Temperature-Controlled Logistics: Provide or Perish
Whether shipping fruit, seafood, flowers, or any other perishable goods, transportation must be fresh, fast, and error-free.
"Consumer confidence in our products is as fragile as the tender leaves of the freshest salads. We never have and we never will take that confidence for granted."
That passion, as expressed by Terry Humfield, vice president of volunteer leadership relations for the Produce Marketing Association, Newark, Del., is shared by all companies in the increasingly complex perishables industry.
In today's world of global sourcing—with perishables supply chains growing ever more geographically diverse—the task of maintaining quality, security, freshness, and economy has never been more difficult.
One overriding business constraint hampers the perishables industry: expiration dates.
"The most important issue in perishable foods management is the 'sell-by' date. Once it has passed, we cannot sell the product," says Stuart Yowell, director of demand planning for U.S. meat processor Smithfield, a subsidiary of Smithfield Foods.
"The concept of overstock is very expensive because expired goods aren't just downgraded, they're worthless."
Smithfield and other leading food companies are adopting a multi-pronged approach to managing their perishables supply chains.
The basic tenets of this approach include:
- Forging closer-than-ever ties to, and communication with, suppliers and customers.
- Relying more heavily on the expanded capabilities of third-party transportation and logistics providers.
- Adopting leading-edge technologies such as RFID and real-time visibility tools.
- Improving the overall process of perishables supply chain management.
Companies using this approach are having a positive impact, ensuring that perishables supply chains preserve and protect the products that traverse them, and do so economically while meeting customer service demands.
A Need for Planning
Smithfield Foods, for example, has grown rapidly through expansion and acquisitions. With headquarters in Smithfield, Va., it is the leading hog grower and one of the largest meat processors in the United States.
To manage its perishables chain as effectively as possible while adapting to this growth, Smithfield realized it had to start at the beginning and improve its forecasting processes.
"We needed to consolidate production forecasting and scheduling for all our trade channels under one organization," Yowell explains. "So about one year ago, we established a centralized demand planning group for processed meats.
"Smithfield maintains extremely high standards for order fulfillment—more than 99.5 percent," he continues. "Our president—and our customers—expect us to perform to that level. We had to manage demand planning so we could deliver that service goal, while holding the line on costs."
The shelf life of Smithfield's products varies among product lines, but is generally about 100 days. Carrying more than five or six weeks of inventory can be costly: the company is forced to sell "distressed" products to secondary markets for 50 percent or less of the direct cost.
"Not maintaining enough inventory, or holding too much, carries a huge penalty," Yowell says. "It is an extremely fine balance. That's where forecasting comes into play. In the past, Smithfield never had a tool—other than spreadsheets and experience—for professionally developing forecasts."
That changed several months ago, however, when Smithfield invested in a demand planning/forecasting system from John Galt Solutions, Chicago.
"The Atlas Planning Suite drives data through 25 different statistical models, so we get the best forecasting information we can," Yowell says. "In the food business, forecasts can never be 100-percent accurate. Sometimes patterns just don't fit, so the system can't be used blindly. But it does provide a comfort level."
The new system centralizes the forecasting information flows for Smithfield's various product categories.
For example, three different business managers handle bacon: one sells retail for the Smithfield brand name, a second sells retail under the Gwaltney brand name, and a third sells to the food-service industry.
All three managers are responsible for their area's profit center. Hitting their profit goals greatly depends on new sales, but it takes time for the processing plant to generate those new orders.
High on the Hog
That's why it is critical that Smithfield have just one central location where each business manager feeds demand information, which impacts production planning and monitoring raw materials availability.
"Hogs are our raw materials," Yowell notes. "So a big part of our forecasting challenge is determining how many hogs we need to produce.
"If, for example, we forecast how many ham muscles we need for the coming year, we'll know how many hogs to raise to produce those hams. If we need an estimated volume of ham in July, we work backward to determine when we have to have the hogs ready—allowing time for the sow to be bred and give birth, and for the pigs to grow.
