‘Smarter Planet’ Initiative
Aims to Cut Waste, Costs
By John Karolefski
The well-publicized product recalls in recent years were an urgent call to action for the industry to ensure safer food for consumers. At the same time, the need to reduce waste and reduce costs in the supply chain has become more imperative.
Addressing these challenges is part of a larger effort. Several high-profile manufacturers and retailers are working with IBM as part of its broad 18-month-old “Smarter Planet” initiative, which aims to create and promote systems to make water cleaner, populations healthier and distribution more efficient. The company is also making sure that food is heartier through biological research.
IBM’s sophisticated and innovative software is providing the intelligence to improve the basic processes and systems. For example, IBM is relying on its digital technology and powerful solutions to make sure food is traced properly as it passes through an increasingly complex global supply chain. The track-and-trace technology, including 2D and 3D barcode and radio frequency identification (RFID), allows for tracking of food from “farm to fork.”
Government regulations and new industry requirements for quality and traceability are prompting food producers to provide more detail on products moving increasingly through a global supply chain. With such detail, companies can benefit through streamlined distribution and lower spoilage rates. After all, consumer product and retail industries lose about $40 billion annually, or 3.5% of their sales, due to supply chain inefficiencies.
IBM sees three major challenges to the world’s food supply that call for a global approach:
- Food Safety Creating more awareness around the globe about food safety
- Food Distribution Getting food to people more quickly and more efficiently.
- Food Quality Ensuring health and wellness and the nutritional value of what we eat.
“We’re not going to change the world overnight, but a handful of manufacturers and retailers are doing something right now,” Ralph Jacobson, the Global Consumer Products Industry Marketing Executive for IBM, told CPGmatters in an interview.
Meanwhile, IBM is also working on a “smarter food” initiative in the U.S. in two different ways: one, via demand-driven replenishment pilot with a major manufacturer, and two, sustainability of the supply chain.
The former, a demand-signal repository, addresses issues all the way from the raw materials goods suppliers to the retailers. “We’re working with a manufacturer right now on generating demand based on the retail’s true point-of-sale movement all the way back to the manufacturer and getting that collaboration going,” he said.
The other “first-of-a-kind project” deals with sustainability of the supply chain and considers
all of the different components that make supply chain more sustainable, more environmentally responsible, and more corporately responsible. The project involves a large pharmaceutical distributor.
Jacobson suggests that companies interested in real solutions should start by looking at their cost structure. He gives the example of apples grown in the state of New York – where 90% of the apples sold are shipped across the country from the state of Washington.
“It costs something to get a product shipped to my manufacturing plant and then shipped to the distributor or retailer,” he said. “As you start looking at the cost components, these different elements of the manufacturing and distribution and retailing processes are chipping away at potential profitability. It does not make any sense to be sourcing a product from [elsewhere] when it could be sourced here and getting it in the most effective way into the retail channel. So manufacturers like Procter & Gamble, Nestle, and others are looking at different ways of distributing their products.
“I think there are a lot of different ways that we can look at helping manufacturers and retailers,” he continued. “IBM consultants have done a great job around the world looking at some of the best ways of doing such things as eliminating costs and then driving that into savings for the manufacturer and for the retailer, so they can really produce a more profitable product.”
Jacobson summed up by say that “going green” is typically not an expense to the business, but a competitive advantage instead. Becoming leaner and greener in the supply chain and overall value chain is something that can be promoted to consumers.
“You could say, ‘This was grown here, it’s sold here, it’s fresher for you, and we saved the environment while we were doing it.’”
Market Watch
Third-Party Study Validates
CHEP’s Environmental Sustainability
By Lynne Cooke
A new third-party study has validated CHEP’s ongoing commitment to environmental stewardship and confirmed the sustainability credentials of its pallet and container pooling solution.
In coordination with the release of the report, CHEP launched a new website – www.chep.com/knowthefacts -- to help companies better understand how the use of CHEP pallets reduces their carbon footprint.
The 2009 life cycle inventory analysis demonstrates how the CHEP system creates significantly less solid waste, requires less total energy and reduces more greenhouse gas emissions than other common shipping platform solutions, including pooled plastic pallets and limited use white wood pallets. The report was produced by Franklin Associates, a leading consultancy specializing in life cycle inventory analysis and solid waste management. It was peer reviewed by an academic expert in the area of life cycle inventory analysis.
