Nestlé has joined food industry business leaders to support the European Union (EU) in increasing supply chain traceability and transparency, for commodities that could be linked to deforestation. Read more
The role of procurement is about ensuring that business operations continue like clockwork and involves understanding the current environment as well as foreseeing the potential future environments. COVID-19 has demonstrated how market changes can be challenging and the importance of reducing risk along the food and beverage supply chain. The challenge is that all businesses currently operate under the pressure of market volatility, uncertainty, complexity and ambiguity. Going forward, food and beverage manufacturers are likely to operate with more uncertainty and face more unexpected crises, placing extra burden on the Procurement and Supply Chain functions.
According to a recent McKinsey report Risk, Resilience and Rebalancing in Global Value Chains, “companies can now expect supply chain disruptions lasting a month or longer to occur every 3.7 years, and the most severe events take a major financial toll.” McKinsey analysts also calculated the damage associated with a severe and prolonged disruption (100 days) and used probabilities to estimate the financial impact that companies can expect over a decade. The report predicts the global food and beverage sector can, on average, expect losses equal to almost 30 percent of one year’s profits over a decade.
Read More: Coles local opens in Chatswood
To help manage the disruptions caused by the pandemic and plan for the unexpected, food and beverage manufacturers should look at a four-step strategy to de-risk procurement and supply chain functions in the wake of global vulnerabilities.
Step 1: Anticipate and plan for uncertainty
Today, the rigorous process of gathering information is being replaced with a data-driven approach. This enables real time decision-making with businesses building AI-driven integrated data ecosystems that are underpinned by predictive analytics and can then be applied in forward planning on both strategy and performance.
Food and beverage manufacturers and distributors can also use technologies such as Enterprise Resource Planning (ERP) to accurately forecast items like demand, stock availability, supplier lead times, cost, raw ingredients and contingency stock requirements; and integrate this into their unique business model. ERP can help procurement de-risk as it provides a single integrated platform that shares all the information across all functions. This allows manufacturers to optimise inventory forecasting capabilities and improves the quality of the decision making within the organisation.
By making a direct link between supply and demand, food and beverage manufacturers and distributors can anticipate and better plan for uncertainty and ultimately improve the cash flow of the organisation.
Step 2: Embrace the limitless potential of digitalisation
With the pandemic, many manufacturers now realise the true potential of digital transformation in the procurement process.
Digitalisation can assist strategic sourcing to become more predictive, transactional procurement more automated, and supplier relationship management more proactive. Digital procurement solutions are enabling the future by providing access to previously unavailable insights or bringing order to massive (but unstructured) data sets, ultimately driving more complex analysis and better supplier strategies, enabling more efficient operations.
Step 3: Enable end-to-end supply chain visibility
World crises have resulted in procurement teams scrambling for alternative and locally based suppliers to ensure that they can still fulfil existing orders and continue to produce with new orders. End-to-end supply chain visibility is therefore a necessity to ensure procurement accuracy and resilience. Such advanced insights are needed to improve customer service, reduce costs and mitigate interruptions that will affect supplier inventory levels and product delivery. With customers demanding better service, embedded AI capabilities provide real-time intelligence, actionable insights and recommendations that reduce disruption time from days to hours, improving customer service in line with expectations.
Step 4: Focus on building a robust procurement model
There are no standard business models to help food and beverage manufacturers manage what we are currently facing. This pandemic has exposed the fragility and thin margins on which many businesses run. Highly indebted companies, working from lean inventory, supported by just-in-time supply chains, and staffed by short-term contractors are suffering the longer-term impact of market unpredictability.
Food and beverage manufacturers and distributors need to identify their own business model that will suit their business and consider how to reengineer their supply chains to reduce risk through design, factoring in increased complexity and uncertainty as the new normal. In future, effective supply chain management will be all about agility and finding the perfect balance between just-in-time processes and just-in-case scenarios, while reducing risk as much as possible.
Global crises are an inevitable factor of life. By planning for the unknown, implementing the right technology for end-to-end supplier visibility and building a robust procurement model, food and beverage manufacturers and distributors can de-risk procurement and supply chain functions and enable resilience in an uncertain world.
Signs the international community are moving away from their commitment to globalisation has been reinforced with the release of the latest CIPS Risk Index. Risk relating to global supply chains has reached its highest levels since 2013 due to a convergence of international issues including uncertainty around the post-Brexit relationship between the UK and the European Union as well as economic and political instability across the Middle East.
Global supply chain risk Q3 2016
The Index, produced for the Chartered Institute of Procurement & Supply (CIPS) conducted by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains. The upward trend in supply chain risk can be partly attributed to a breakdown in political consensus over globalisation, with the World Trade Organisation reporting an average of 22 new trade restrictive measures introduced each month in its latest report.
According to Bodhi Ganguli, Lead Economist, Dun & Bradstreet, the CIPS Risk Index reflected the general unease about the state of the global economy with its increase in operational risk.
“Political and economic uncertainties, such as the extent of the growth slowdown in China, emerging markets’ financial vulnerabilities, the impact of terrorism on cross-border movements, and the fallout from Brexit, continue to weigh on global business sentiment,” Mr Ganguli said.
In addition, growing disillusionment with globalisation is contributing to political risk. Elections over the next 12 months are expected to see gains for far-right parties across the globe. Incumbent governments are also demonstrating worrying responses to the growing issue of cross border movements with the Australian government proposing radical changes to immigration policy in response to perceived terrorist threats stemming from violence in the Middle East.
