Tag: food industry

OM in the News: Where Did Your Steak Come From?

Consumers around the world are demanding to know where their food comes from and how it was produced, increasing the pressure on processors to invest in new technology to stay ahead of the game, report The Herald (Sept. 3, 2018) and The Wall Street Journal (Oct. 3, 2018) With customer expectation for quality and value increasing, supply chains are expanding, and this is making them less transparent and harder to control.

Silicon dioxide particles are sprayed onto meat as it is packed. It is scanned at the point of sale to confirm the product’s authenticity.

Remember the scandal of 2013 when frozen beef products being sold in the UK and Ireland were found to contain traces of horse DNA? That same year it was revealed that a parmesan cheese being sold to Australian customers didn’t actually contain parmesan, but did include wood pulp. In 2015, $483 million of smuggled meat was seized by Chinese authorities, some of it was found to be up to 40 years old!

In a world-first for the food sector, PwC has developed an electronic etching procedure that creates an invisible, trackable barcode for beef based on edible, non-toxic silicon dioxide. Soon, it will be possible to point your smart-phone at a cut of beef to reveal the meat’s entire history including where it was raised, what it ate and when and where it was processed. The revolutionary beef-tagging technology is expected to be launched this year.

The procedure starts when sides of beef are sprayed with particles of silicon dioxide as fine as sugar. This natural, edible fingerprint, forms a crypto anchor that can be scanned using a hyper-spectrum gun. This shines a light onto the micro particles of silicon dioxide and refracts back a wavelength signature, or what PwC  calls “a unique serial number on a piece of steak”.

Classroom discussion questions:

  1. Why is this a supply chain issue?
  2.  How does this technology differ from blockchain?

 

OM in the News: Farm to Cradle–Tracking Gerber Baby Food on the Blockchain

Gerber traced the ingredients of its sweet potato, apple and pumpkin puree on the Food Trust blockchain

Gerber is putting some of its baby food products on a food-tracking blockchain to test whether the technology can trace the fruits and vegetables that go into its products, writes The Wall Street Journal (Aug. 1, 2018). Gerber’s effort is part of a wider food-industry exercise aimed at improving food recalls by using the technology behind bitcoin to trace a worldwide ingredient supply chain. Food recalls can diminish consumer confidence and lead to lost sales. News of tainted baby food hits an especially sensitive nerve – stakes that in part prompted Gerber to choose blockchain.

Gerber has discovered that putting blockchain technology to use in a corporate supply chain takes some grunt work, mainly centered on moving data from the company’s SAP SE enterprise software onto the shared digital ledger. Another wrinkle is dealing with the mix of paper and electronic data in different formats, from farmers, processors and others in its supply chain.

Gerber (and parent Nestle) are working with 9 other large food companies, including rivals Unilever and Walmart, and with IBM on a blockchain system called Food Trust, to trace food and ingredients worldwide. (The 107-year-old IBM sees blockchain as a key area of growth). The theory is that having partners and competitors share a single record-keeping system can speed up investigations of bad food and make recalls more accurate and less expensive. IBM supplies the blockchain technology and a mobile app that farmers and others can use to enter data onto the Food Trust system. For companies using Food Trust, data about harvests, processing, packaging and shipping is stored electronically on the blockchain system, which can allow trace-backs in seconds compared to days and weeks.

Classroom discussion questions:

  1. Why blockchain?
  2. Why is Gerber working with competitors on this technology?

 

OM in the News: E.Coli and the Lettuce Supply Chain

Romaine lettuce is the source of a growing E.coli outbreak.

A growing nationwide E.coli outbreak linked to romaine lettuce has revived concerns over a leafy green industry that has long grappled with how to produce safe food. And questions remain over the origins of the more than 98 illnesses across 22 states. The U.S. Food and Drug Administration said that it is still looking for the lettuce source.

The outbreak from romaine lettuce grows to the largest multistate E. coli outbreak since one in 2006 tied to spinach that killed 3 people and sickened more than 200. The strain of E. coli making people sick is particularly virulent, leading to a high hospitalization rate. The FDA said it isn’t clear at what point in the supply chain the whole-head lettuce was contaminated. “In this case you’re looking at a more of a web trying to figure out where it came from,” said one exec.

Much of the difficulty in pinpointing an outbreak’s origin, writes The Wall Street Journal (April 28-29, 2018), stems from the complexity of the U.S. supply chain, in which food is grown, packed, processed and shipped by multiple companies before it reaches grocery store shelves. Produce from different farms can be combined into a single shipment to buyers. Product labels often don’t indicate where lettuce was grown. “Tracking a product from the farm through to the point of sale isn’t easy,” said a food-safety expert. “It’s not a new problem and it’s obviously not fixed.”

Blockchain, which we have discussed in several recent posts, may be one answer.

Classroom discussion questions:

  1. Why is this supply chain so complex?
  2. Why is lettuce a particular health risk?

OM in the News: The Blockchain Chicken

Did the chicken you just buy at the supermarket have a nice life, roam free, and eat healthy grains? asks Businessweek (April 16, 2018).  Every chicken at Carrefour, the big France-based grocery chain, comes complete with its very own life story, thanks to blockchain software. All you need to do is scan the label with your smartphone to get all the details. Carrefour wants to do whatever it can to ensure its products aren’t tainted, part of a broader industry trend that buys into the as-yet-unproven promise that blockchain can improve food safety.

