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SPECIAL EDITION: CAPITALIZING ON CONSUMER TRENDS

Food Logistics

®

Global Supply Chain Solutions for the Food and Beverage Industry

PACKAGING EVOLVES

MARKETPLACE TRENDS PLAY A PIVOTAL ROLE IN MORE SUSTAINABLE SOLUTIONS

CONSUMERS

CALL THE SHOTS

Consumer-driven demands have far-reaching implications for the logistics providers and others who support the food supply chain

AN

OMNICHANNEL APPROACH

CHANGING BUYER HABITS SHAPE NEW GROCERY FULFILLMENT STRATEGIES Issue No. 198 July 2018

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FoodLogistics.com

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ON THE MENU

OCTOBER 2015 ISSUE NO. 171

ON THE MENU

July 2018 ISSUE NO. 198 COLUMNS FOR STARTERS

R  efreshing the Retail Grocery Sector

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Consumers wield an incredible amount of power in the retail space today, and customization is at the heart of it. COOL INSIGHTS

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F  ood Losses in Vietnam: The Shocking Reality Food loss and waste is a major issue worldwide. Poor production, post-harvest handling, storage and transportation activities make Vietnam a low performer.

FOOD (AND MORE) FOR THOUGHT

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COVER STORY

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CONSUMERS CALL THE SHOTS WHEN IT COMES TO ONLINE GROCERY SHOPPING

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Consumers Shape New Grocery Fulfillment Strategies

A growing mix of brick-and-mortar and e-commerce options is forcing food retailers to consider an omnichannel approach to fulfillment.

E  xceptional Service a Must in Today’s Competitive Retail Environment

Success will come to those retailers who address the dynamic online shopping experience and future consumer demands.

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T  he Grocery Store of Tomorrow

Consumers are shifting away from the weekly trip to the grocery store, and the food retail industry is responding.

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Blockchain technology is known for its ability to track and trace products across the supply chain, but its potential to free up trillions of dollars-worth of economic value is less discussed.

Some retailers are getting the message, but others are scrambling to catch up.

FEATURE

Packaging Continue to Evolve

Marketplace trends are playing a pivotal role in the continued development of packaging materials and technology.

H  ow Blockchain Can Improve Trade Finance in Food Supply Chains

DEPARTMENTS

Supply Scan 12 Food on the Move 40 Ad Index 8

WEB EXCLUSIVES • New HR Strategies Create Appealing Work Environment for Fleets foodlogistics.com/21009430

• Order Fulfillment in Three Easy Clicks foodlogistics.com/21011481

• Food Logistics’ Educational Webinar Series foodlogistics.com/webinars

Published and copyrighted 2018 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. Food Logistics (USPS 015-667; ISSN 1094-7450 print; ISSN 1930-7527 online) is published 10 times per year in January/February, March, April, May, June, July, August, September, October and November/December by AC Business Media Inc., 201 N. Main Street, Fort Atkinson, WI 53538. Periodicals postage paid at Fort Atkinson, WI 53538 and additional mailing offices. POSTMASTER: Send address changes to Food Logistics, P.O. Box 3605, Northbrook, IL 60065-3605. Canada Post PM40612608. Return undeliverable Canadian addresses to: Food Logistics, Station A, P. O. Box 25542, London, ON N6C 6B2. Subscriptions: U.S., one year, $45; two years, $85; Canada & Mexico, one year, $65; two years, $120; international, one year, $95; two years, $180. All subscriptions must be paid in U.S. funds, drawn from a U.S. bank. Printed in the USA.

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FOR STARTERS

FROM THE EDITOR’S DESK

REFRESHING THE RETAIL GROCERY SECTOR

C SOWINSKI

To meet this growing demand, savvy retailers are

leveraging technology

to enhance the shopping experience and meet modern consumers’ evolving needs.” Mercatus

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onsumers wield an incredible amount of power in the retail space today, and personalization and customization are at the heart of it. Keeping consumers engaged, elevating their experience and making sure they come back to spend more means that retailers need to deliver what they want, when they want it, and where and how they want it. Groceries are no exception. This month’s special edition of Food Logistics looks at how consumer trends are changing the food supply chain and how grocery retailers, manufacturers and growers, as well as their logistics partners, can capitalize on these trends. I spoke with Sylvain Perrier, president and CEO of Mercatus, about this topic. According to the company’s research, “a growing number of retailers are introducing e-commerce models to make it easier for tech-savvy, time-crunched consumers of today to buy the things they need.” Online shopping has become a “deeply ingrained” behavior, adds Mercatus. Furthermore, its grocery e-commerce survey of over 1,000 female shoppers shows that 97 percent of those polled have made online purchases, and most of those (89 percent) buy products and/ or services online at least once per month. Interestingly, of those that made purchases online, 69 percent are between the ages of 40 and 60 years old, or 60 and above, suggesting that the “lion’s share of today’s e-commerce adopters are from Generation X,” notes the company. However, the online experience has to meet consumers’ expectations. For instance, Mercatus

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says “companies like Amazon and Netflix offer shoppers access to an extensive catalogue of products, user reviews and personalized suggestions based on search and purchase history, and as consumers become more accustomed to these benefits in other digital settings, they’re beginning to expect them to be incorporated into the grocery experience as well. “To meet this growing demand, savvy retailers are leveraging technology to enhance the shopping experience and meet modern consumers’ evolving needs,” states the company’s research. There are signs that grocery retailers are getting some traction in the e-commerce sector. Kroger’s latest earnings report showed that its digital sales spiked 66 percent compared to a year ago as the company continues to make in-roads with tech-savvy consumers. The company’s ClickList service, which allows shoppers to buy online and choose either home delivery or curbside pickup at the store, is helping boost its e-commerce performance. Kroger’s CEO Rodney McMullen said during a conference call with analysts that everything they are doing today “will enhance our ability to provide everyone in America with the convenience of shopping for anything, anytime and anywhere.” He added that customers who shop online at Kroger and its other grocery chains are spending more per week than shoppers who just buy groceries inside the physical store. Enjoy the read.