"In addition," he says, "hogs can weigh anywhere from 240 to 280 pounds, so they generate different sizes of raw materials. Forecasts have to take all that into account."
Centralizing demand information from business managers also provides a consistent contact point, with visibility through all sales channels, so Smithfield can plan for both cyclical and random sales surges.
"Hot dog volume shoots way up in the summer, for example," Yowell notes. "The new system helps us recognize those demand patterns, and send the appropriate signals back to the production planning group to build or deplete inventory seasonally."
The planning system also recognizes demand anomalies. Last December, for example, several major grocery chains ran special discounts on bacon, boosting Smithfield's volumes higher than usual for that month.
The Galt system has the ability to recognize this anomaly. It will smooth the forecast out so the company doesn't overproduce bacon next December.
"The new forecasting system will have a tremendous impact on customer service—on our ability to maintain appropriate inventory stocks and increase order fill rates," Yowell states. "We'll do a better job managing our business."
Getting products to market quickly is a critical aspect of controlling any perishables supply chain operation. But that speed often comes with a price—higher transportation costs.
"Managing cost trade-offs is part of moving perishables," notes Larry Landry of American Airlines. "If a computer is delivered one day late, it retains its effective useful life. Flowers, however, have a shelf life of only 10 days. Lose one day in delivery and you've lost 10 percent of the effective shelf life, limiting the opportunity for the customer on the transaction's back end to sell the product."
Perishables are also extremely sensitive to transportation price increases.
"Freight charges on perishables represent a greater percentage of the shipment's value than dry cargo," Landry notes. "Any price increase is an issue for shippers."
American Airlines Cargo recently introduced a value-added program designed to extend product shelf life. AA Cool Perishables provides pre-cooling and expedited USDA and in-house customs clearance for fresh shipments on site at the carrier's Miami hub facility.
AA Cool Perishables helps maintain product quality by utilizing pre-cooling services to restore proper temperatures before delivery in Miami, or transit to another final destination throughout the world.
The air carrier started this service on an experimental basis a few years ago, pre-cooling asparagus moving from Lima, Peru to Europe.
"The product traditionally was shipped to Miami, then sat 12 hours waiting for its connecting flight," Landry recalls. "So we put the asparagus in front of forced air coolers to remove the heat."
The Miami-based program has grown so much that last fall American added new evaporators to its facility and began providing the service in-house, rather than using an off-site cooler facility.
Miami is also a major fresh flowers and produce transit hub for DHL Global Forwarding.
DHL customer VistaFlora Corp., a fresh flower wholesaler based in Bogota, Colombia, ships 5,000 boxes of flowers per week through Miami; each box contains multiple arrangements. But for major holidays such as Valentine's Day and Mother's Day, that volume soars to as many as 53,000 boxes.
"We receive customer orders via EDI," says Angela Cardona, VistaFlora's planning and logistics manager. "We ship orders the next day from Bogota; two days later they arrive in Miami."
VistaFlora's shipments must be maintained at 36 degrees F/2-4 degrees Celsius. DHL handles the shipment documentation, freight brokerage, customs paperwork, and clearance processes.
"Every day is different when you ship flowers," Cardona notes. "You never know what to expect. Sometimes a flight is delayed; sometimes capacity is not available. By maintaining relationships with multiple airlines, DHL can help resolve these issues quickly."
Because its origin location is a major drug-smuggling country, VistaFlora must manage its freight very closely when it comes to security.
"We have to work diligently to ensure that our cold chain is unbroken, accurate, and fully documented," Cardona notes. "For example, we seal our packages at the farm,not at the broker's facility. We double-check that the paperwork matches the number of boxes we are dropping—if the paperwork says 542 boxes, we have to drop exactly 542 boxes or our shipment will be stopped."
DHL Global Forwarding helps VistaFlora manage these types of security matters.
Finally, DHL works with the flower wholesaler to closely track shipments as they move to customers in the United States.
"We guarantee customers that every order will be delivered on time," Cardona says. "So shipment tracking information is critical for us."
DHL is working on an upgrade of VistaFlora's Web site to enable the tracking of every shipment and box.