According to the study, the CHEP system generates 48% less solid waste, consumes 23% less total energy and generates 14% less greenhouse gas than pooled plastic pallets. Compared with limited use white wood pallets, the CHEP system generates 50% less solid waste, consumes 19% less total energy and generates 5% less greenhouse gas.
“The entire CHEP business model was founded on the principles of reuse and recycling more than 50 years ago,” said CHEP Americas Group President Jim Ritchie. “We continue to place a heavy emphasis on being a responsible corporate citizen and business partner. We are pleased with the independent third-party validation that our business is effectively managing resources and that the report from Franklin Associates confirms the positive impact CHEP’s customers continue to make on the environment. CHEP is committed to proper stewardship of all natural resources, and this study proves our efforts continue to reap positive results for users throughout the supply chain.”
CHEP USA has been using the life cycle inventory analysis methodology to quantify and reduce the environmental footprint of its products and services since 1999. CHEP uses life cycle inventory data to identify and prioritize continuous improvement initiatives across the organization and in the evaluation and design of new product and service offerings.
The unique feature of life cycle inventory analysis is its focus on the entire life cycle of a product, from raw material acquisition to final disposition, rather than on a single manufacturing step, process or environmental emission. It quantifies resource use, energy consumption and environmental emissions to the air, water and land for a given product system, using a comprehensive and standardized methodology outlined by ISO14000 (section 14040), an international environmental management standard.
The 2009 life cycle inventory analysis examines CHEP pooled wooden block pallets, pooled plastic pallets and non-pooled, limited use white wood pallets. The life cycle impacts evaluated for each pallet system include:
- Extraction, processing and transportation of raw materials
- Platform processing and manufacturing
- Transportation of the platform to the customer
- Use of the platform by the customer (including transportation cycles)
- Recovery, reuse, recycling or disposal of each platform at the end of its useful life.
After Franklin Associates conducted the life cycle inventory analysis, Dr. David Allen, Director of the Center for Energy & Environmental Resources at the University of Texas, performed a peer review to further analyze and validate the methodology, assumptions and conclusions. Allen has an extensive record of participation on national advisory boards and councils, including the U.S. Environmental Protection Agency’s Science Advisory Board.
CHEP USA Director of Environment & Regulatory Affairs, Candice Herndon, said, “CHEP’s pallet pooling system helps to maximize the inherent benefits of wood, a renewable, biodegradable, 100% recyclable and repairable material. Since CHEP maintains ownership of the pallet at all times in the supply chain, greater accountability and opportunity for control exists throughout the life cycle of the pallet.
“CHEP builds higher quality platforms designed for extensive reuse and provides systems for controlled inspection, repair and maintenance that greatly extend the useful life of the pallets,” she continued. “This results in less need for raw materials and energy, and a reduction in solid waste over time. CHEP’s commitment to environmental sustainability, social accountability and continuous improvement, combined with its global reach, national service base and more than 50 years of proven pooling experience all help ensure CHEP is a responsible, long-term supply chain partner.”
Giant Eagle Earns LEED
Multi-format retailer Giant Eagle has received a Leadership in Energy and Environmental Design (LEED) Silver Certification for the Giant Eagle Supermarket and GetGo convenience store and fuel station in Wexford, Pa.
The Township of Pine Giant Eagle is the company's fourth LEED-certified supermarket. The LEED-certified certification of the Township of Pine GetGo marks the company's first fuel and convenience store location to receive such an honor. It is also the first of its kind in the entire western Pennsylvania region and one of the first nationally.
LEED is a national green building rating system administered by the U.S. Green Building Council (USGBC). To earn certification, a building project must meet certain prerequisites and performance benchmarks (“credits”) within each category. Projects are awarded Certified, Silver, Gold, or Platinum certification depending on the number of credits they achieve.
APRIL 2010
Coke, Walmart to Explain Importance of Standards
By Jack Grant
Senior executives from Coca-Cola and Walmart will explain the importance of standards to
the supply chain in keynote addresses at the 10th annual U Connect Conference June 7-10 in
San Antonio.
J. Alexander (Sandy) Douglas Jr., president of Coca-Cola North America and Rollin Ford, executive vice president and chief information officer for Walmart, will address attendees at the event, hosted by GS1 US and the Voluntary Interindustry Commerce Solutions Association (VICS), working with a planning committee that includes representatives from several major retailers and suppliers.