All told, increased political and economic risk globally is beginning to effect the bottom line of businesses as they look to navigate an increasingly hostile global trade and supply market.
Mark Lamb, General Manager of CIPS Asia Pacific, said: “Supply chain managers are facing a new wave of impediments to the flow of goods across borders. With international trade deals under threat around the world, supply chain managers must be as aware of political risks as they are of natural disasters and economic hardship.”
Asia Pacific has bucked the global trend with slight improvements in risk levels for domestic businesses. Australian suppliers in particular have benefited from rising coal and iron ore prices together with an increase in national defence spending. In the short-term, Australian businesses are also showing improved payment performance. Of concern is a continued reliance on an unstable Chinese economy. A major issue likely to have deep effects on Asian trade is the recent bankruptcy of South Korea’s Hanjin Shipping. Responsible for 3 per cent of global shipping, it has left cargo as large as $14bn unable to dock. The bankruptcy is likely to have wide-ranging impact on trans-Pacific and Asia-Europe supply chains.
A further breakdown of region-specific results shows the highest increases in risk can be found in Western & Eastern Europe, Central Asia, the Middle East, and North & Sub-Saharan Africa, while there is Improved risk in the Asia Pacific region.
Growing calls for transparency throughout the supply chain are taking clean & clear label to a new and supreme level. This comes as the inherent benefits of plant-based products are being active marketed to a more health conscious consumers. “Clean Supreme” and “Disruptive Green” lead Innova Market Insights’ Top Ten Trends list for 2017.
“Interest in naturalness and clean label continues to feature strongly,” according to Lu Ann Williams, Director of Innovation at Innova Market Insights. “It has become somewhat of a running theme through our trends forecasts in recent years. In 2008, ‘Go Natural’ led our trends list, and since then the theme has featured each year in different forms, such as ‘Processed is Out’ in 2011, ‘From Clean to Clear Label’ in 2015 and ‘Organic Growth for Clear Label’ in 2016. This year, clean & clear is a theme weaving throughout the entire list, but is specifically the case for trend #1 (‘Clean Supreme’).”
Innova Market Insights has revealed its top trends likely to impact the food industry in 2017 from its ongoing analysis of key global developments in food and drinks launch activity worldwide.
The top five trends for 2017 are:
- Clean Supreme: The rules have been rewritten and clean and clear label is the new global standard. The demand for total transparency now incorporates the entire supply chain, as a clean label positioning becomes more holistic. Trending clean supply chain claims include “environmentally friendly,” which has shown a CAGR growth of +72% from 2011-2015 and “animal welfare,” which has grown at +45% per year during this period.
- Disruptive Green: As plant-based milks, meat alternatives and vegan offerings have rapidly moved into the mainstream, consumers are looking for innovative options to take the inherent benefits of plants into their daily lives. Even dairy companies are now leveraging the functional and technical benefits of plants in new product development, driving more variety and excitement into their category. Innova Market Insights has reported CAGR of +63% for new product launches with a plant-based claim from 2011-2015.
- Sweeter Balance: Sugar is under pressure, although it remains the key ingredient delivering the sweetness and great taste that consumers are looking for. The quest to combine taste and health is driving NPD, as the industry faces the challenge of balancing public demand to reduce added sugars and create indulgent experiences, while at the same time presenting clean label products.
- Kitchen Symphony: Italian Lasagna is no longer enough – we want Melanzane Aubergine Al Forno! The connected world has led consumers of all ages to become more knowledgeable of other cultures. As a result, there is growing demand for greater choice and higher levels of authenticity in ethnic cuisines. At the same time, pride in local and regional foods is also seeing an upsurge in some countries, with a resulting rise in availability and authenticity of local cuisine.
- Body in Tune: Consumers are increasingly personalizing their own nutrition intake, making food choices based around what they think will make them feel better. They are also experimenting with free from products and specific diets like paleo and low FODMAP. At the same time, consumers continue to increase their intake of foods and beverages with ingredients that they consider to be healthy, like protein and probiotics.
The other trends identified by Innova Market Insights are Plain Sophistication, Encapsulating Moments, Beyond Pester Power,Fuzzy Borders, and Deeds of Change
All of the top ten trends will be discussed in a live webinar to be broadcast on November 22.
A leading Brisbane based meat works producing high volumes needed an inspection system that guaranteed speed, product integrity and accuracy. It turned to Omron, a global leader in automation solutions, for the answer.
When your business supplies fresh meat products to major supermarkets and consumers across Australia, you can’t afford to get it wrong.
Products displaying illegible date codes, damaged packaging or wrongly labelled products can be disastrous for suppliers.
Through its integration partner, Pac Technologies, the meat works commissioned Omron to install a vision inspection system that would minimize the risk of sending out any non-compliant products.
“All final packaged product lines were installed with Omron’s FQ2 vision inspection cameras for traceability of all shelf ready meat products,” said Omron’s Queensland State Manager, Paul Gibb.
“The main aim was to increase productivity, while maintaining consistent, high quality standards.”
The Brisbane meat works is unique. It is a globally recognized fully integrated facility that completes a full circle in beef production including slaughter, boning, value add, retail-ready and distribution.
According to its Production Manager the site processes some 1200 head of cattle per day.
Apart from bulk meats it also produces stir-fry and diced beef and veal, beef sausages, corned, marinated, glazed and coated beef and veal products, corned beef silverside and hamburger patties.
“We currently have an annual production of over 15 million kilos for national distribution to prominent retail and supermarket shelves,” the Product Manager said.
“Due to very stringent requirements demanded by our retail distribution partners, our entire packaged shelf ready product needs to be exactly as per what is ordered and labeled as.”