LARA L. SOWINSKI, EDITORIAL DIRECTOR LSOWINSKI@ACBUSINESSMEDIA.COM

DETAILS

Published by AC BUSINESS MEDIA INC. 201 N. Main Street, Fort Atkinson, WI 53538 (800) 538-5544 • www.ACBusinessMedia.com

WWW.FOODLOGISTICS.COM PRINT AND DIGITAL STAFF Group Publisher Jolene Gulley Associate Publisher Judy Welp Editorial Director Lara L. Sowinski lsowinski@ACBusinessMedia.com Editor John R. Yuva jyuva@ACBusinessMedia.com Assistant Editor Amy Wunderlin awunderlin@ACBusinessMedia.com Web & Copy Editor Mackenna Moralez mmoralez@ACBusinessMedia.com Contributing Editor Barry Hochfelder Senior Production Manager Cindy Rusch crusch@ACBusinessMedia.com Creative Director Kirsten Wiskus Audience Development Director Wendy Chady Audience Development Manager Angela Franks ADVERTISING SALES (800) 538-5544 Associate Publisher (East Coast) Judy Welp (480) 821-1093 jwelp@ACBusinessMedia.com Sales Manager (Midwest and West Coast) Carrie Konopacki (920) 542-1236 ckonopacki@ACBusinessMedia.com National Automotive Sales Tom Lutzke (630) 484-8040, tlutzke@ACBusinessMedia.com EDITORIAL ADVISORY BOARD Jaymie Forrest, Chief Supply Chain and Commercial Officer, ScanTech Sciences Inc. John Haggerty, Vice President of Business Development, Burris Logistics Robert A. Norton, Ph.D., Professor of Veterinary Microbiology, Public Health and Biosecurity, Auburn University; Coordinator of National Security Initiatives, The Futures Laboratory Jon Shaw, Director of Sustainability and Global Marketing Communications, UTC Climate, Controls & Security Smitha G. Stansbury, Partner, FDA & Life Sciences Practice, King & Spalding CIRCULATION & SUBSCRIPTIONS P.O. Box 3605, Northbrook, IL 60065-3605 (877) 201-3915, Fax: (847)-291-4816 circ.FoodLogistics@omeda.com LIST RENTAL Jeff Moriarty, InfoGroup (518) 339-4511 jeff.moriarty@infogroup.com REPRINT SERVICES Carrie Konopacki (920) 542-1236 Fax: (920) 542-1133 ckonopacki@ACBusinessMedia.com AC BUSINESS MEDIA INC. Chairman Anil Narang President and CEO Carl Wistreich CFO JoAnn Breuchel Digital Operations Manager Nick Raether Digital Sales Manager Monique Terrazas Published and copyrighted 2018 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage or retrieval system, without written permission from the publisher.

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WE’LL PROTECT YOUR RETAIL RELATIONSHIPS.

OD’S MABD SERVICE MEETS TODAY’S SUPPLY CHAIN CHALLENGES Old Dominion’s Must Arrive By Date (MABD) service is supported by a 99+% on-time rate and #1 ranking for damage-free deliveries.1 With OD, your time-sensitive shipments will arrive intact and are guaranteed2 to meet shrinking retail delivery windows. MABD helps strengthen your retail partnerships, protects your vendor scorecard and delivers value in every shipment. Throughout the entire process, you have 100% door-to-door visibility with an OD Customer Service Representative as your single point of contact. For more information, visit odfl.com or call 1-866-637-7333.

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Old Dominion Freight Line, the Old Dominion logo, OD Household Services and Helping The World Keep Promises are service marks or registered service marks of Old Dominion Freight Line, Inc. All other trademarks and service marks identified herein are the intellectual property of their respective owners. ©2018 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved. Major League Baseball trademarks and copyrights are used with the permission of Major League Baseball Properties. Visit MLB.com. 2

1 2017 Mastio & Co. National LTL Carrier Report. If scheduled delivery time is missed, charges revert to standard rates. Restrictions apply.

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SUPPLY SCAN

NEWS FROM ACROSS THE FOOD SUPPLY CHAIN Daily Updates at FoodLogistics.com

RLS LOGISTICS ENHANCES ITS GREEN INITIATIVES

RLS Logistics continues to make reduction of waste and improvements in efficiency as two of its primary goals. To reduce usage and keep services priced competitively, the company has invested in a number of green initiatives. RLS Logistics installed 3,979,800 watts of solar panels in its solar field. In the first year, the solar system is predicted to generate over 5,700,000 kilowatt hours of AC electricity. “Through our implementation of LED lights, sustainable packaging and our enhanced solar field, RLS Logistics continues to invest in green initiatives to help the environment,” says Tony Leo, CEO and president of the Warehousing Group.

INDIA TO START BREWING BUDWEISER BEER VIA SOLAR ENERGY

VEGAN DIET MAY LOWER EMISSIONS

Researchers have found that buying sustainably-sourced meat or dairy products won’t outdo the benefits that a plant-based diet has on the planet. Newsweek reports that the adoption of plantbased diets has the potential to cut food emissions by upwards of 73 percent. If a vegan diet went global, it would reduce global agricultural land by 3.1 billion hectares. The study shows that cutting consumption of animal products in half worldwide, and not buying from high-impact producers, would achieve a 73-percent reduction in emissions of an entire plant-based diet. The study also found that lessening the consumption of oils, refined sugar, stimulants and alcohol by a fifth would slash greenhouse gas emissions by 43 percent.

