News from FreshXperts: January 2011

January / 2011

Pink Flowers

Revolution In Cool Chain Management

By Mike Nicometo, EmpowerTech Inc.

An expert of FreshXperts Mike N. Headshot

Shrink affects each and every one of us in the produce sector. Every stakeholder shares in the cost of losses-the grower, brand owner, logistics partner, wholesaler, retailer, food service provider, insurance provider and, ultimately, consumer.

The primary cause of shrink and, subsequently, lost revenue in the produce sector is accelerated loss of shelf life; and the principal factor contributing to this loss is improper temperature control and monitoring. Because the effects of accelerated loss of shelf life are often not immediately visible, distribution mistakes occur that result in product loss and consumer dissatisfaction.

Most retailers stock their shelves using the First In, First Out (FIFO) philosophy, meaning that the first shipments in the door are the first to hit the shelves. This philosophy gives little consideration to a product's actual shelf life. Shipments based on FIFO rely on 'average shelf life' across all pallets received on any given day. Because of the lack of visibility for Remaining Shelf Life (RSL) on a pallet basis, longer Ship To deliveries with longer shelf life requirements get pallets that do not have the "legs" to make it to the consumer = Loss. Imagine one delivery that needs nine days of shelf life getting twenty pallets with nine days of shelf life and eight pallets with only six days of shelf life, while the truck at the next loading door is going to a Ship To that only needs six days of shelf life and is loaded with twenty eight pallets of nine day shelf life! Eight pallets moved from one load to the other would have avoided the loss of those eight pallets.

The ability to more accurately predict product expiration would enable retailers to use a First Expiring, First Out (FEFO) strategy, providing consumers with better quality products and reduced product loss.

Integrating FEFO information with existing operational software will empower companies to develop what Intelliflex's Tom Reese calls Shelf Life Inventory Management or SLIM, an enhanced form of FEFO. SLIM inventory management enables the shipment of perishable products based on the products RSL, such that product with a longer shelf life is shipped to the furthest destinations, while product with shorter shelf life is shipped to closer destinations. Managing inventory based on the SLIM methodology provides the consumer with consistent quality product while at the same time minimizing shrink.

In the past, implementation of a FEFO strategy was difficult because, though produce may have been exposed to a range of temperatures as it traveled from the farm to grocery store shelves, and though its shelf life may have been dramatically curtailed as a result, monitoring and tracking that information was virtually impossible.

New technology has been developed, however, that allows the produce industry to attain efficient, automated RSL "Visibility". The Intelleflex Perishable Produce Solution, an affordable new technology based on Radio Frequency Identification (RFID) technology, offers temperature monitoring from the point of harvest and at every step of the supply chain. The technology also ensures effective pallet movement through facilities to prevent costly delays.

The Intelleflex Perishable Produce Solution uses industry standard RFID readers and tags placed on a produce shipment at the point of harvest. The reader monitors and transmits information about the shipment, and this information is then used to provide a more accurate predictor of remaining shelf life. Intelleflex updates the potential remaining shelf life value on the tag itself, providing a much better inventory management tool than simple low or high temperature alarms typically found on traditional temperature monitors. It offers every member of the supply chain rapid access to information about remaining shelf life for each pallet by reading a single value.

Intelleflex first field tested its technology with live operations at Clifford Produce Sales, a leading greenhouse grower based in Ruthven, Ontario. Clifford was selected for the trial because the company has been a leader in the implementation of operational efficiencies to reduce cost, enhance product safety and traceability, improve product quality, and increase grower net profit.

During the field test, pallet movement and temperature history was monitored from harvest and through central packing, storage, staging, shipping, and delivery to retailer distribution centers. Clifford was also able to electronically "view" pallets physically residing in different areas of the facility providing real time inventory visibility.

A more robust pilot test is currently planned at Clifford that is expected to help the company group inventory by SKU and remaining shelf life; identify the right products to send to the right retailers with consideration of Remaining Shelf Life; avoid the "eight pallet problem"; and locate post-harvest problem areas.

Additional pilot tests will also be conducted at other produce companies before the technology is aggressively marketed to the entire industry. Parties interested in this technology can contact Tom Reese, senior director of business development, Intelleflex, at 1-408-200-6523 or info@intelleflex.com.

This new technology has the potential to ease inventory reconciliation, find shipping errors, enhance traceability, and enable First Expiring, First Out inventory rotation opportunities. The end result is reduced shrink, improved product quality, and increased revenues. Even retailers who choose to continue using First In, First Out distribution strategies will benefit significantly from the ability to more accurately predict remaining shelf life, track shipments and enhance inventory management.

Because change takes time, this technology will likely be a gradual evolution, but it can change the way the produce industry does business. Early adopters will benefit from competitive gains in cost control and product quality, as well as differentiate themselves from the competition in positive ways.

Mike Nicometo is a produce industry veteran and independent consultant with over 15 years of experience in the cool chain logistics field. Nicometo, who is affiliated with the produce consulting group FreshXperts, provides expertise in logistics processes, cool supply chain management, project management, roadmap development and control, global team leadership, software prototyping and business development. He has developed systems and processes for numerous companies involved in food import, export and wholesale brokering, and is asked to speak at organizations and universities all over the world on issues pertaining to cool chain technology and traceability.