The biggest challenge for any meat works is traceability. Most facilities traditionally rely on casual labor in the final packaging and inspection process.
“We turned to Omron to assist us in greatly reducing the risk of sending out non-compliant product final packaged product,” the Production Manager said.
A challenge for this application was to check both 1D and 2D barcodes at varying focal lengths on the final production line. Also there was a requirement to check and verify the date code on each shelf ready product.
Kim Simonsen from Pac Technologies, in conjunction with Omron application engineers, created a vision solution using FQ2 machine vision cameras on each line. On some lines, two cameras were used at varying focal lengths to handle the varying heights of the target product.
The carton barcode is pre-checked to verify that the product is as expected before the individual packs are checked.
“We accessed some very powerful algorithms built in to the FQ2 camera to achieve what the customer needed to satisfy their date and barcode checks”, said Yang Qui, a senior application engineer form Omron Electronics, Brisbane. “OCR, or Objective Character Recognition was used to not only check for the presence of the date code, but actually read the text to ensure that the date code was correct and readable. The small sized 2D bar code was a challenge, and required us to employ the high resolution version of the FQ2 vision camera to obtain a reliable and accurate reading each and every time”.
Mr Gibb said Omron is also assisting other Queensland based meat works that produce down to shelf ready product as well as bulk packs.
Hundreds of different variants
“There are common issues emerging when talking to each company about checking integrity and accuracy of the final packaged product and its labelling and identification,” Mr Gibb said.
“Hundreds of different product and label variants, many types of barcodes and date codes, varying existing PLC architecture, high turnover of transient workforce, and a hostile operating environment all present a challenge to a solid and reliable vision solution.”
One of the main challenges was how to process the data once reliable and accurate judgements of the final product are obtained.
“In this instance we used our powerful and flexible NJ Machine controller with SQL connectivity and Ethernet IP to communicate directly to the customer’s database without the need for any software based middleware,” Gibb said. “Since Omron’s NJ controller has the option of Ethernet IP communications, it communicated directly with the customer’s existing PLCs, creating a seamless network from camera to database.”
Gibb said Omron’s FQ2 vision cameras are rugged enough to be installed directly on the production line in a meat works hose down environment and they have enough capacity to store more than the customer’s total product lineup and label varieties.
Gibb said the main issues for Quality Assurance (QA) inspection in the meat industry are:
- Hundreds of different products and labels
- IP rating camera
- Huge variety of codes, different types of bar code, different type of 2D Codes,
- Complex production and device information like expiry date, batch number, lot number, stamp
- Many workers lack technology, knowledge and training
- Difficult to use traditional sensors or PLC’s to collect all of the information
- Difficult to integrate PLC/Vision/Motion/Sensors all together
- Difficult to manage QA inspection information
- Image logging? Data logging?
- How to integrate to existing Scada software
Omron FQ2 supports up to nine types of barcodes. Whether it’s for verification or barcode character reading, the FQ2 can easily meet customer’s requirements.
The Australian meat industry uses GS1-databar code widely and FQ2 has been successfully used for product verification and production information inspection.
FQ2 can read the main six types of 2D codes. There is no need to use more than one code reader – even for processing that combines different types of codes.
FQ not only forms a powerful and accurate vision inspection/data sharing network. It is the beginnings of a fully future proofed new single platform plant wide architecture, ready for upcoming robotics, RFID, safety and advanced sensing.
That platform is Sysmac – Omron’s new machine automation platform.
With Sysmac (System for Machine Automation Control) you have one control for the entire machine or production cell.
A strategic partnership between Result Group and IDlocate brings together the printing expertise of Result and IDlocate’s consumer-facing authentication platform.
Both companies believe the partnership will allow them to deliver best practice traceability and anti-counterfeiting.
“It’s an exciting partnership” says Result Group GM Michael Dossor. “Consumers are demanding traceability as to the source of supply…this strategic partnership allows us to continue delivering best practice solutions for our clients with an off-the- shelf solution. Of upmost importance is ease of use and consumer engagement; these are ticked off better than any other solution we have seen.”
“Our partnership with IDlocate enables us to deliver our customers a complete turnkey solution from Coding and Marking equipment and control software, to print a unique QR code on every product that will read and engage with any consumer on any handheld platform,” says Michael Harrop, Result’s Business Unit Manager. “Whilst there are a few other options in the market, we haven’t seen anything that works so well from both the manufacturer and the consumer stand-point.”
IDlocate was founded in 2015 by two consumer behaviour specialists, who understood that the existing platforms were IT led, and they were not delivering what the consumer was demanding or what brands could deliver. It was great to have all the technology and tests, but when they aren’t communicated to the consumer in an easy to access platform, the consumers lose interest and don’t engage with brands.
The solution is built on an enhanced version of a platform that has been delivering coding solutions for the last 15 plus years, and addresses all the issues and risk in printing a unique identifier in a manufacturing environment. More importantly, it allows a consumer to engage with the brand owner’s message without the need for a specific reader or to download a special app.
Everything is web deployed meaning it does not matter what smartphone or reader is used, or what social media application or code reader a consumer is using. There is no barrier for the consumer to participate. Research has shown that consumers are now demanding to know where their products are sourced from, so it makes sense to display this to them in a way that provides for easy to access content. This is addressed by a brand owner being able to build custom content relevant to their products and existing systems, and share this with consumers at the touch of a button.
CHEP won gold and silver for two of its customer solutions at the 2016 POPAI Marketing at Retail Awards, announced last week in Sydney.