Anheuser-Busch announced last year that it was planning to produce all its beer with renewable energy by 2025. According to Quartz, this would amount to 6 terawatt-hours of electricity from sustainable sources annually across markets Anheuser-Busch has a presence. The company announced last month it will officially start its sustainable mission in India. Anheuser-Busch’s Mysuru plant will be powered by up to 80 percent solar energy, Quartz reports. The brewer plans to buy between 75 percent and 85 percent of its electricity requirement through direct power-purchasing agreements. Quartz says that the remaining will come from on-site production facilities.

CPG BRANDS BRING DIGITAL TOOLS TO BRICK-AND-MORTAR STORES

CPG brands are racing toward digitization as e-commerce gains on brick-and-mortar stores. The latest item on their get-even list? Store shelves. Traditionally CPG companies like Coca-Cola have conducted manual audits and surveys to see how and where stores stock their products on shelves, even looking into how their goods are placed next to rivals’ and if any out-of-stock items have been replenished. Forbes reports that technology is increasingly replacing this process as CPG brands seek to bridge the gap between what they can see in stores and online. In fact, Coca-Cola plans to replace its manual audit with tools from software provider Trax, allowing product-shelf images to be taken on mobile phones using augmented reality, Forbes reports. According to the publication, a combination of image recognition, machine learning and artificial intelligence will be used to study the images and give the company faster insight into shelf patterns or changes. With the new technology, Coca-Cola will not only cut costs and time, but increase corporate-level marketplace surveys from two to six per year.

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SUPPLY SCAN

NEWS FROM ACROSS THE FOOD SUPPLY CHAIN Daily Updates at FoodLogistics.com

MICROSOFT PLANS FOR CHECKOUTFREE STORE

Microsoft is working to eliminate cashiers and checkout lines from its stores, a direct move to challenge Amazon’s automated grocery store, Reuters reports. Microsoft has allegedly been in talks with Walmart about a potential collaboration where the software company uses its systems to track what shoppers add to their carts, according to sources familiar with the matter. Since opening its highly automated store, Amazon Go, companies have been scrambling to prepare for the newest round of disruption. According to Reuters, some

companies have tested programs where customers can scan and bag each item as they shop, only to have received mixed results. Microsoft has also been amping up its artificial intelligence approach to help cut down on costs. Currently, Microsoft is working on attaching cameras to shopping carts to track customers’ items, Reuters reports. The company is also studying to see how smartphones play a role in the shopping experience.

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AGRICULTURE INDUSTRY FACES LABOR SHORTAGE

According to Bakersfield.com, competition for farmworkers has tightened so much that workers now earn $12 per hour, plus a bonus for high productivity. As the pay gets better, however, workers still think about leaving the field due to a lack of career development and promotions. The agriculture industry is starting to a see a challenge in maintaining workers, causing companies to face steep labor costs. Bakersfield.com reports that competition from farmers to the north and overall improvement to the economy is threatening to cut profits of local growing operations.

PREFERRED FREEZER EXPANDS COLD STORAGE IN LA Preferred Freezer Services (PFS) will satisfy the demand for modern and efficient cold storage warehousing services in the Los Angeles market with its newst facility, Big Bear Los Angeles. The facility will be located just minutes from downtown Los Angeles and will cover an entire city block, adding to the company’s expanding footprint. The building features 32 dock doors, all with levelers and seals. “We are thrilled to officially open the doors of our industry-leading public refrigerated warehouse in downtown Los Angeles,” says Mike Townsend, director of sales and operations for the Western Region. “The entire Los Angeles market area has been starved for a temperature-controlled warehouse which has the space to consolidate all their goods under one roof. Big Bear delivers just that, with nearly 95,000 frozen pallet spaces in a beautiful new facility.”

FOODLOGIQ TEAMS WITH INDUSTRY LEADERS FOR BLOCKCHAIN PILOT

FoodLogiQ is teaming up with a select group of industry leaders to launch a blockchain pilot. The project, set to kick off in the third-quarter of 2018, will research the opportunities and challenges of the technology within the food industry. Companies continue to flock to the potential benefits of blockchain to gain security and transparency within their supply chains. While the technology seems promising within the food and beverage industry, there is much left to be tested and validated on its real-world application within the food chain. “Virtually everyone has heard the claim that blockchain will revolutionize business and redefine companies and economies, but it is in its infantile stage within the food supply chain,” says FoodLogiQ Chief Technology Officer Charles Irizarry. “We are finding that companies are jumping into blockchain pilots without first understanding their business problems.” JULY 2018 | FOOD LOGISTICS

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CAMS SOFTWARE COMPANY PROFILE

PERISHABLES IN PERIL:

