Fragility should be the ‘word of the year’.
As a general truth our supply chains lack resilience, and those with ‘extended’ supply chains have been sorely tested in the last twelve months.
With the recent weather-related events in Texas, many are surprised at the fragility of the very ecosystems that support our day-to-day lives. A surprise ‘cold-snap’ with ice on the powerlines brought chaos as the backup systems failed as quickly as the electricity supply.
Serious? “We were one day away from food riots” said Jose Deloquer, owner of one of the larger fresh produce wholesale businesses in Texas. “We had no electricity or water for 4 days. We were melting snow to get water to wash with, people were cold, tired, hungry and angry. The shops that did manage to open had no food. It was chaos. We had no phones, we didn’t know what was happening. Some thought America had been invaded!”.
Why did the backup systems fail so completely? “The backup generators weren’t insulated, so they froze too. Texas just isn’t built for cold weather. Houses are designed to cope with a 30 degree temperature fluctuation (100deg-70deg), and we had a 60 degree drop (70deg-10deg). The house insulation isn’t designed to cope with this. We were freezing”.
And your Wholesale fresh produce business? “I have probably lost $500k-$1m, and I am completing the insurance claim form as we speak. How long before we hear the words ‘Act of God!’”
Lack of planning and foresight caused chaos. The infrastructure is too fragile.
As indeed are many of our supply chains.
Sustainability of supply chains has become a prime focus during the pandemic and is likely to remain so as business moves back to some form of normality.
A recent Oxford Economics study of 1,000 businesses concluded that “Sustainability will be a growing focus for SME’s over the coming years as they seek to satisfy consumer demand and comply with increasing regulation.”
Interestingly, 86% of the study’s respondents flagged the fact that ‘a sustainable supply chain is a competitive differentiator’, which of course makes a great deal of sense as it means that you can probably deliver when others cannot.
Unsurprisingly, the key technique flagged in the report was visibility and collaboration of your suppliers.
Wim Vandenholst, Head of Supply Chain with consultancy Mitrax commented “historically suppliers were all too often viewed as remote third parties on whom we placed orders and hoped for timely delivery. The recourse for failed performance was simply selecting a different supplier. In today’s connected world that attitude simply will not work.
Suppliers need to be treated as partners, as an extension of your business, you need to know as much about your key suppliers as you do about your own internal key departments”.
Technology can certainly help. In our increasingly digital world, collaboration tools are available in abundance that will enable you to create ‘glass walls’ into your supplier’s business. From simple tools such as ‘Slack’ that enables you to build pan-company teams to improve communication, through to a raft of products enabling you to share projects, order visibility etc (some free-ware, some payable) that are best explored via Google search.
How can your ERP system help?
Having a supplier portal is undoubtedly a help. Being able to clearly see what is due in and when, and making it easy for your suppliers to update with changes will help give you some visibility.
Having an ‘open’ ERP system with the ability to integrate with some of the emerging Artificial Intelligence (AI) technology is going to be key to success in the future. Imagine this scenario; your ‘AI’ system spots possible disruption of supply from the Costa Rican ports that you rely on, due an impending hurricane. It is part of your ERP system, so it recommends re-sourcing product from Mexico where there is availability and less likelihood of disruption. Your ERP system is plugged into the real world. And this is available now; not yet at a price tag that you would wish to see, but technology is very democratizing; if Moore’s Law taught us anything it is that expensive technology today is a commodity tomorrow.
Microsoft are calling ‘AI’ “the new oil”. They say it is the next BIG THING that will turn our lives upside down (after mobile phones and the internet). Do you believe them? Have you seen any evidence of it yet? Have you noticed that when you leave home at 8am your phone advises you, without prompting, “17 minutes to the High School”. Your phone knows where you normally go at 8am each weekday and it is delivering to you information that it thinks will help you at that particular moment in time. This is ‘AI’ – and so it begins.
Traceability and provenance hasn’t gone away – if anything it is strengthening… so the message here is if you don’t have great traceability functionality – you are an accident waiting to happen. In the USA traceability has become a massive topic, partly driven by increasing & high profile fresh produce scares and recalls in recent years. But why has US ‘fresh produce’ suddenly become problematic? Well, the answer lies not in the fresh produce itself, but in the systems for measuring food related illnesses. After ‘911’ the US was understandably concerned about further terrorist attacks. One of the measures taken to detect a chemical attack was to increase the hospital reporting of food related illnesses, the result being an apparent increase in the incidence of food poisoning.
And if you want great traceability, you need a modern ERP system that will instantly ‘track backwards and forwards’ to identify problem batches and their destination, so that any subsequent ‘recall’ affects the smallest number of customers. Without it you could end up recalling an entire day, week, month’s worth of shipments just to be sure you had completely addressed the risk. ERP software with good traceability can save you a fortune!
Trading platforms are another area gaining ground – most Fresh ERP systems don’t address this, Affinitus does. You have tended and nurtured your precious ‘produce’ to the point of harvest and now you need to sell it for the best price. You need to make your existing customers aware of your product availability and current pricing, and you would like to attract interest of new buyers too. What do you do? You print off your usual 24 page paper catalogue and you send it to all your existing customers, who then, if interested, have to phone your office to find today’s pricing and availability and then place an order over the phone which then has to be keyed manually into the ERP system.
Wouldn’t an online catalogue be better where the buyers can instantly see on their phone or laptop your current product availability with photographs and pricing (unique to them), and at the click of a button the order is placed and is automatically transferred into your ERP system?
What will you do with the staff you save as you no longer have to negotiate each order and manually key it into your ERP system. What about the benefit of ‘broadcasting’ promotional prices to ‘move’ slow moving stock? Sell more and reduce wastage.
Some forward-thinking ERP systems (like Affinitus) already have this, others will have to link to third party products.
Fresh ERP systems are adapting to the rapidly changing demands of the fresh produce sector, and with the ‘right’ ERP system at the heart of your business, you too can track and ride the changes.
By: Andy Makeham, CEO of US Operations, Affinitus (USA)