Off the shelf
Nowadays, however, most food manufacturers probably feel they know all they want to know about logistics and trucks and warehousing and regional distribution centres (RDCs). They certainly know how it feels to sit in the middle of the food supply chain, squeezed at both ends between ingredients suppliers and customers.
Yet 50 years after Ducker, many firms are still struggling to get their supply chain logistics running smoothly. In many cases, the problem can be blamed on retailers and supermarkets , which are increasingly demanding seven-day ordering and seven-day delivery, coupled with better on-shelf availability and shorter lead times.
Fortunately there are a number of ways manufacturers can meet these challenges. The Supply Chain Best Practice Forum run by logistics consultancy Scala is one. It consists of 25 food and non-food grocery manufacturers including Pepsico, United Biscuits, Bernard Matthews and Silver Spoon. Meetings also take input from retailers. The group's aim is to share best practice, says Scala md John Perry. Hot topics over the past year have included the way retailer ordering patterns are changing, environmental controls, merchandising units, and pallet management.
"On-shelf availability is a real conundrum," says Perry. "On the one hand it is the ultimate key performance indicator for all supply chain directors in that it is a measure of delivery on time, in full." But on the other hand, he says, on-shelf availability is rarely really known or properly measured. "There is a need for manufacturers and retailers to work closely together to ensure co-ordination."
It is easy to blame the changing demands of retailers and supermarkets for turmoil in food supply chain logistics. But many problems are caused by food manufacturers, suggests Brian Young, director general of the British Frozen Food Federation (BFFF). Frozen-food wholesalers, he says, are frustrated by the way many suppliers still use faxed and handwritten notes when fulfilling orders. As a result, he says, the BFFF is trying to persuade smaller firms to start using the age-old technology of barcodes to convey the correct product data to the wholesaler.
"About two years ago BFFF contacted wholesalers to ask them about their business systems, particularly the receipt of orders. And by far the most popular way of doing that was still by fax and handwritten orders." Clearly the bigger players have gone electronic.
BFFF is looking to set up webinars to educate its members about the business benefits of using barcodes. It wants to do this in conjunction with GS1 UK, part of the global GS1 organisation that develops barcode data standards for use in supply chains. In particular, GS1 is helping spread the use of global data synchronisation (GDS), which allows manufacturers to put all their product data in one place in one global format. It is then transmitted to all their customers' systems.
GDS and the way forward
GDS means that as soon as a firm updates a product or introduces a new one, the data goes to all of its customers automatically. Then a simple barcode carrying a global trade item number (GTIN) will uniquely identify a product or case load of product with this database, ensuring everybody in the supply chain "has the same version of the truth", says Andrew Stinchcombe Gillies, consultant at GS1 UK.
The UK food and grocery industry is described as one of the most demanding sectors for supply chain logistics. Something like 5.3bn cases of products were distributed through 3.33Mm3 of warehouse space in 2008, just for the UK's 12 major retailers, according to the grocery think tank IGD. It believes one of the biggest challenges food manufacturers face this year will be seven-day operations becoming the norm as retailers work towards shorter lead times.
Another challenge is the issue of return logistics, says Chris Sturman, chief executive of the Food Storage & Distribution Federation (FSDF). Essentially, he says, this means minimising, or totally eliminating, packaging and food waste going to landfill. "It means working out ways of recovering all the packaging plastics, paper, cardboard, glass from stores and supermarkets and getting it back to the RDCs." Also, any waste food needs to be recovered and put into anaerobic digestion.
"The downside for the waste disposal firms is that they lose the business of putting skips and compactors round the back door of every major supermarket because now all the stuff goes back to the RDC." Most of the supermarkets are now achieving significant benefits, says Sturman. Look at McDonald's: today nothing leaves a McDonald's store except on the back of an empty vehicle going back to depot, he says.
What is really exciting, he says, is the way retailers are seeking to become even more environmentally friendly. They are doing a lot of work via the IGD to reduce food miles and get better vehicle utilisation. And the Freight Transport Association has now got a significant number of retailers, wholesalers, manufacturers and third-party logistics providers to work together to reduce carbon.
But, according to Perry at Scala, it is on-shelf availability that is the ultimate measure of a supply chain director's worth. Traditionally, the measure of success is that their job is finished once they have delivered it to the retailer's back door or RDC. But that is only part of the story. Perry says: "The ultimate aim is to get the product on the shelves, and traditionally that has been left to the retailer. The manufacturer's job was to get it to the retailer as promised and then leave it to the retailer to make sure it got on shelf."
What is happening now, says Perry, is that manufacturers are becoming more aware that getting products on shelf has a massive impact on their business in terms of lost sales. They are having to work with retailers to address this problem, which isn't easy. "But people are starting to discuss how it can be achieved. That's what we try to enable in the forum.
"So the hot topic around the table in our forum is the impact of shortening lead times and extending the number of deliveries. To what extent does this reduce order size and therefore vehicle efficiency and the impact on road miles."
According to GS1 UK, Britain's grocery retailers and suppliers could save at least £1bn in five years if they ironed out data inconsistencies across the supply chain. This would enable consumers to make more informed choices and improve the shopping experience.
In research for its Data Crunch Report published two years ago, GS1 UK compared data held by Nestlé, Unilever, Proctor & Gamble, and Mars, with that stored by the UK's four largest supermarkets. After calculating its impact on lost or late deliveries, inaccurate orders, surplus transport costs, and duplicated work, it found that the retail sector could save £700M and create opportunities for £300M of new sales.
Stinchcombe Gillies at GS1 UK says it is all about identifying, capturing and sharing data automatically and accurately so that anyone who wants it can understand it. "GS1 is about creating one common 'language' across the globe for supply chain logistics."
Another reason barcodes are gaining interest, he says, is because they are seen as a vehicle for meeting EU food traceability regulations. Simple paper-based systems would become extremely cumbersome and probably not be capable of meeting the requirements to quickly identify where food came from into a factory and where it went out to, says Stinchcombe Gillies.
"We are looking to hold a series of free webinars for BFFF members to explain global trade item numbers barcodes: the benefits and how to store and move the associated data," he says.
In seeking views from its members, Brian Young was "quite shocked to find some of the biggest players still not providing an accurate barcode or even a barcode at all".