Nestlé, Dole Food, Unilever, and Tyson Foods are also working with their biggest customer, Walmart, to implement a blockchain platform built by IBM. “There’s no question about it, blockchain will do for food traceability what the internet did for communication,” says Walmart’s VP. For every 1% reduction in food-borne diseases in the U.S., the economy is estimated to benefit by $700 million from increased productivity.

By making suppliers more accountable, adoption of the technology would help reduce some of the headline-grabbing food tampering of recent years: wood pulp blended with Parmesan cheese, horse meat passed off as minced beef, melamine added to water-diluted milk to raise protein (which caused 300,000 illnesses in China), and plastic mixed in frozen chicken nuggets. Such meddling, health dangers aside, costs the food industry as much as $49 billion a year.

Reducing waste is another goal. Recalls contribute to the 133 billion pounds of food  lost in the U.S. every year. Let’s say there’s a norovirus or listeria outbreak associated with spinach at your local grocery. It’s currently very difficult to identify the origin of contaminated food. With blockchain, grocers can quickly pinpoint the source, narrowed to even a single farm. And once in stores, blockchain data—combined with sensors and computer models—could help grocers better gauge the shelf life of produce.Classroom discussion questions:

  1. What are the strengths and weaknesses of blockchain?
  2. How does it work?

OM in the News: Where to Locate the Next 1,000 Dollar General Stores

There are 14,000 one-story cinder block Dollar Generals in the U.S.—outnumbering by a few hundred even Starbuck’s domestic footprint. (Fold in the second-biggest dollar chain, Dollar Tree, and the number of stores, 27,465, exceeds the 22,375 outlets of CVS, Rite Aid, and Walgreens combined). And, writes Businessweek (Oct. 16, 2017),  1,000 Dollar Generals are opening this year as part of the $22 billion chain’s plan to expand rapidly in poor, rural communities where it has come to represent not decline but economic resurgence.

As retail stores were going under across the nation, the commercial real estate company, Cushman & Wakefield, was searching for bright spots in the industry. For 5 years running, Cushman realized, a dollar store had opened once every 4.5 hours, an average of more than 5 a day. “They see a need and are aggressively racing to meet that need for low-cost goods in places that are food deserts,” the firm says.

Dollar General’s sales per square foot have risen steadily in recent years, to $229– less than half of Walmart’s. Their gross profit margins were 31%, though, compared with 25% at Walmart. A Dollar General store also has lower startup costs; it spends about $250,000 for a new store, vs. the more than $15 million Walmart puts into a new Supercenter. The dollar chain thrives mostly on selling low-ticket items and basics, such as toilet paper, that help shoppers on tight budgets get through the week. (Dollar General hasn’t technically been a dollar store for decades, and only a quarter of its products sell for that amount today.)

In 2016, the firm detailed a site-selection strategy focused on small towns, dubbed “Anytown, USA.” It defined the core customer as: “Our Best Friends Forever”—an extremely cash-strapped demographic, with a household income less than $35,000, and reliant on government assistance, that shops at Dollar General to “stretch budgets.” These BFFs represented 43% of its sales. The company’s map shows 13,000 green dots as “remaining opportunities” for new stores—some in low-income urban neighborhoods, but most in small and very small towns.

Classroom discussion questions:
1. How does Dollar General’s location strategy differ from that of Walmart?

2. Are Walmart and Amazon threats to Dollar General?

OM in the News: Heinz Goes on a Diet

Heinz's Pocatello factory scheduled for closure
Heinz’s Pocatello factory scheduled for closure

For years, H.J. Heinz Co. managers considered their frozen-food plant in Pocatello, Idaho, the heart of potato country, a model factory, ranking it the best in the U.S. in 2009 and 2011 for safety, cleanliness and efficiency. But in November, 2013, Heinz said it would close the Idaho plant this year. It may have been a model factory, writes The Wall Street Journal (Feb.11, 2014), but it also was an example of the kind of dubious logistics that were costing Heinz money. Frozen enchiladas, for instance, were trucked nearly 1,000 miles from a factory in San Diego, packaged with rice and sauce by workers in Pocatello then shipped across the country to distribution centers on the East Coast.

The market for packaged frozen foods had been hit hard by a broad consumer shift to fresher foods. And Heinz had too much production capacity in that sector. It had built a new frozen-food factory in South Carolina in 2009. Moreover, Pocatello was situated far from Heinz’s other factories and from its main markets. Roughly 70% of all ingredients used in the factory are shipped in from east of the Mississippi, well over 1,000 miles away. Others came from Denver, nearly 600 miles to the south.

A similar announcement at another plant last November proved tumultuous. Managers at a century-old Heinz ketchup factory in Leamington, Ontario, told several hundred employees that their plant also was to be closed. Some started cursing, crying and knocking over chairs, and others stormed out. The company will consolidate its frozen-meal operations at its factory in Ohio, which, according to its spokesperson, is “the most central location to customers, distributors and the supplies we need.” He added that the decision to close the Idaho plant “is based primarily on factory location in relation to our customer/consumer base and the need to improve transportation efficiencies and the fact we have we have excess frozen manufacturing capacity.”

Classroom discussion questions:

1. Why is Heinz closing the two factories?

2. Which of the factors that affect location decisions (see Chapter 8) influenced Heinz?