Grocers will have to implement more stringent controls throughout the supply chain, especially for fresh items.
By Tom Kozenski
There has been a fair amount of discussion about the new Food Safety Act that came down from the federal government recently. I think everyone is trying to figure out what the true impact will be from it, both short and long term. That goes for us software providers as well as the companies that are producing and handling the goods.
For our grocery customers in particular, complying with the new standards will require a much tighter focus on fresh item management, not only in stores, but throughout the supply chain. Consistency, in this instance, is particularly key. Food-borne illnesses and product spoilage issues are still most often associated with fresh, refrigerated and frozen foods, so grocers need to establish a process for handling those items and execute it consistently across their entire network of stores, carriers and suppliers. Automating that process and empowering employees and partners with mobile devices can accelerate communication about a possible recall or need for product rotation to ensure that only the freshest and safest products are on the shelves.
The supplier side of that equation is most likely a tougher nut to crack, so now is the time to put a system in place that allows easier collaboration. By implementing a single, accessible database that grocers and suppliers can access, inventory forecasts can be made more accurate and thus time replenishment shipments to stores can be made in a way that reduces spoilage. That means less-fresh products stay off the shelf, new items are rotated in more quickly and overall waste is reduced.
However, all of these recommendations are useless if the overall result does not maintain profit levels and customer service. But I do not think anyone needs to point out that having fresh products in the store, that are delivered at the right time can help meet both of those goals. An accurate forecast can even help with promotion execution, since a collaborative process between suppliers and retailers means a staff will have a better idea of what is coming off a truck and when. Combined with mobile technology, issues on the floor can be resolved more quickly and more appropriate product can be placed out for purchase in an efficient manner.
All of this, however, relies on the path these regulations take in the future and how grocers and their suppliers react. If the government plays a heavy hand, where they perform strict audits and apply fines, it will definitely change the behavior of how items move and are processed within the extended supply chain. I would envision more and more companies will invest in both the software tools and new operational practices to accommodate the new regulations.
When you look at all the potential processes needed to support compliance, some companies will have a long road ahead of them. They will need to provide documentation for when the on-site audits occur. They will need to ensure they have the proper traceability data and inspection procedures in place. They will need to keep records for a minimum of two years. They may need to track the supplier for each unit of inventory they handle. RFID technology may be raised again as a good answer to the inventory tracking problem. The GS1 labeling initiative will help certain aspects of ensuring traceability “from farm to fork.”
But in all honesty, most of these added steps are going to reduce the speed at which inventory moves through the extended supply chain. When inventory slows down, the amount of days-on-hand inventory will increase and the handling and storage costs associated with your supply chain will increase. It is not a good scenario. That is why an efficient change in process is critical so that these added costs can be minimized. I believe that companies will also think differently about their suppliers. Where previously, a company might treat a purchase as a commodity-buy and choose a supplier based solely on costs, they may now start to look at their suppliers as strategic partners.
Tom Kozenski is vice president of product strategy at RedPrairie (www.redprairie.com), which provides productivity solutions to help companies around the world with inventory, transportation and workforce management. He can be reached at Tom.Kozenski@RedPrairie.com.