The global provider of supply chain solutions won gold for its Retail Display Pallet and Beverage Tray System; and silver for its Retail Modular Pallet.
According to the company’s Director of Strategy and Marketing for Australia and New Zealand, Justin Frank, both solutions deliver significant sustainability benefits in the supply chain. He said the two awards reflect the environmental benefits of the products in the distribution and merchandising of beverages.
“CHEP supports a share and re-use circular economy and we work with our customers and partners to innovate and deliver efficiencies, reduce waste, and improve flow through their supply chain.
“Both platforms are designed to move products seamlessly from the manufacturer to the retail floor, as an innovative one-touch solution fully-stocked and ready to go, while also removing the need for one-way cardboard packaging and minimising transport resources, including a reduction in fuel.
“The solution delivers superior category management by being: easy to see; easy to access; easy to replenish; easy to flex; easy to remove; and easy to re-use.
Around 65 per cent of retail supply chain costs are incurred in the short distance from the loading dock to supermarket shelf display.
“Together, with the movement from the distribution centre, it is commonly known as the ‘last mile’ and is the current battleground for innovation in the quest to gain efficiency, reduce environmental impact, improve on-shelf availability and promote sales.” Frank added.
Global supply chain risk climbed in the second quarter of 2016, reaching the highest levels since records began in 1995, according to the CIPS Risk Index, powered by Dun & Bradstreet.
The Index, produced for the Chartered Institute of Procurement & Supply (CIPS) by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains. The UK’s risk rating was downgraded by Dun & Bradstreet as a result of the leave vote.
This continued the worsening trend in global risk which has been following this trajectory since Q4 2015. Amid sluggish growth across developed and emerging market economies in Q2, the UK’s vote to leave the EU at the end of June marked an unprecedented event that is expected to have a reverberating effect on supply chains in the region, and also across the rest of the world.
Immediately after the result, a dramatic fall in the Pound Sterling led to soaring costs for businesses that relied on importing, prompting many to reconsider their sourcing strategies. In addition, early evidence of a drop in consumer spending and business investments in the weeks following the EU referendum result increased the risk of the UK economy falling into contraction in the third and fourth quarters.
A similar picture was seen across Western Europe, with early signs of a dip in consumer and business confidence raising concerns about a wider economic slowdown.
Brexit – consequences near and far
While the UK will still have access to the EU’s single market for at least another two years after it invokes Article 50, the medium-term outlook is less clear. If the UK and the EU are unable to find an agreement about post-Brexit market access, the effects on supply chains could be significant, potentially bringing big changes in trade and investment.
John Glen, Director of the Centre for Customised Executive Development at The Cranfield School of Management said, “The UK’s departure from the EU could lead to some of the most dramatic shifts and severe implications for global supply chains in the coming years. While the full impact of the leave vote is still unfolding, the confusion and uncertainty surrounding the current situation has already driven supply chain risk to a worryingly high level.”
At a global level, the Brexit vote underlines concerns about a wider shift towards protectionism in global trade policy. In France, the UK vote has given a boost to the Front National which is campaigning for more economic protectionism; the party also wants to hold an EU membership referendum. A victory for Marine Le Pen, the party’s leader, in the parliamentary and presidential elections next year is an unlikely scenario, but if it happens, it could lead to another sharp rise in supply chain risk. In the US, the presidential election shows that a significant proportion of the population feel that global trade has not been in their interest.
Trump causing uncertainty in the US
While the US risk score remained stable in Q2, the outlook is uncertain. If Donald Trump wins, he is likely to seek to increase trade barriers with countries such as China and Mexico, two countries at the top of the global manufacturing food-chain. This in turn will have a significant impact on global supply chain networks.
Meanwhile, concerns about a near-term collapse in China’s growth have subsided and the associated rise in commodity prices has taken some of the strain off Australia. The country’s risk rating, as a result, improved by one quartile in June 2016.
Global supply chain risk Q2 2016
The NHVR has launched a national supply chain survey ahead of an education campaign about chain of responsibility requirements.
NHVR CEO Sal Petroccitto told the Australian Logistics Council’s Annual Conference that the online survey will run from September until early October and will take approximately 15 minutes to complete.
“The survey is aimed at both the heavy vehicle industry and the supply chain throughout Australia,” Mr Petroccitto said.
“We need all of industry to be involved, so the right information and tools can be developed and delivered to support business education across the national freight task.”
The results of the survey will be analysed and form the basis of the NHVR’s Chain of Responsibility education program. The information and guidance material will be used to assist all supply chain businesses to better understand their heavy vehicle safety obligations and to adopt safe management practices.
Mr Petroccitto said the survey forms part of a larger Chain of Responsibility project.
“We are committed to a heavy vehicle industry that delivers the information and tools necessary for managing the ongoing safety and compliance requirements under Chain of Responsibility legislation,” he said.
“The survey will be available through links on our website and social media channels as well as through the national bodies and individual emails.”
Managing Director of the Australian Logistics Council, Michael Kilgariff said the survey will be an excellent tool to raise a greater understanding of the supply chain and the vital role it plays for our growing freight industry.
“We congratulate the NHVR for this education initiative and look forward to seeing more industry resources in the future,” he said.
Companies around the world are exploring blockchain, the technology underpinning digital currency bitcoin. In this Blockchain unleashed series, we investigate the many possible use cases for the blockchain, from the novel to the transformative.
If the food industry is not in crisis, it certainly contains an increasing level of complexity and associated risks. A recent analysis suggested 50% of US food production is wasted, with global estimates above 30%.