WHY MOST OUTBOUND TRANSPORTATION MANAGEMENT SYSTEMS FAIL IN GROCERY The 1% vs. The 99% Although you may live in a grocery transportation environment, delivery to supermarkets is relatively rare in the grand scheme of things. There are almost 2 million power units capable of pulling full-sized trailers licensed to drive in the US and another 13 million LTL trucks, yet there are only about 38,600 supermarkets. This means that far less than 1% of the trucks haul groceries to supermarkets. Most solution providers have designed shipper and carrier TMS systems for that other 99%—not for the 1% hauling groceries. To understand why generic systems stumble in grocery, it helps to know where they do well. The majority of TMSs come in one of two flavors: shipper and carrier. Shipper TMSs primarily handle shipping in non-asset based environments. Their goal is simply to ship freight from A to B as cheaply as possible. Shipper TMSs help shippers select carriers, tender loads, and reconcile freight charges, having the effect of working well as inbound systems, even for grocery. Trucking companies generally deploy carrier TMSs in asset-based environments. Carrier TMSs manage their customers, equipment and drivers. These systems typically feature driver scheduling capabilities, intermodal support, brokerage management and currency conversion. Both shipper and carrier TMSs are best suited for one-way shipping models and typically operate with several days of lead-time between when an order is placed and when it is shipped. But the outbound transportation process in grocery is distinct from any other industry for a number of key reasons. For one, grocery transportation is predominantly a round

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trip delivery model: Store clean-up responsibilities and lucrative backhauls, that avoid potentially wasteful return legs of a store delivery, are opportunities missed by systems geared to the 99% of transportation.

Food not freight Unlike freight, the lead-time between order cutoff and grocery delivery is only a matter of hours, not days. Because much of the product is perishable, supermarkets typically reside closer to their distribution centers. Grocery operations optimize orders in large batches then release them to the warehouse. Warehouse staff then select and load the product into trailers in the optimal sequence for delivery. Optimization has to handle constraints such as loading frozen product first, in the nose of the trailer, so it is closest to the refrigeration unit. This is just one of many grocery-specific idiosyncrasies that affect route optimization. On the warehouse floor, large grocery distribution centers often cross-dock general merchandise, dairy or bakery goods and blend them with outbound orders of dry grocery or produce. The timing and sequencing of cross-dock orders is often a complex manual process even though it is critical to the overall scheduling and efficiency of the operation; therefore visibility into such processes is a crucial component of any outbound TMS in grocery. In contrast to general trucking, grocery truckers travel to the same locations repeatedly. Drivers have to hit tight delivery windows varying by day of week and commodity type. Routing is constrained even further by restrictions and curfews for stores in urban areas. All these diverse variables call for the enhanced location management of a TMS specifically tailored to grocery. Additionally, large grocery fleets require an entirely different kind of driver management. These typically unionized environments—riddled with driver seniority nuances, bid schedules and other contractual peculiarities—can greatly affect optimization strategies.

An increasing majority of grocery companies now pay drivers via activity based compensation (ABC) rules based on custom-engineered labor standards, rather than hourly wages or mileage rates. As compensation rules becoming exceedingly more complex, systems unequipped with point-to-point mileage tables or MPH by hour of day will cause additional overhead for payroll. TMSs serving grocery must also interface with legacy order and warehouse management systems, on-board ELD systems, purchase order systems, ERP systems, etc.— each interface bogging down implementation efforts and introducing the risk of yet another breakpoint.

Prospero: 100% for the 1% After over 20 years of deploying to over 150 major grocery distribution centers across the country with a 100% success rate, a dedicated systems provider developed Prospero, a suite of transportation management tools purpose-built for the grocery industry. As a comprehensive solution, Prospero features three major, integrated systems: Outbound, Mobi and Inbound. Prospero Outbound sits at the core of operations and supports dynamic route optimization, online real-time dispatch, ABC driver payroll, backhaul optimization, salvage optimization, reporting and more. From Outbound, dispatchers dispatch trips directly to Prospero Mobi, an FMCSA-registered, certified ELD. In addition to real-time trip updates, Mobi handles DVIR and driver activity reporting. Lastly, for all product coming into your distribution centers, Prospero Inbound manages freight with LTL PO consolidation, tendering, carrier management, dock scheduling and freight reconciliation. With Prospero, all your assets—drivers, tractors, locations etc.—are managed in one location and integral data are shared in real-time. Never has it been easier to make the strategic, cost-saving decisions demanded by the logistics-intensive grocery industry. www.foodlogistics.com

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FOOD ON THE MOVE

LOGISTICS TRENDS IN OUR INDUSTRY

CANADIAN PACIFIC, CN RAMP UP FLEET FOLLOWING TRANSPORTATION MODERNIZATION ACT

Canadian Pacific Railway (CP) and Canadian National Railway (CN) are about to make a multi-million dollar investment in new hopper cars, Financial Post reports, a move farmers say will improve grain transport after a season that saw delays on shipments. CP will invest more than $500 million to purchase new high-capacity grain hopper cars over the next four years and will retain 500 by the end of the year. The railway plans to order 5,900 cars in total to remove all the low-capacity cars in its fleet. CN will acquire 1,000 new cars over the next two years to improve its aging fleet, Financial Post reports. The purchase is part of the railway’s $3.4 billion capital spending program.

DHL LAUNCHES IOT-ENABLED TRANSPORTATION SOLUTION

DHL has launched an innovative trucking solution that leverages Internet of Things (IoT) technology. DHL SmarTrucking equips trucks with IoT sensors to provide real-time data analysis for route optimization, reducing transit times by 50 percent and providing 95-percent reliability for real-time tracking. The IoT sensors are monitored through a centralized control tower, creating real-time temperature and consignment tracking for perishable goods.

NEW UBER FREIGHT FEATURE TARGETS SMALL COMPANIES

Uber Freight added a new feature to its mobile app last month that targets small trucking fleets. The new “fleet mode” tool is specifically aimed at companies with 10 or less trucks. The tool allows dispatchers to find and assign loads based on multiple drivers’ availability without having to leave the app, Trucks.com reports. The publication says that nearly 90 percent of all motor carriers in the U.S. have six or fewer trucks. The app was originally intended for owners with one truck. Uber’s intention for the “fleet mode” tool is to help improve communication between dispatchers and drivers who can connect through the app. Once the dispatcher assigns a load to drivers, they will receive a notification and can respond if they’re able to haul it or not, Trucks.com reports.