“U Connect attendees will find these keynotes extremely valuable,” said Bob Carpenter, president and chief executive officer, GS1 US. “It’s a rare opportunity to get insights on how the world’s largest beverages producer and largest retailer are using standards to become more efficient and effective as they navigate the ‘new normal’ economy. Both companies are heavy users of supply-chain standards as well as thought leaders in this area, so small businesses and large businesses alike will get a lot out of this program.”
Douglas, who is also chairman of the GS1 US Board of Governors, will discuss how Coca-Cola North America is leveraging standards to support collaborative integrated supply chain strategies that create a more efficient and effective supply chain and reduce disruptions.
“Standards are a key enabler to industry-wide supply chain solutions,” Douglas said. “GS1 standards allow us to build capabilities which can be used by all of our retail partners across multiple industries.”
Douglas has been with Coca-Cola since 1988, and has held a variety of positions, including senior vice president and chief customer officer of The Coca-Cola Company.
Ford, who has been CIO of Walmart since 2006 and has previously headed logistics and supply-chain operations for the company, will speak about the value of GS1 standards in the retailer’s efforts to optimize its value-chain processes and sustainability.
“Walmart is leveraging industry standards to level the playing field for our suppliers globally, and to increase our process efficiency, which helps us take out costs and deliver everyday low prices to our customers, so they can save money and live better,” said Ford.
“This includes our work with data synchronization-based item-file alignment, which gives us one version of truth about product data, enabling item data accuracy, store-level inventory management, and global replenishment. And standards help us address emerging issues around food and product safety, sustainability, and visibility into our global supply chain.”
To learn more and register for U Connect 2010, visit www.uconnectevent.org
More than a thousand business professionals from industries including Apparel, Fresh Foods, Foodservice, Healthcare, Retail/CPG, and Hardlines will converge at U Connect to learn how to use new and existing standards to address emerging and expanding issues, such as food and product safety, recalls, traceability, sustainability, and brand integrity.
The conference theme, “Build a Visible, Secure and Sustainable Value Chain,” refers to the ability of GS1 standards to help companies better understand where their products and assets are, how to protect them, and how to ensure ongoing high performance of business processes.
“The most fundamental challenge is an incomplete understanding of how GS1 Standards can be leveraged throughout an enterprise to accomplish those goals,” said Laura Proctor, senior director of marketing for GS1 US. “At this year’s U Connect Conference, as in previous years, we’ll provide education on the fundamentals, but we’ll be aiming to help people understand how to optimize their existing investments in standards to improve business processes and deliver more value to their organizations.”
According to Proctor, the critical issues in the industry that will be presented at U Connect are represented in the educational tracks: visibility, security, sustainability, collaborative business processes, healthcare, fresh foods, and foodservice. In addition, food safety and data accuracy are two critical issues that are threaded throughout the program. Addresses by Coke and Walmart about the importance of standards to the supply chain in the new economy will highlight the event.
“It’s clear that a large percentage of consumers are never going back to their old spending ways,” said Proctor. “Businesses that in the past have done the bare minimum with standards – what some people call ‘slap and ship’ – can drive new efficiencies by using the standards to increase their visibility into the supply chain, increase its security, and ensure its sustainability. Most people have only a partial awareness of these capabilities vis a vis supply-chain standards, but our attendees will gain great understanding. More important, they’ll be equipped to go back to their offices and make positive contributions.”
She said retailers and manufacturers should attend U Connect because it is the one conference where they can get in-depth education on GS1 Standards, collaborate and network with their trading partners, and participate in communities that help all participants move their businesses forward. Attendees include decision makers from C-level through managers, and from business and systems analysts to implementers of business processes.
“U Connect is unique because it draws a hybrid of stakeholders in the value chain across multiple industries,” Proctor said. “So it connects internal stakeholders at various levels within a company, peers across industries, and trading partners between companies. They get access to best practices and real-world business cases from their peers.”
Market Watch
CPG/Retailer Collaboration Spurs
Better Performance, Margins
By Lynne Cooke
Increasing revenue remains a challenge for both manufacturers and retailers even as the economy improves. Adjusting to the consumer’s “new normal” – that is, cautious spending habits, difficulty securing credit, concern with high unemployment rates – is critical.