Retailers want perfect produce, leading to wastage occurring throughout the food supply chain. They also seek low prices, leading to industrialisation of processes.
Food scares such as mad cow disease (BSE) and cross contamination mean many consumers have less trust in their food, increasingly seeking information on authenticity and production practices.
Over 80% of antibiotics used in the US are used in food production. Farming practices lead to environmental issues and may exacerbate to climate change. Alternate “real world” models are being developed to address some of these issues. For instance, farmers’ markets can reduce food miles, and demonstrate localism. Gleaning, where people collect leftover crops from farmers’ fields after they have been commercially harvested, is becoming popular. There is ever increasing legislation and standards, though these tend to be national or regional, and often onerous to implement.
Recent developments in the digital economy could help. Among these are a growing use of sensors providing information to allow more intelligent practices to reduce costs and improve flexibility. Real time temperature monitoring and smart fridges in homes can help reduce waste. But a relatively new innovation, the blockchain, is seen by many as offering significant opportunities within agricultural supply chains.
Blockchains are the technology that underpin cryptocurrencies like bitcoin, but they have uses other than currencies. They record information in a distributed ledger in a way that is both secure and immutable; by being distributed among many users these ledgers are resilient with no single point of failure, and they can be (depending on design), transparent to all users.
Blockchains and trust
Described by the Economist as “the trust machine”, blockchains provide supply chain transparency and data integrity, allowing a visible assurance of authenticity.
A number of startups are exploring the potential for blockchains in agriculture. Most notable is Provenance.org, a small UK B2B software startup using the blockchain to establish the authenticity of high value goods, including food. They are experimenting with proving the supply chain of tuna caught in Indonesia being delivered to Japanese restaurants. They will use information on sensors or RFID tags and local certification, recorded in the blockchain, to track the fish along its journey from “hook to fork”; creating in the words of one of their founders, a “reputation system”.
Other software firms are developing similar off the shelf solutions for global tracking. Innovators are researching ways in which DNA can be recorded and tagged to an animal, and recorded in the blockchain. This information can easily be made available to end users and customers using mobile phones and apps.
BlockCrushr Labs is a Canadian startup addressing issues of local food poverty and is using the currency and transparency aspects of blockchain technology to increase donations to homeless people, and also to ensure these donations are responsibly spent.
Farmshare is using blockchain to evolve community-supported agriculture, where a local “currency” can be used to purchase locally produced food within a natural community.
A wireless sensor firm, Filament, is developing sensors to monitor crop health and recording results in a blockchain. Others are embedding sensors in the harvested crop to record temperature and humidity. These make it easier to trace damaged crops. Linking these sensor records to other connected equipment in the internet of things, such as transport and storage coolers ensures end to end monitoring and safe handling.
Skuchain is developing improved barcodes and RFID tags, and blockchain technology with the aim of protecting end to end global supply chains against counterfeiting.
Firms such as sandwich chain Subway have pledged to remove antibiotics and preservatives from their ingredients. If the wish to deliver these promises, a transparent blockchain where product origin and contents are visible to all would seem to be a suitable approach.
We may typify these proofs of concept and ideas as using the blockchain to provide a permanent audit trail, where visibility leads to accountability and trust, without the need to establish local reputation. This philosophy is obviously not restricted to agriculture.
However blockchain solutions have their own limitations. Principal among these are the need to ensure a tight coupling between the product and its digital representation, and the ongoing need for some form of reputable local certification system in the first mile to, for example, establish the fact of ethical practices.
The inevitable mixing of products and supply chains is another factor complicating easy adoption and implementation. For these reasons current proofs of concept tend to be high value and low volume, and often stimulated by strong social motivations of their founders. Blockchains can only be part of a wider solution, and may remain limited to niche markets where establishing provenance can command higher returns.
Top image sourced from shutterstock.com
The Australian Logistics Council has pushed for a renewed wave of national productivity that can help Australia’s supply chain industry deliver economic and social benefits to the community.
According to ALC Managing Director Michael Kilgariff, the Coalition must improve the efficiency and safety of the the nation’s supply chains by resourcing the development of a National Freight and Supply Chain Strategy.
“The development of a National Freight and Supply Chain Strategy, which would incorporate the various, interlinked components of our national and international supply chains, was one of the high-level recommendations contained in Infrastructure Australia’s 15-Year Plan released earlier this year.
“The development of the National Freight and Supply Chain Strategy should be viewed as the next step of the economic reform agenda and in the same context as the white papers that have transformed many of Australia’s economically critical industries.
“The need for such a long-term, visionary approach to national supply chains is underscored by an ALC Report which found the industry represented 8.6% of the national economy and that a 1% increase in supply chain efficiency can deliver a $2 billion benefit to Australia’s economy.
“The efficiency of Australia’s supply chains is critical to Australia’s future economic prospects, whether it be getting our exports to our ports, consumer goods to our supermarkets or delivering products to our doors.
“The volume of freight going through our ports and airports will grow inexorably over the next 30 years, with Infrastructure Australia predicting a 165% increase in containerised trade from 2011 to 2031.
“It is therefore critical that we have a long-term plan to deal with this growth and to maximise the logistics sector’s benefits to the Australian economy,” he said.
“ALC encourages the Government to respond to the Infrastructure Australia 15-Year Plan within its first 30 days of Government, and to provide the necessary resources to develop the proposed National Freight and Supply Chain Strategy,” he said.
“We would like to see the proposed Strategy developed like a Productivity Commission White Paper and for industry to be closely involved in its development.