DAT SOLUTIONS’ MONTHLY FREIGHT REPORT

Truckload Rates at Record Highs Mark Montague is an industry rate analyst for DAT Solutions, which operates the DAT network of load boards and RateView rate-analysis tool. He has applied his expertise to logistics, rates, and routing for more than 30 years. Montague is based in Portland, Oregon. For information, visit www.dat.com.

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Truckload capacity tends to tighten during the first week of June, when the annual Roadcheck truck and bus inspection blitz is held across North America. On average, 17 vehicles are inspected every minute, and one in four is found to have at least one out-of-service violation. This was the first Roadcheck event with the ELD mandate in full effect, and not coincidentally, inspectors were focused on hoursof-service enforcement. Some truckers took a mini-vacation that week. For instance, the number of available loads on DAT load boards was up 27 percent during the

FOOD LOGISTICS | JULY 2018

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By Mark Montague

first week of June compared to the previous week, which included the Memorial Day holiday. That’s in line with expectations when you compare a five-day workweek to one with just four business days. Even with the extra day and 27 percent more available loads, the number of truck posts was unchanged week-over-week.

As a result, national average spot rates were the highest they’ve been since January, when the spot market was first adjusting to the ELD mandate. By mid-June, spot rates were on track to achieve their highest-ever monthly average. Refrigerated loads averaged $2.70/mile, and there were 12.6 available spot loads for every available truck. Those are national averages—the demand for trucks is higher in areas where produce harvests are coming online. As we head deeper into the summer, it appears that the capacity crunch isn’t due to truckers taking a holiday. Shippers just have a lot of freight to move—and carriers are getting top-dollar to do it.

www.foodlogistics.com

7/2/18 3:20 PM


FOOD ON THE MOVE

LOGISTICS TRENDS IN OUR INDUSTRY

AMERICAN AIRLINES OFFERS FIRST US TO CUBA CARGO SERVICE

American Airlines has become the first U.S. passenger carrier to offer cargo product in Cuba with the launch of a mail service that extends to and from Havana’s Jose Marti International. According to Aircargonews, American operates four daily flights from Miami and a daily flight from Charlotte Douglas International Airport. Come October, the daily flights from Miami are expected to increase to five times a day. With the new arrangement, each country can operate 20 daily round-trip flights between the U.S. and Havana, Aircargonews reports. The airlines can have up to 10 daily round trip flights between the U.S. and each of Cuba’s other nine international airports.

CONSUMER PRICES HIT BY TRUCKING SHORTAGE

Retailers aren’t the only ones feeling the drive shortage squeeze. Consumers are also starting to see an effect on their wallets, as the American Trucking Associations (ATA) most recent report estimates a shortage of more than 50,000 truck drivers across the United States. Amazon recently raised its Prime membership to $119 a year from $99 due to high shipping costs. Cream of Wheat, Kellogg’s and Coca-Cola agree that the rising costs of freight have caused their prices to increase as well. The driver shortage isn’t caused solely by e-commerce, however. According to Bob Costello, chief economist at ATA, there’s a demographic problem, with old age, a lack of female drivers s and the ELD mandate all contributing. The trucking industry is also preparing itself for electric semis and autonomous vehicles. CNBC reports that self-driving cars could potentially cost drivers up to 25,000 jobs a month. The ATA says that the country will need 898,000 more drivers over the next 10 years to keep up with growth and demand.

PORT OF LONG BEACH APPROVES $982 MILLION BUDGET

The Long Beach Board of Harbor Commissioners has approved a $982 million budget for the port’s upcoming fiscal year. Nearly 70 percent of the spending will be focused on modernization and other construction projects. Starting Oct. 1, the department will spend $695 million on the Gerald Desmond Bridge Replacement and $333 million on the Middle Harbor Terminal redevelopment, Port Technology reports. The Harbor Department doesn’t receive taxpayer revenue to operate. The port’s budget is funded by income from terminal leases and fees for moving cargo throughout the port. Once the Harbor Commission approves the budget, it will move to the Long Beach City Council for consideration. www.foodlogistics.com

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MAERSK PILOTS FIRST BLOCKCHAINBASED MARINE INSURANCE PLATFORM AP Moller-Maersk has introduced the first blockchain-based marine insurance platform, Market Exclusive reports. Insurwave stems from a collaboration with Guardtime, Ernst & Young and Maersk. The technology was developed on a distributed notebook technology that is standard for employing blockchain technology. According to Market Exclusive, the platform will adhere to global insurance standards. Insurwave will manage 1,000 ships in its first year and will support around 500,000 digital bookkeeping operations. Market Exclusive reports that Maersk first took trial of the insurance system for its marine platform and will use it for its marine hull insurance. CEO of Willis Towers Watson, Alastair Swift believes that blockchain technology will “revolutionize insurance.”

REGULATORY REVISIONS PROPOSED FOR LIVESTOCK TRUCKERS

The National Pork Producers Council is backing legislation that would revise existing trucking regulations they say hinder drivers hauling livestock. The Modernizing Agricultural Transportation Act would establish a working group at the Department of Transportation (DOT) to examine the impacts of the recently enacted federal hours of service rules and the electronic logging device (ELD) regulations. The group would be charged with identifying obstacles to the transport of livestock, insects and other perishable agriculture commodities and developing a set of guidelines to improve those challenges. If it passes, the bill would suspend the ELD regulation for commercial motor vehicles hauling livestock, insects or perishable agricultural commodities until the proposed guidelines are approved. JULY 2018 | FOOD LOGISTICS

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7/2/18 3:20 PM


COOL INSIGHTS

BY JULIEN BRUN, ROBERTO MATTOS

FOOD LOSSES IN VIETNAM:

THE SHOCKING REALITY

F

Julien Brun is the managing partner at CEL Consulting. Roberto Mattos is a senior consultant.