In addition to major service providers such as American and DHL, some smaller, niche third-party logistics service providers specialize in handling perishables. PeriShip LLC, located in Branford, Conn., is one such provider.
PeriShip works exclusively with FedEx to manage the shipment of seafood, cakes, meat, cheeses, and other perishable products from across the United States.
"We provide shippers a high level of customer support by monitoring those shipments and immediately resolving any issues or problems that arise," says Luciano Morra, president and CEO of PeriShip.
"Until a few years ago, the large airlines and integrators treated perishables much the same way as other express freight, particularly in issue resolution," Morra notes.
"If a shipment of expensive Pacific salmon to an upscale restaurant was delayed, the recourse level and issue resolution was the same as if you were shipping books or clothing. The problem would get handled later that day, or the next day.
"But that's not good enough for the chef who is counting on serving the salmon that evening in his restaurant only to find out at 5 p.m. that it won't be there," Morra says.
Detailed Shipment Scans
That's where PeriShip comes in. It has built a system that is strategically aligned with FedEx so it can monitor the progress of all its shipments moving through the FedEx system.
PeriShip also maintains high visibility levels; its shipment scans are much more detailed than general tracking-level data. An XML application program interfaces with FedEx's systems to receive real-time snapshots of shipments as they pass the origin ramp, destination ramp, and other points in their progress.
PeriShip's monitoring also includes weather and flight status at all major FedEx hubs, allowing it to anticipate problems.
This level of status detail means peace of mind for shippers.
"If a customer shipped 20 boxes the night before, he gets an e-mail from us the next morning notifying him that all the boxes are moving according to plan," says Morra. "And, because we fix address problems en route in about 23 minutes, a mislabeled box never wastes hours being returned to the station. Most of the time, customers never even know there was an issue."
PeriShip provides weekly or monthly reports that help customers optimize shipping costs.
"A report may point out, for example, that while we recommend using 20 percent coolant during winter, we noticed that 10 boxes used 35 percent coolant," Morra says. "The shipper can go back to the packaging department and find out why they're using so much coolant when it's not necessary. That saves money."
Clearly, information is a critical element in managing the perishables supply chain.
But the perishables industry requires more than just the transaction and location shipment information common with general freight supply chains. Perishables shippers also require information regarding the condition of their freight as it moves through the supply chain.
"Different categories of perishables degrade at different rates," says Elizabeth Darragh, director of food strategic marketing at Sensitech Inc., Beverly, Mass., a provider of cold chain visibility information solutions.
Consider a truckload of fresh produce that is subjected to high temperatures while in transit. Product that was once fresh and valuable is worth less at the point of delivery, measured as a reduction in available selling price and grade, weight, and/or shelf life.
Perishables not transported correctly also carry a greater risk of microbiological contamination, and outbreak of food-borne illness.
"If pharmaceutical products are exposed to temperatures outside the acceptable range, they might be rendered unsafe or non-effective," Darragh adds. "Products must be withdrawn from sale; they are worth nothing.
"A containerload of biologically derived drug products can be valued at more than $10 million. But, if drug products are in limited supply, not having that medicine available because it was mishandled may result in serious social cost, as well."
Better condition information provides a higher level of control, allowing supply chain partners to know that incoming products are out-of-spec and must be replaced, or rerouted to a closer location and promoted for quick sale because of reduced shelf life.
The Old-Fashioned Way
Many perishables companies, however, still rely on 80-year-old technology—paper-based strip chart recorders—to monitor product temperature in transit.
"When the shipment is delivered," Darragh explains, "someone opens the recorder box, pulls out the temperature strip chart paper, looks at the report, makes an 'accept' or 'reject' decision, and staples the paper to the box." The company has to keep those paper records for up to 12 months.
In contrast, Sensitech's electronic and RF data collection technology and analytics provide the ability for users to bank the data and learn from it.
"Is this shipment a good one? Was it well- maintained? Perishables shippers can look back across their shipment history and analyze the last 50 shipments, pinpointing any problems," Darragh says.