“The Strategy would map nationally significant supply chains and their access to supporting infrastructure, and recommend a series of reforms and investments to enable the more efficient movement of freight.
“Such an approach would cover issues such as improved corridor protection, rail freight, improving heavy vehicle safety through a focus on technology and progressing reforms to heavy vehicle pricing and investment.
“We cannot expect to achieve the economic and social dividend unless we have a comprehensive national plan that sets out a long-term framework for future investments and reforms,” he said.
The Refrigerated Warehouse & Transport Association of Australia (RWTA) has called on the Victorian Government to explain why it encouraged a business with a history of serial insolvency in Europe to enter the local market.
An investigation by the international Forensic and Risk Services company PKF has revealed NewCold’s European Directors have a history of insolvency associated with failed companies in the same industry.
RWTA Chairman David O’Brien called on the Victorian Government to disclose any subsidies or financial assistance offered to NewCold’s establishment in Victoria, and to explain what due diligence has taken place.
“Our own investigation found both of NewCold’s foreign Directors have been directors of companies that have gone into liquidation in the UK. How have they proved financial viability when there is a history of serial insolvency in Europe?” Mr O’Brien asked.
“This should have raised the alarm for any Australian business or Government considering entering a commercial relationship with this firm,” he said.
Mr O’Brien said he was extremely concerned that if NewCold decided to buy market share by price gouging, this would lead to job losses by destroying local players.
“The Premier needs to explain what data he relied upon to support his promise of the creation of 127 jobs in a business which is highly automated.”
The Australian cold storage industry is estimated to be worth about $6 billion, and is forecast to continue growing at around 2.5 per cent per annum.
SAI Global has announced the appointment of Dawn Welham as Global Technical Director and Thought Leader, continuing to expand its expertise in Retail, Food and Agribusiness industries.
With a wealth of experience across food product safety, public health, consumer protection and occupational health and safety, Dawn will use her expertise across 100 countries, with a focus in Asia-Pacific, the Americas and Europe, and continue growing the company's capabilities in product safety.
Businesses are focusing more on embedding product safety processes and culture as food provenance, safety and integrity become more important to consumers.
According to Dawn, SAI Global is taking a leading role in providing risk management solutions to Retail, Food and Agribusiness industries, to ensure product integrity and safety.
"True technical leadership is about putting systems in place to make sure customers get what they pay for. They pay for quality, legality and safety, and my new role will be focused on all aspects of this compliance for many large businesses around the world," Welham said
"An effective technical system is one which takes the complexity out of compliance, but also creates a competitive advantage for the business. This is paramount to the way SAI Global works and is the part that makes my new role very rewarding and exciting."
Galipo Foods, one of the largest food distribution companies in South Australia, teamed up with VoiceID and Honeywell Sensing and Productivity Solutions to upgrade its warehouse technology and increase productivity by 80 per cent.
As part of the upgrade project, Galipo Foods updated its existing voice technology system with the latest advancements in Honeywell’s voice solutions, including the Vocollect A730 device with an integrated hands-free scanner, Vocollect SRX2 wireless Headset and VoiceLink software to connect with Galipo’s system in real time.
“The priority for Galipo Foods was upgrading its picking process without having to undergo a complete system replacement, as this meant a lower initial investment and therefore a quicker return on investment,” said Rizan Mawzoon, director of sales for VoiceID.
“Galipo had already made an initial investment in Honeywell’s Vocollect voice solutions. By introducing the VoiceID connector solution and Honeywell A730 devices, we were able to complete a straightforward upgrade of the voice technology they were using, with great results in terms of productivity increases.”
“We are very excited that our upgrade to the latest Honeywell voice technology has delivered such dramatic results, with our throughput increasing from 50 million to 65 million units processed each year. With more areas to be brought in under this technology, we will be able to move 90 million units by January 2016,” said Nathan Narayanan, general manager at Galipo Foods. “And the best part is that our productivity growth has been achieved without adding additional workers, which has saved us money.”
Voted as best distributor of the year in Australia in 2014 and South Australian distributor of the year in 2014 and 2015, Galipo Foods offers its customers biscuits, soups and gravies, sauces and dressings, condiments, oil, pasta, dairy, jams, meat, cereals, bread, seafood, pastries, herbs and spices, grains, drinks, eggs, syrups and more. Operating in the competitive food service space, it is vital that Galipo Foods’ warehouse operates at an optimum level in order to deliver the right product, at the right time and in the right condition.
“We are very pleased to see that Galipo Foods’ voice technology upgrade is already helping them increase productivity and the accuracy of their order fulfilment,” said Paul Phillips, ANZ regional manager, Honeywell Sensing and Productivity Solutions.
“With increased productivity and accuracy, Galipo Foods can now be confident they are offering the highest level of customer service at all times.”
Pepsi has been awarded both the 2015 Supply Chain Management Award and the 2015 Storage & Materials Handling Award by the Supply Chain & Logistics Association of Australia in Sydney.
Over 55 years, the ASCL recognises an individual or a company for outstanding achievements and contribution working within the Transport, Supply Chain and Logistics Industry.
The 2015 Supply Chain Management Award is given out to encourage and acknowledge the outstanding achievement of an organisation that has demonstrated significant achievements in managing the integration of Supply Chains. This could be functional integration within an organisational Supply Chain or more widely across Supply Chains involving several organisations that have formed trading partnerships or alliances.
PepsiCo were recognised for their Supply Chain Optimisation project, which included automated palletising, AGV pallet transport and put-away/retrieval from ASRs.