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ood loss and waste is a major issue worldwide, with deep socio-economic and environmental impacts—and Vietnam is no exception. During the first quarter of 2018, CEL Consulting developed a pioneering survey to estimate food losses among three food chain sectors in Vietnam’s major agricultural regions: fruits and vegetables, livestock, and fish and seafood. The scope of the survey encompasses losses during production and post-harvest handling, storage and transportation activities. It excludes losses from processing and food waste by retailers and consumers. The survey revealed that, on average, a quarter of the food produced within the three studied sectors is lost before it actually reaches processing plants or distribution centers. Total losses are estimated at 8.8 million tons or $3.9 billion (2 percent of Vietnam GDP). Considering that Vietnam has 117,100 kilometers of agricultural land, a 25 percent loss represents 29,696 kilometers, which is 9 percent of Vietnam’s total land mass. The fruits and vegetables group accounts for the worst food loss

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percentage (32 percent of production). This represents approximately 7.3 million tons of fruits and vegetables lost per year, or if converted into bananas, 168 million units lost per day. For the meat industry, losses reach 14 percent (roughly 694,000 tons per year), which can be translated into an equivalent of around 2,000 cattle, 11,000 pigs and 139,000 chickens per day. In the fish and seafood group, losses represent 12 percent of production (about 804,000 tons per year). Considering that a pangasius fish has an average weight of 0.95 kilograms, total loss is equivalent to losing 2.3 million pangasius per day.

Root Issues of Food Loss in Vietnam Fragmentation of its agricultural production into micro-farms is one major cause of food losses. For instance, the average fruit farm in Vietnam is approximately 0.4 hectare (or about 43,000 square feet), more than 400 times smaller than a U.S. fruit farm. This configuration leads to a complex and inefficient logistics system: hundreds of small trucks and boats, lack of proper storage and cooling infrastructure, and numerous middlemen that add little value to the trade. Besides, a large majority of farmers lack access to credit that could facilitate investments in improving poor production and harvesting conditions. Also, existing packing and handling solutions in the agriculture chain are basic and low grade (large bags, recycled carton boxes, polystyrene boxes, bulk), leading to spoilage during transfers. An affordable and efficient packaging solution is yet to be designed

and must be developed according to the type of commodities. For instance, when fruits and vegetables are packed too tight or with many layers, they end up damaging themselves. In contrast, if packed too loose they will be damaged by the impacts during road transit. Most concerning of all, however, is Vietnam’s lack of cold chain solutions, which are used to maintain food at a desired temperature to avoid premature spoiling and to extend the product’s shelf life. According to the CEL survey, only 14 percent of Vietnam’s producers are using some type of cold chain solution. Despite the fact that cold storage capacity in Vietnam quadrupled in the last 10 years, refrigerated transport is still in its infancy with a limited number of solid actors in the market. Furthermore, the general trade channel, which is composed of family businesses and small-scale traders (e.g., distributors, wet markets, mom-and-pop stores) is still highly predominant in Vietnam, accounting for 94 percent of total grocery retail sales. Most of them operate food product logistics under inappropriate storage and transport conditions. In this context, they usually lack awareness of the financial benefits in reducing food losses and waste for their business. On the consumer side, Vietnamese are still unaware of food loss issues and the importance and benefits of higher standards for the entire supply chain (not only at the farm or retail level). For instance, the absence of food safety standards renders an indirect but significant impact on the food loss problem. www.foodlogistics.com

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150 MILLION HUNGRY CUSTOMERS WITHIN A DAY’S DRIVE North Carolina boasts two deep-water seaports, four international airports, the country’s largest consolidated rail system and 90,000 miles of open road. This is where an appetite for growth meets an eye for expansion.

E C O N O M I C D E V E L O P M E N T PA R T N E R S H I P O F N O R T H C A R O L I N A

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COVER STORY

BY LARA L. SOWINSKI

Some retailers are getting the message, but others are scrambling to catch up.

CONSUMERS CALL THE SHOTS WHEN IT COMES TO ONLINE GROCERY SHOPPING

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onsumers are a powerful influence on the food supply chain. Their desire for a wide array of fresh, healthy foods year round—combined with easier and convenient shopping options, including online grocery ordering and home delivery—are reshaping where food is sourced, how it is grown and/or manufactured, and ultimately how and where food is purchased from retailers. Moreover, these consumer-driven demands have implications for the logistics providers and others that support the food supply chain with respect to handling (especially perishable foods), transportation, food safety and last-mile delivery. Sylvain Perrier, president and CEO of Mercatus, a leading

