheld mobile devices. At the head office, managers direct, manage and monitor operations in the fi eld as executives access real-time business intelligence in order to make informed decisions. Real-time information enables companies to optimize critical periods such as the first hour, the first-half day, the first six weeks of a product launch and in-store promotions. With real-time field information, managers can swiftly reorder field priorities to energize a launch, avoid a supply disaster, magnify an opportunity, or blunt a new product test by a competitor.

The return on the investment (ROI) in retail execution systems is often seen within the first few months of implementation. It is characterized by a reduction in out-of-stock products, increased speed to shelf of new products, improved store-level ordering and inventory holdings, and enhanced at-shelf facings.

Companies can use such systems to manage traditional general trade and the modern retail environment in Asia. While the modern retail scene reduces the influence of store owners and focuses more on self service and customer selection, general trade – which is still the dominant format in countries such as China and India – presents a complex multi-tiered distribution model that may have up to four levels of distributors managing the same products. This increases the challenges for companies to get the products onto the shelves and their ability to gain visibility of the performance of their distributors and brands.

By perfecting their retail execution in the two trading formats, companies can feed real-time data from retail channels to the office. Since syndicated data on point-of-sale results is not commonly available across Asia, companies are limited to receiving store-level data captured by their field teams. The information flow between field representatives and company headquarters can eliminate the weak link that exists between demand and the supply chain. Here are some positive outcomes.

• Branching logic: a representative sees a supply gap in a store and uses the system to take him through resolution activities such as checking the storeroom and seeing the department or store manager.

• With analytical tools and charting on the device, a representative can encourage a store manager with more sales if the latter works with the retail programs created by the company headquarters.

• With an analysis of sales and field conditions, suppliers can predict possible out-of-stock product scenarios and deploy resources to avoid them.

• Field representatives can access inventory data on their handheld devices to ensure the delivery of high demand, low-supply product.

Enhancing collaboration

Companies can use the intelligence captured with retail execution technology to collaborate with modern retailers to improve product on-shelf availability. When field representatives are in a store, they can use information such as product movement, sales and profitability to provide insights to store personnel and management. To maximize sales and profit, both retailers and suppliers can communicate daily on promotions in-store for better sales accuracy, track sales and order more stock if necessary.

Retail execution solutions can be integrated into existing information technology (IT) systems or proprietary in-house applications to ensure comprehensive, end-to-end technology solutions. The supply chain also enable users to access real-time information and insights such as:

• Identifying the areas for efficient field organization,

• Identifying the effectiveness of promotions,

• Evaluating store conditions and head-office assumptions, and

• Competition.

Working with traditional trade

The traditional or general trade format exists in Asia and using the appropriate retail execution technology in the supply chain enables companies to have a consistent and accurate real-time visibility of this retail format. Besides office-based staff, field sales representatives and team leaders, distributors and third-party agencies can use simple, low-cost data capture devices for field audits. These solutions also institutionalize the process by which distributors deal with stores, create visibility in the supply chain, and standardize corporate practices.

The data captured can provide companies with a greater visibility of key in-store success factors such as distribution, pricing, share of shelf, promotions and competitor activity. These solutions can be configured to trigger automatic, rules-based actions in response to the data obtained in the field. For example, an out-of-stock condition captured in a field audit can trigger an alert to inform a field sales representative or area manager to take the necessary measures.

A retail execution system enables companies to perfect their supply chain processes and bridge the information gap between modern retail and general trade. When companies get the system right, they reap the benefits of a closed loop supply and demand chain; a stronger relationship with retailers; improved brand loyalty from satisfied consumers; and a lesser risk of being overtaken by the competition.

www.quofore.com