Feb 25, 2018

Comment: Digitisation is Key to Averting the Global Food Crisis

Laura Mullan
7 min
Without democratising an incredibly consolidated food supply market, it will be impossible to reduce wastage, embrace innovation and change consumer behaviour. Systemic change is essential.
The world today has a vast problem with food – from a lack of biodiversity to excessive wastage, from poor health linked to over cons...

The world today has a vast problem with food – from a lack of biodiversity to excessive wastage, from poor health linked to over consumption to massive food poverty. We grow enough food to feed 12 billion – far in excess of the seven billion population – yet more than one billion people are underfed. The UN estimates that, on our current path of food consumption and waste, by 2050 we will reach a tipping point and the world will be in a food crisis.

The problems extend from agriculture all the way through the food supply chain to the home, where food wastage – in more economically developed countries at least – is excessive. The UN target calls for the world to cut per capita food waste in half by 2030 – but while changing consumer education and expectation is essential, as is the drive to increase biodiversity, it is within the food supply chain that these changes will come together. Without democratising an incredibly consolidated food supply market, it will be impossible to reduce wastage, embrace innovation and change consumer behaviour. Systemic change is essential.

Jason Kay, CCO of IMS Evolve, explains the role digitisation is playing in transforming the cold food chain to eradicate waste, improve food safety and mitigate the risk of a global food crisis:

Unsustainable Model

The way in which consumers have been educated to purchase food – both in store and in restaurants – has changed radically over the past few decades. Following significant consolidation, both retail and restaurant markets are dominated by a small number of organisations delivering a consistent and stable customer experience, one that offers products of identical size, shape and price irrespective of season or country of origin.

Of course, a sizeable proportion of fresh produce will never meet these unrealistic criteria. By creating a consumer expectation for blemish-free goods and specific size, food purveyors have built a market predicated on waste. Even if these ‘non-perfect’ items can be reallocated to sauces or ready meals, damage will occur at each stage of sorting and sifting that will result in further wastage.

Yet what has been achieved by this approach? Economically it is flawed, with subsidised agriculture and incredibly low margins for producers and retailers alike. Consumer populations – certainly in more economically developed countries – are less healthy, due in no small part to excessive consumption and the increasing use of excessive processing to address food safety concerns, especially regarding fresh food, and to extend shelf life. Yet, while much of the population feasts on unhealthy, processed food, by 2027 the world could be facing a 214 trillion calorie deficit. Something has gone awry with the global model of food production and consumption.

Lack of Innovation

Over the past 50 years, the economies and ethics of food production have fallen out of sync. Farmers do not want to produce food that is wasted but every aspect of this low margin model results in wastage. Fears regarding food safety combined with failure of cold chain equipment leads inevitably to food being destroyed. But basic process failures are just one aspect of the problem.

The sheer cost of managing suppliers to ensure product consistency and safety makes it difficult for retailers to embrace new, innovative providers; whilst those with existing contracts cannot afford any risks associated with late delivery or under supply, and hence build in significant contingency. The result is not only more wastage but also minimal opportunity to invest in innovation, to explore opportunities for new, healthier food options or embrace automation to improve efficiency.

Achievable Change Today

Clearly, the systemic change required if the world is to avoid the predicted food crisis cannot be achieved overnight. In a difficult, low margin market, with small numbers of players fighting hard to retain share, it is incumbent upon innovators and disruptive market players to leverage digitisation to drive that change.

The most obvious role of digitisation is in minimising avoidable waste. When one in three freight journeys in the UK is food, the use of real-time information to improve routing and distribution planning is key to improving resource utilisation. In addition, using existing sensors on refrigeration units, heating units and air conditioning systems to raise alarms when problems occur to enable immediate rerouting or allocation of items, plus the use of predictive maintenance to avoid equipment downtime, can have a very significant impact on food wastage.

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This approach is already being used by forwarding thinking organisations that are using digital and automation strategies today to reduce avoidable loss of food, achieve huge reductions in reactive maintenance costs, even reducing customer complaints. Add in the use of real-time data to support a comprehensive energy management strategy incorporating a range of different metrics, from seasonal differences to equipment reliability, and organisations can radically reduce annual power consumption. Together these changes result in a reduction in revenue expenditure of tens of millions and, in large estates, percentile point gains on capital employed can run into many hundreds.

Critically, this is being achieved by layering digitisation over existing infrastructure – clearly it is not feasible for retailers to rip and replace control infrastructure across hundreds or thousands of locations. The impact on both profit and customer experience would be hugely damaging.

Instead, by leveraging edge-based processing to ensure information from existing equipment throughout the supply chain is both actionable and actioned to make immediate changes, retailers are able to achieve IoT capacity at pace and with no downtime. It is this frictionless approach to digital adoption that will be key to releasing measurable value.

Democracy and Innovation

With this approach, organisations can achieve a significant revenue uplift - without the need for massive investment. Indeed, it is the compelling ROI from this initial step of leveraging existing equipment that will be key to providing the investment that will underpin the next level of digitisation – the use of traceability systems to manage the advocacy, source and safety of food.

With the ability to confirm not only that products have been correctly produced but that they have followed the correct processes at every stage of the supply chain, from farm to retailer, digitisation provides a full audit trail of trusted information. This approach delivers low cost governance, radically reducing the cost of supplier ownership for retailers and opening up new opportunities for suppliers to enter the supply chain and create the democracy that is essential to enable innovation.

And it is this innovation that will be key to moving away from the entrenched practices of food procurement that have embedded consumer expectations and misunderstanding. A democracy of participation within the food market will help to educate consumers, improve understanding of food quality and the implications to health, and facilitate the introduction of new products and practices, including biodiversity, that delivers a new consumer experience.

A more predictable marketplace will also encourage investment, enabling SMEs to enter and embrace automation to replace the reliance upon cheap labour to improve productivity. The result should be not only less wastage and a fairer distribution of food globally but also a better consumer experience with access to fresher, healthier and less heavily processed food. In effect, the adoption of IoT to minimise avoidable waste within the retail cold food chain is the essential first step towards full digitisation throughout the food production lifecycle – digitisation that will underpin the global response to the developing food waste crisis.

The road ahead

A fundamental change to the global supply chain will take time. But there are very significant changes that can be made today that not only begin to address the wastage endemic within the food chain but also release the investment required to support the adoption of digitisation throughout the infrastructure that will be key to transforming the end to end business model.

It is by embracing digitisation to improve food safety and advocacy that the market can democratise access in order to generate the innovation key to making fundamental change, from automation to enhanced productivity to improving consumer education and supporting essential change in global food production and consumption.

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Jun 11, 2021

NTT DATA Services, Remodelling Supply Chains for Resilience

NTTDATA
supplychain
Supplychainriskmanagement
Procurement
6 min
Joey Dean, Managing Director of healthcare consulting at NTT DATA Services, shares remodelling strategies for more resilient supply chains

Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.

The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.

A Multi-Vendor Sourcing Approach

“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.

“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.

But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?

“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.

Wielding Big Tech for Better Outcomes

So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry

“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality. 

“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”

Evolving Procurement Models 

From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view. 

“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.

“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”

“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”

But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?

“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.

The Challenges

These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.

On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.

Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”

He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”

As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”

 

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