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provider in digital solutions for grocery, describes the current state of disruption underway in the online grocery sector as a kind of “hyper-Uberization.” Consumers are demanding more efficiency, real-time response and transparency in the process, and it’s having a big impact on grocers, CPGs, farmers and suppliers, he says. “Not only do consumers want home delivery, but they still want the ability to shop for groceries in the store, or pickup inside the store or curbside,” he adds. Meanwhile, the desire for more fresh foods and the rising popularity of meal kits are adding to the pressure on grocers and logistics providers. At the same time, the profile of today’s online grocery shopper may be surprising, according to surveys conducted by Mercatus (Insights Into Grocery eCommerce 2016). For example, in a survey of more than 1,000 female shoppers who made online purchases, 69 percent are between the ages of 40 and 60 years old, or 60 and above. Surprisingly, there’s also an equal distribution of those who want home delivery and those who want to pickup their groceries in the store, says Perrier, “and of those that want delivery, 46 percent want it the same day.” The shoppers in this age range tend to fall into three different groups, he says. One is made up of people with fixed incomes who like to shop online, so long as it’s easy, because it helps them stay within their budget. They also prefer to walk into the store to pickup their grocery order for exercise and socialization. The second group is made up of those who have a younger family member buying groceries online for them, and the family member is typically doing it remotely. The third group is typically nurses and others who work in an assisted

living community, who are making online grocery orders for the elderly residents in the facility. Online grocery shopping in rural areas is also growing faster than in urban areas, in part because younger shoppers in urban areas tend to buy groceries and carry them home. The company’s research revealed other noteworthy trends. Perrier says people are willing to pay a premium to get what they want. “We found that 50 percent of the consumers we surveyed were willing to pay up to $10 for the convenience of home grocery delivery, and close to 20 percent were willing to pay up to $25 dollars or more to have groceries delivered the same day,” he says. And, these aren’t just consumers living in New York or California, he adds, but Middle America. They are also not in high-income brackets, “but people making $65,000 to $84,000 a year.”

70% OF THOSE SURVEYED BY MERCATUS

SHOP AT THEIR FAVORITE GROCERY STORE ONCE PER WEEK OR MORE, WHILE ALMOST ALL

89%

REPORTED SHOPPING AT THEIR FAVORITE STORE AT LEAST ONCE EVERY TWO WEEKS

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COVER STORY

continued

While consumer demands are moving fast, the response from traditional grocers hasn’t kept pace in some instances. Some traditional grocery chains have been caught flat-footed, and rather than taking a more thoughtful approach are trying anything they can to catch up and appease the consumer. “It’s more of an afterthought,” remarks Perrier. "It’s not intrinsically tied to the strategy of the business, so it becomes more like a ‘me too’ approach in some cases.” However, “We’re slowly beginning to see some really old-school retailers in the heartland start to come around,” he adds. Finding a solution for last-mile delivery remains a challenge, even for Amazon. Yet, there’s another, even more important reason for Amazon to embed itself in the online grocery space, suggests Perrier. “It’s a big data play for Amazon,” he explains. Most everyone buys groceries, even those who eat out a lot or opt for take-out. A person or household’s preferences and grocery buying habits tell a lot about the other kinds of product(s) they are likely to purchase, says Perrier. Amazon’s acquisition of Whole Foods and incentives and discounts for Prime members are also helping the company gain even richer data—and on consumers from across the United States. The data play isn’t an entirely new concept. Banks used to do something similar—albeit more simple—years ago, he says. For instance, when a woman opened a long-term

OF THE 97% OF RESPONDENTS WHO HAVE PURCHASED ONLINE,

69%

ARE BETWEEN THE AGES OF 40 TO 60 YEARS OLD, OR 60 AND ABOVE. THIS SUGGESTS THAT THE MAJORITY OF TODAY’S E-COMMERCE ADOPTERS ARE FROM GENERATION X

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BRICK OR CLICK? 91% agree more and more retailers will continue to turn stores into fulfillment centers

86% agree click and collect will become the default delivery method

76% of retailers surveyed use store inventory to fulfill orders

68% expect store use of inventory to fulfill orders to grow in the next five years

As retailers across all segments look to effectively respond to their omnichannel consumers, they are leveraging one of their greatest assets: their fleet of stores. The following excerpt is taken from Zebra Technologies’ Future of Fulfillment Vision Study… Merchants are diving into “ship from store,” retrofitting locations to double as online fulfillment centers and shrinking selling space to accommodate e-commerce pickups and returns. The study revealed that 76 percent of retailers use store inventory to fill online orders, and six out of 10 expect that to grow. In fact, some of the biggest retailers now fill digital orders from every one of their brick-and-mortar locations. The strategy taps stores to fulfill digital purchases to defray the high transportation costs of online orders, which have been eating into retail profit margins. By offering click and collect, retailers skirt the cost of delivering to shoppers’ homes, while encouraging add-on sales. That’s because consumers that come in to pick up their digital order often end up making impulse purchases. Industry leaders are also calculating that a network of stores can get digital orders faster and more efficiently to the consumer than a handful of centralized warehouses. This is particularly critical amid the growing consumer expectation for same-day or even two-hour delivery. Optimizing the distribution network is key to omnichannel success. Meeting the unfolding demands of the omnichannel retail landscape is also fostering newfound collaborations between manufacturers and retailers. Suppliers are increasingly drop shipping merchandise directly to consumers for their retail partners’ online operations. The study revealed that worldwide 32 percent of retailers request drop ship from manufacturers, and 73 percent of manufacturers expect this to increase up to 10 percent over the next five years.

education savings plan for her newborn child, she would likely receive a pamphlet in the mail from her bank a few weeks later asking her to buy life insurance.

