The supply chain optimization of the fresh food industry presents specific challenges, most notably the precise control of expiration dates that are very short and complex seasonalities that are typically more erratic than what ‘non-fresh’ supply chain practitioners would expect.
Food trading is probably one of the earliest commercial activities recorded in the whole of human history. However, despite this initial head start, it’s an industry that often lags behind in terms of cutting edge technology when compared to other verticals. In this episode of LokadTV, we learn more about the vast array of challenges that must be overcome in order to provide the variety and freshness in food retail that modern shoppers now demand.
The main particularities of the fresh food industry are its massive size and the fact that it has been around for such a long time. It’s a combination of factors that is somewhat rare, therefore there are very few industries that are comparable to the fresh food industry in this respect. Due to its age, a lot of the solutions for its various problems were found way before many technological advances took place, which often complicates its supply chain matters.
We can say that, for many modern supply chains, everything is characterized by packaging and barcodes, but fresh food supply chains are often dealing with raw materials, such as meats, that are sold by weight and are not packaged in a standardized way. This is an aspect that has disappeared from pretty much every other industry - even the chemicals industry packages and measures its products with barcodes and fixed units.
Additionally, fresh food is actually an umbrella term that groups together various different supply chains, each with their own specificities. For example, frozen food has its own challenges when compared to fresh products produced locally and again when compared to fresh products that have to be imported from overseas. There is also the all important factor of perishability. We discuss in more detail how the SKU (stock keeping unit), a supply chain cornerstone, usually doesn’t take into account this crucial element of expiry date.
To top it off, supermarkets and hypermarkets are “noisy” environments in terms of data and tracking your stock within these environments can often be very tricky. To give a simple example, customers often pick up items only to put them back in the wrong place because they found something better.
To wrap things up, we discuss the impact of promotions and the richness of data that hypermarkets possess, in part due to the use of customer loyalty cards. However, despite what the media says, most hypermarkets aren’t even using this data to its full potential. We also talk about how the introduction of AmazonFresh and other e-commerce players in the industry will have an effect on more traditional fresh food vendors.
00:31 Which are the things that make the food industry so particular?
02:22 Do you mean that these companies may not be so advanced from a data perspective point of view?
03:48 What are the key challenges the industry faces?
06:01 How are big supermarkets managing things like expiry dates?
08:36 What about the suppliers’ side? I imagine they have their own complications with harvests and weather, which make things less than straightforward.
11:13 How easy is it to multi-source and use stock from lots of different suppliers?
13:08 What about promotions? How are these agreed between distributor and supplier?
16:11 From a data perspective, hypermarkets are tracking what we buy through the use of loyalty cards. How much is this data actually used?
19:41 How about the growth of e-commerce within the industry? How is the entry of companies such as Amazon Fresh affecting the industry?
22:49 To conclude, why is the fresh food industry slightly behind in terms of technology nowadays?