- Optimization
Improving supply chain transparency is a high priority for companies, especially in industries such as foodservice, where consumers and regulators are pushing for more information on how products are made and delivered to be publicly available. Increasing product complexity – growing demand for organic and gluten-free foods, for example – as well as food safety and security concerns, continue to drive the demand for more transparency.
Responding to these demands is no easy task. The fragmented nature of the supply chain can make it difficult to achieve the kind of consensus that is needed to create efficient, end-to-end monitoring systems, and historically, the foodservice industry tends to trail behind more technology advanced segments.
However, as the industry responds to the need for more transparency, there is a huge opportunity to take a leadership position. Key to developing the level of transparency that is now expected, is changing the behavior of stakeholders and harnessing the power of data visualization technology to present abundant data in easily understood and actionable formats. With these changes in place, the industry can open the way to innovations that could take supply chain performance to a new level. Moreover, the journey provides some valuable lessons for other industries that are striving to meet market demand for increased supply chain transparency.
The foodservice supply chain is extremely complicated. The companies in this industry sell food that is prepared and served in venues outside the home, the most familiar outlet being restaurants. Each restaurant is supported by a complex supply chain that stretches from agricultural growers across the globe to end consumers. The supply chain also includes manufacturers, freight carriers, forward warehouses, distribution centers (DCs), and third-party logistics providers. Many of these players tend to operate in silos that can impede the end-to-end flow of information.
Another challenge is data veracity. There are many reasons why inaccuracies creep into supply chain data streams. An overarching problem is a lack of widely adopted, consistent standards for exchanging data. There also are various operational issues to contend with. An example is the reuse of product numbers and warehouse identifiers without alerting trading partners to such changes.
The industry also must deal with fluctuations in demand. Demand for food products can be unusually volatile, since it is influenced by shifting consumer preferences. Some of these variations – for example, when a restaurant dish suddenly becomes popular because a celebrity tweets about it – are almost impossible to anticipate.
The industry fragmentation described above compounds such problems. In a fragmented environment, trading partners tend to optimize locally. For example, a DC might build safety stock of a critical product for a favored restaurant chain that is not visible to other players. Unseen inventories scattered across a supply chain causes significant inefficiencies.
Add the dramatic increase in the volume of data to the mix, and it becomes clear that operational models have opportunities to improve before the industry can deliver levels of supply chain transparency that are expected in today’s world. These changes are within reach – and many are being implemented.
One of the first steps to overcoming these problems is to change the behaviors that cause data errors and latency.
For example, Armada, a Pittsburgh-based fourth-party logistics provider to the foodservice and retail industries, is working with DCs and other entities to make sure that the inventory and shipment data they provide is as near to real-time as possible. This does not require them to make big investments in technology; huge improvements are possible by simply rethinking the way data is managed and shared. It’s also important to break down operational silos, and eliminate the practice of optimizing locally. End-to-end visibility is extremely difficult to achieve when stakeholders have a parochial view of the supply chain.
Changing stakeholder behavior lays the foundation for the new technology that drives greater supply chain transparency. At Armada, this emerging technological base has two key elements.
First, an integrated platform allows the company to receive data in multiple formats such as EDI. This information backbone is available to every enterprise application – including warehouse management and transportation management systems – accessed by designated stakeholders.
Second, Armada is working to fundamentally change the way this data is stored and accessed for clients and their network stakeholders. For example, the practice of generating reports from data stored on applications is no longer sufficient. Data warehousing and extraction as well as business intelligence capabilities are being built to support the high-volume information management systems that are now needed.
Traditional methods of displaying and analyzing operational data through columns and rows isn't enough if the goal is to redefine supply chain transparency. In addition, practitioners need faster, more effective ways to consume and use the large volumes of data now available. And it is likely that the flood of data will increase over the next few years. Importantly, much of this data needs to be configured for mobile technology platforms that are growing in importance.
An example of an innovative display format is an Items at Risk dashboard, that shows when items in specific DCs are reaching stock-out levels based on lead times. Managers no longer must pore over rows of numbers to get this information; they can quickly review the screen and see which items are at risk. Moreover, the information that managers need to take remedial action is displayed, such as contact details of DCs that can supply the flagged items. Another application, Loads at Risk, uses truck GPS information cross referenced with supply chain inventory across the network to identify shortages and potential spoilage. The next generation of these capabilities will cross-pollinate the information from such applications. The correlation between items that are approaching out of stock and shipments that are late, is one area that offers much promise.
These are exciting innovations, but the industry is only at the beginning of this journey. For instance, there is huge potential for developing more advanced analytics. The ultimate analytical goal is to develop systems that automatically identify potential problems and trigger remedial action.
The good news is that once you have started on this path, new opportunities for raising supply chain performance open up. Moreover, technology advances, notably the development of increasingly sophisticated analytics, will drive more innovation and provide further impetus for change.
It’s now up to individual companies to start the journey, and embrace these new ways to improve supply chain transparency.
This article was written by Alexis Bateman, Director, MIT Responsible Supply Chain Lab (hickmana@mit.edu), Holly Cundieff, Vice President of Marketing, Armada, Mark Ohlund, CIO, Armada (mohlund@Armada.net). It is based in an Innovation Strategies column published by Supply Chain Management Review.