The good news is that CPG/retailer collaboration provides an opportunity to increase revenue margins by quickly adjusting product and inventory strategies based on the ever-changing consumer buying patterns.
Gartner’s recent “Top Supply Chain Planning Processes” research report noted that collaborative business processes with other partners in the supply chain can only improve a company’s internal planning processes and execution by improving visibility and helping to align goals and objectives. When done well, collaboration ensures a win/win situation for the participants, and improves the overall performance of the end-to-end
supply chain.
David Johnston, senior vice president, supply chain for JDA Software, outlines the rewards and quantifiable cost savings that may be achieved from enhanced communication and collaboration between retailers and manufacturers.
Gain Valuable Insight
While large retailers are tasked with managing up to 100,000 products, manufacturers have a much more intimate level of knowledge and understanding about their products that can be shared with their retail channel partners. Likewise, retailers can provide their manufacturing counterparts with invaluable insights into consumer behavior by sharing real-time sales at the shelf and store-level inventories. By sharing this visibility, retailers and manufacturers can leverage their relationship and both benefit from more timely consumer insights, better planning, more effective promotions and greater success when introducing new items.
A leading U.S. drug store chain implemented a strategic collaboration program that enabled one of its key partners, a leading global health and hygiene consumer goods manufacturer, to access data at the point of sale and SKU level. With this depth of detail, the retailer’s order frequencies are now based on true customer demand, while the manufacturer can anticipate demand and recognize trends before they occur, leading to significant outbound and inbound cost savings.
Use One Synchronized Forecast
CPG manufacturers often operate from multiple forecasts such as account team forecasts, demand planning forecasts and marketing forecasts. Retailers use a different set of forecasts, based on intricate sales data all the way down to the store shelf. CPG manufacturers and retailers have the opportunity to leverage and link this data to create one, synchronized view of demand for joint forecasting and replenishment efforts.
Pharmavite set up a Collaborative Planning, Forecasting and Replenishment (CPFR) program with many of its retail partners – including warehouse retailer, BJ’s Wholesale Club – to improve in-stocks, increase sales and enhance supply chain visibility. Through this close-knit collaboration effort, Pharmavite ensured that the right product is on its retail partner’s shelves at the right time; eliminating excess safety stock, allowing planning at a more targeted level and keeping the focus on the end consumer.
Quantifiable results of the CPFR program are also impressive, Pharmavite has improved inventory turns by 30-50%, decreased weeks of supply by 30-50% and reached a 97.8% forecast accuracy with retail partner BJ’s Wholesale Club.
Collaborate on Planning Initiatives
As retailers increase their ability to create time-phased views of demand, there is an opportunity to collaborate more strategically with manufacturers so that product flow is optimized and tied to the overall sales plan. With this strategic collaboration in place, manufacturers can also address scenario planning such as how packaging changes or delivery frequency might impact order flow from raw materials planning all the way to the store shelf.
For example, a product with a high seasonal peak requires manufacturers and retailers to determine how to get the product on the store shelf as close to the sale as possible, while taking into account constraints such as distribution center and logistics capacity. By collaborating on how to get the right amount of inventory on the shelf closest to the sale, manufacturers and retailers can achieve more efficient supply chain planning, market share and margin increases, as well as reduced inventory and storage costs that can be passed down to the consumer.
3PLs Can Do Better
Lee Stucky, former Vice President of International Logistics for Walmart, urged 3PLs working with retailers to get closer to the action and work more directly with vendors and individual stores to get a “feet on the ground” understanding of bottlenecks and improvement opportunities. He spoke at a CPG Think Tank Exchange sponsored by Kane Is Able.
Another presenter, Jack Ampuja, president of Supply Chain Optimizers, said 3PLs must transform from being “great counterpunchers” – reacting to challenges presented to them – to innovators, leading their clients to implement new and better processes.
Lunds Seelcts SBT Platform
Two supermarket chains, Lunds and Byerly’s owned and operated by Lund Food Holdings, have selected the Consumer Driven Sales Optimization (CDSO) platform from Park City Group in support of their Scan Based Trading (SBT) initiative.
The SBT platform is designed to align retailer operations with the interests of their supplier communities. Also, it aims to provide trading partners with a distinct competitive advantage through scan sales visibility that sets the supply chain in motion and is a proven procurement strategy that guarantees sales results and minimizes or eliminates inventory.