The data also can help managers decide how quickly to move products to market. If a shipment of bananas is delivered, for example, and the data shows they have three days of salability left, the manager can expedite the shipment to the retail level.
"Without cold chain visibility, the same shipment would still make it through to retail, but because it was not put on 'rush', the bananas may be unsalable by the time they arrive," Darragh notes.
Starbucks is using Sensitech's RF technology to monitor third-party distribution of perishables to its stores.
"Sensitech monitors log the delivery time and temperature, the software and data hosting collects all the data, and we send Starbucks daily compliance reports," Darragh says. "Then we do a monthly review of what's happening at each Starbucks distribution center, as well as across its entire DC network."
Making Perishables Attractive
We take it for granted that perishables will be able to move in the supply chain—that transportation is always available. But what happens if it is not?
In 2003, members of the Produce Marketing Association (PMA) began to report that transportation access and availability was becoming a problem.
"A growing number of members were experiencing a shortage of trucks," says the Association's Terry Humfield.
"When we investigated the issue, we discovered that the problem was not so much a shortage of trucks as a shortage of drivers," Humfield recalls.
"So, in late 2005, we established a task force to study this issue. We began to hear repeated stories of loading dock appointment times not being honored, long wait times at docks, frequent use of 'lumpers' to load and unload trucks, and related problems."
The task force came to the conclusion that, in order to secure the transportation services the produce industry needed, the products had to be made more desirable to haul than other products.
To that end, PMA developed a set of best practices for working with motor carriers. It published those guidelines in October 2006.
"Some of our best practices are pretty simple," Humfield says. "For instance, treat drivers with respect and dignity. That sounds like a no-brainer, but it often doesn't happen. Drivers are not given the respect shown to other business partners.
"So we recommend that receivers and shippers put in place practices that treat drivers fairly and appropriately, and allow them to do what they do best—drive.
"Drivers make their money on the road, not waiting in parking lots," Humfield adds. "So our best practices are aimed at enabling drivers to make money. They include establishing advance loading schedules so trucks can get loaded and on their way as quickly as possible."
The best-practice guidelines also include suggestions on handling rejected products.
"One issue carriers have to deal with is arriving at the receiver's dock with a load of products that don't meet specs, through no fault of the driver," says Humfield. "What steps do the shipper and receiver take to dispense with the product?"
The PMA suggests companies develop formal processes to address this issue.
Wegmans Foods Markets Inc., based in Rochester, N.Y., has done just that. When unacceptable product arrives at its two produce warehouses in Rochester and Pottsville, Pa.—and the carrier is not at fault—the grocer works directly with its vendor to resolve the matter.
If the carrier is at fault, it has two options. First, the product can be reloaded on the trailer and the carrier can attempt to sell it for some salvage value in a secondary market. Or, Wegmans will hold the rejected load in its warehouse for 48 hours while efforts are made to find a secondary market.
Wegmans assists the carrier in this endeavor. The carrier and wholesaler can either make direct arrangements, or Wegmans can contact the wholesaler on the carrier's behalf.
Because Wegmans' overall approach is to view carriers as business partners, it understands that a rejected load is never a good situation. Helping the trucker in these instances eases the carriers' overall burden.
Wegmans works to avoid shipment rejections from either suppliers or carriers by carefully communicating optimal shipping temperatures and pickup times.
The retailer provides carriers with training videos and pocket guides on details such as how to distribute the perishables load within the trailer, and how to maintain proper trailer temperature to ensure product quality.
Finally, Wegmans has completely discontinued lumping practices—where the driver hires outside loaders/unloaders—at its distribution facilities.
"We believe the driver does not want to be in the lumping business and should not be. We want drivers to be drivers," says Roy Winters, Wegmans' manager of transportation services. "Lumpers are not allowed on our docks, and only Wegmans employees can unload trucks."
The processes and services embraced by companies such as Smithfield, Wegmans, Starbucks, and VistaFlora—and supplied by their transport and technology service providers—mean the difference between a profitable and safe perishables supply chain and one that is not.
They enable manufacturers, growers, and wholesalers to deliver not only fresh products, but confidence and trust to their customers.