Pepsi were also awarded the 2015 Storage & Materials Handling Award, which recognises the significant achievements in the techniques and technology of materials storage and handling at any stage of the supply chain.
Technology covers equipment and design techniques, including the facilitation of design and associated information and control systems.
Other awards given out at the Sydney show included the 2015 Industry Excellence Award, the Future Leaders Award, the 2015 Training, Education & Development Award and the 2015 Information Management Award.
CHEP has reaffirmed its commitment to developing better supply chains to food and logistics industries through an opening of an advanced pallet service in Malaysia.
With an opening ceremony officiated by the Chief Executive Officer of Brambles Limited, Tom Gorman, the event featured supply chain leaders from local and international companies.
“This service centre sets a new benchmark for modern pallet repair facilities in Asia and positions CHEP to better meet the growth demands of our customers in the region, many of whom are household names such as Nestlé, F&N, Coca-Cola, Mondelez and Unilever,” Gorman said.
CHEP supports more than 500,000 customer touch-points for global brands such as Kellogg’s and Nestlé as part of Reusable Plastic Containers (PRCs), which operates a fresh food supply chain globally to the automotive, aerospace, oil and gas sectors.
Consumer goods (such as dry food and groceries) are served in the fast-paced industry that services fresh produce, beverage and manufacturing groups.
A new site has been designed to support an additional 30 per cent increase in future pallet repair volumes and also incorporates CHEP Malaysia’s head office and support functions such as customer service.
Gorman said CHEP’s role in providing supply-chain solutions to help customers transport goods can assist in driving trade and business worldwide, with the quality and efficiency impacting on consumer experience.
Independent arbiter, Jeff Kennett has instructed Coles to refund over $12 million to suppliers and has also allowed suppliers to exit the ARC program without penalty or have their ARC contribution rebates reviewed.
The $12 million is in addition to the penalty ordered by the court of $10 million fine in December last year.
“The arbitration process conducted by Mr Kennett has proven both extremely timely and effective with significant benefits to suppliers,” ACCC Chairman Rod Sims said.
“The process will also deliver flow on effects for suppliers more broadly as a result of changes Mr Kennett says Coles has begun to implement that affect the way it deals with its suppliers.”
The refunds process arose out of the resolution of two proceedings commenced by the ACCC against Coles in 2014: the ‘ARC proceedings’, and the ‘claims proceedings’. In December, the Federal Court made declarations in both proceedings by consent that Coles had engaged in unconscionable conduct in 2011 in its dealings with certain suppliers.
As part of the resolution, Coles also provided a court enforceable undertaking to the ACCC to establish a formal process to provide options for redress for over 200 suppliers. In December 2014, Mr Kennett was appointed to administer the process and to assess the eligibility of:
- over 200 smaller suppliers listed in the ARC proceedings, categorised by Coles as ‘Tier 3’ Suppliers, to obtain refunds of any prior ARC rebate payments and seek adjustments of future rebates (taking into account the circumstances of their entry into the ARC program and any benefit received from their access to ARC over and above any arrangements they had with Coles prior to the implementation of the ARC program); and
- suppliers referred to in the claims proceedings (in respect of which Coles made admissions in relation to profit gap claims, waste claims, and delivery fines) to obtain possible payments.
“The high level feedback from suppliers is that they are largely satisfied with access to redress from Coles and the timely, efficient and low cost approach. Ultimately, it was a matter for each supplier to decide whether or not to proceed with the resolution proposed, and as Mr Kennett’s report demonstrates, a very large number accepted the relief offered by Coles,” Sims said.
“The arbitration process was intended to provide an efficient alternative to otherwise lengthy and costly processes in determining the loss and damage of affected suppliers. Mr Kennett has now finalised his deliberations and has instructed Coles to refund over $12 million to a number of ‘Tier 3’ suppliers and a further $324,000 to suppliers listed in the claims proceedings. This is in addition to the penalty ordered by the court of $10 million,” Sims said.
Under the arbitration process, it was also open to suppliers to simply exit the ARC program. A number of suppliers took this option. Suppliers who sought a review of their eligibility for refunds also had the option to exit the ARC program.
“Mr Kennett has reported that his arbitration process has resulted in substantial ongoing savings for suppliers. Exit from the program chosen by some suppliers and reduced rates for others will save suppliers significant additional costs into the future,” Sims said.
Kennett’s determinations, as the independent arbiter, are binding on Coles and Coles has already moved to implement steps necessary to comply with those determinations. Kennett also made a number of non-binding recommendations to Coles on the basis of his discussions with some suppliers.
“The ACCC recognises and acknowledges Coles’ co-operation in acting upon the binding determinations made by Mr Kennett and in making some of the non-binding changes recommended by Mr Kennett. It moved quickly and without challenge to accept the decisions and implement changes,” Sims said.
The Australian Research Council (ARC) Food & Beverage Supply Chain Optimisation Industrial Transformation Training Centre (ITTC), hosted by the University of Newcastle, will train the next generation of multi-disciplinary researchers capable of designing and managing safe, sustainable, and cost-effective food supply chains.
The training centre received $2.1 million in ARC funding through the Industrial Transformation Research Program, which will employ three postdoctoral researchers and support 10 PhD students.
Based at the University of Newcastle’s Central Coast campus, the centre will bring together a diverse set of research organisations and industrial partners to ensure the research carried out, and training provided, are both at the cutting-edge and industrially relevant.
The food industry is important to the Australian economy with 15 percent of the national workforce involved in food production and food exports equating to $30.5 billion each year.
The National Food Plan White Paper states the vision for Australia’s food system is a sustainable, globally competitive, resilient food supply, supporting access to nutritious and affordable food. Key to achieving this vision are safe, sustainable, and cost-effective, food supply chains.
The ARC Training Centre for Food & Beverage Supply Chain Optimisation will support the development of new and innovative postharvest treatments to improve horticultural market access and reduce waste in the horticulture supply chain.
Centre Director Professor Rick Middleton said the ARC Industrial Transformation Training Centre scheme had a focus on postgraduate research that was directly linked to industry needs.
"The ARC Training Centre for Food and Beverage Supply Chain Optimisation brings together researchers both in operations research (optimising logistics) and in food science."
The University’s School of Mathematical and Physical Sciences, the School of Electrical Engineering and Computer Science and the School of Environmental and Life Sciences form part of the training centre.
Researchers at the centre will collaborate with the University of Sydney, The Georgia Institute of Technology, Commonwealth Scientific and Industrial Research Organisation, NSW Department of Primary Industries and Ghent University Global Campus, as well as industry organisations Coca Cola Amatil (Australia), Sunrice, Batlow Fruit, and the Sanitarium Health & Wellbeing Company.
Former Kellogg chief executive Jean-Yves Heude has warned suppliers not to rely on the grocery industry code of conduct.
The code of conduct, which was declared legally enforceable on 3 March, aims to deliver more contractual certainty in trading relations between suppliers and supermarkets and encourage the better sharing of risk and reduce inappropriate use of market power across the value chain.
It sets out clear obligations to ensure key elements of Grocery Supply Agreements are discussed and agreed up front.
The Australian Food and Grocery Council (AFGC) said the tabling in Parliament is a step towards levelling the playing field for food and grocery suppliers in their transactions with the major supermarkets.
“Signing onto the Code will be a mark of the retailers commitment to fair dealing and to improving the operation of one of the most dynamic and competitive sectors of the economy – the fast moving consumer goods sector,” said AFGC CEO Gary Dawson.
However, Jean-Yves Heude, who ran Kellogg's Australian and New Zealand operations for five years, says the code of conduct is "not necessarily the answer" for suppliers under pressure from Coles and Woolworths to cut prices, fund deeper and more frequent promotions, fill profit gaps and fund supply chain changes, The Australian Financial Review reports.
“They shouldn't rely on this to help them,” said Heude, who now advises food and grocery suppliers. “Coles and Woolworths will use whatever levers they can to deliver their financial targets.”
Mr Heude, a 25-year veteran of the European grocery market, says suppliers need to adapt to a shift in the market from a "win win" model to a European style "balance of power" model, where the major chains exploit their market power to secure better deals from suppliers.
The only way suppliers can level the playing field, he says, is by ensuring their products are unique and relevant to consumers and to adapt their trading strategy to this model.
"If your product is unique and relevant then the retailer needs you as much as you need them," he said. "The minute your product becomes a commodity you're in trouble, price is the only differentiator and on price they will crush you."
"Uniqueness drives loyalty and if consumers are loyal to your brand the retailer can't touch you – loyal consumers will go to another store if they cannot find their preferred product, then the retailer runs the risk of losing the entire basket," Heude said.
"If you are small with very loyal consumers then you have the balance of power."
The Australian Competition and Consumer Commission has promised to use its new powers under the code to enforce its provisions and take legal action for breaches of the code by retailers who sign up.
However, Heude believes that retailers still have scope to demand lower prices and extra discounts and payments from suppliers without crossing the line of unconscionable conduct or breaching the code, as long as they have the right to buy the products they want at the price they want – "which is obviously the case in a liberal economy like Australia."
"Suppliers need to understand what they are facing," he added. "Don't wait for the code to save you, but adapt your business to the balance of power model now."
Premier Foods, one of the UK's biggest manufacturers, has been accused of demanding payments from its suppliers to continue doing business with them.
BBC’s Newsnight reports that Premier Foods said it was confident the scheme did not break any rules under competition law, but the UK government said it was "concerned by recent reports".
The company, which owns brands like Mr Kipling, Ambrosia, Bisto and Oxo, demanded the payments from suppliers across the UK.
Newsnight has seen a letter sent by chief executive Gavin Darby, dated 18 November.
He wrote: “We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas.”
“We will now require you to make an investment payment to support our growth.
“I understand that this approach may lead to some questions.
“However, it is important that we take the right steps now to support our future growth.”
But when a supplier raised questions in an email about the annual payments, another member of Premier's staff replied.
“We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list.”
Liesl Smith, from the Federation of Small Businesses, said: "This is the first time that we have ever seen anything so blatant… in this very direct way before.
“We think it is unjust, it is not competitive and it is not helping the supply chain.
“It's not just going to affect the business owners, it will affect staff as well.”
Premier Foods told Newsnight: “We launched our 'invest for growth' programme in July last year as part of a broader initiative to reduce complexity in support of plans to help turnaround the business.
“This included a commitment to halve the number of our suppliers and develop more strategic partnerships focused on mutual growth.
“The programme requires our suppliers to make an annual investment to help fund our growth plans.
“In return, our suppliers benefit from opportunities to secure a larger slice of our current business.
“They also stand to gain as our business grows in the future.”
It added: “In the current challenging environment, the support of all of our suppliers is crucial.
“We have had a positive response from many who are actively engaging in building a new partnership with us, including many small companies.”
Newsnight understands many suppliers have paid a total in the low millions so far.
Competition law states that in some cases, pay to stay can be against the law.
Premier Foods is confident its scheme is within the rules.