There’s also something to glean from membership and loyalty programs. According to Mercatus, “research suggests that it costs a business as much as five to 10 times more to acquire a new customer than it does to sell to an existing one. It is also estimated that current customers spend 67 percent more than new customers. In light of these statistics, loyalty programs that reward buyers for sticking with brands have grown in popularity, and the findings [of several surveys conducted by Mercatus] suggest that respondents are reaping the www.foodlogistics.com

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COVER STORY

continued

benefits by becoming members of such programs.” In its Insights Into Grocery eCommerce 2016 survey, Mercatus found that 72 percent of those polled belonged to some form of grocery rewards program. “These findings suggest that if grocers can meet consumer demands by offering incentives and better value for shoppers, they will ultimately be rewarded with greater customer allegiance,” concluded the company. Although consumers are attracted to rewards WHEN CONSIDERING THE POTENTIAL FEATURES AND programs, they’re FUNCTIONALITIES OF ONLINE more fickle when GROCERY SHOPPING, RESPONDENTS it comes to brand RANKED CONTENT NAVIGATION— loyalty, says THE ABILITY TO QUICKLY Perrier. “Brand SEARCH FOR PRODUCTS influence is AND BROWSE PRODUCTS BY becoming a big DEPARTMENT, CATEGORY, challenge,” he BRAND AND PRICE says. “If the con—AS MOST IMPORTANT. sumer can get something faster, quicker, fresher and for less money, then they will change brands.” Meanwhile, the rest of the grocery sector continues to grapple with last-mile delivery, and “none of them are making money in this area, because they’re taking an allin approach,” says Perrier. In other

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words, grocers need to look closely at their specific market and evaluate whether home delivery is most important, or if pickup inside the store or curbside is best, and create the right fulfillment strategy. Industry research from Mercatus finds that in the digital age, “shoppers will use whatever channel best suits their needs for convenience, choice and value, which means it’s critical that retailers leverage both physical and digital assets to optimize online and in-store customer experiences.” The company proposes two ways for retailers to remain competitive in today’s digital environment: 1. Provide value across channels. Regardless of channel, key drivers behind consumer purchases remain the same: price, quality, convenience and product selection. Retailers must demonstrate their ability to deliver these values in every interaction—whether it takes place online or in-store. 2. Consider channels holistically. Online and in-store are inherently different formats, with unique uses, expectations, challenges and economics. When developing a strategy, retailers must consider the entire retail landscape and appreciate the differences between channels. Online and offline tactics should complement one another to drive increased engagement and sales across all channels.

Finally, “understanding consumers’ wants and needs is crucial when developing an omnichannel strategy and experience,” states Mercatus. “However, while today’s consumers demand a more personalized shopping experience, retailers need to prioritize which initiatives they wish to execute and determine how much of an investment they’re willing to make. This requires a deep understanding of the decisions that shoppers make along the path to purchase, the types of information they seek to inform those decisions, and where and how they choose to make their purchases. Once grocers are armed with this knowledge, they can use it to personalize and align content to meet shoppers’ unique needs.”

Grocery Leaders and Laggards When it comes to the impact of e-commerce in the grocery sector, “today’s consumers are causing a ripple effect all the way from the front-end of the grocery retailer all the way back to the food manufacturers. We are redefining the supply chain,” emphasizes Jim Hilton, global principal of manufacturing, transportation and logistics for Zebra Technologies. In Europe, it’s quite common to find grocers that use self-scanning to streamline the front-end of the grocery store. While the concept was novel five or six years ago, that’s changed significantly in recent years. Over the next few years, Hilton expects to see things “move pretty quickly” toward other technologies such as scanning as customers enter/exit the store and smart shopping carts as a way of continually streamlining the frontend of the grocery retailer. In the meantime, grocery retailers as a whole are not prepared for e-commerce and online grocery shopping, nor are manufacturers, retailers and logistics firms, in general. In Zebra’s Future of Fulfillment Vision Study, 89 percent of those polled agree that e-commerce is driving the need for faster delivery, www.foodlogistics.com

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spiking concern and investment. Yet, only 66 percent of respondents estimate that their current inventories are accurate. Even more shocking, the study found that 55 percent of organizations are still using pen and paper to manage omnichannel logistics. Hilton says that companies are failing when it comes to order fulfillment, too. Specifically, companies polled for the study believe that if they attained 75 percent accuracy that would be sufficient. Hilton admits he was surprised by this response. “They are saying that, ‘If I miss one out of four orders, that’s going to be good enough.’ But, that’s not going to be good enough. It’s not even close. It really should be at 95 percent accuracy or better,” he says, adding that ultimately, “this drive for accuracy is going to push people off of paper.” Furthermore, retailers lack confidence in their inventory counts and out-of-stocks remain a problem for the grocery sector. So much so, that some retailers limit the number of SKUs they offer for online orders to help reduce the chance of an item being out-of-stock. Years ago, “we all thought that RFID was going to solve out-ofstocks,” says Hilton. But, the price of RFID tags was prohibitive for mass adoption, particularly in the grocery sector, while item-level RFID was equally cost prohibitive, he says. However, machine vision and robotics have the potential to dramatically reduce out-of-stocks, says Hilton. Walmart is currently testing robots manufactured by Bossa Nova Robotics in 50 of its U.S. stores for inventory monitoring to see if robots can do it more accurately and cheaper than humans. Target is using robots built by Simbe Robotics in some of its stores to scan shelves and maintain proper inventory levels. Disruption driven by consumers and technology innovations are ushering in permanent changes that cannot be rolled back, explains Hilton, and the industry had best start to embrace it. www.foodlogistics.com

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COVER STORY

BY HENRY CANITZ

USING SOCIAL SENTIMENT

TO DRIVE SUPPLY CHAIN PLANNING

T

Sentiment Based Plan

Actual Sales

1,400 1,200 1,000 800 600

Source: Logility

400 200 0 35 ek we

34 ek we

33 ek we

32 ek we

31 ek we

30 ek we

29 ek we

28 ek we

27 ek we

26 ek we

25 ek we

24 ek we

23 ek we

22 ek we

21 ek we

20 ek we

19 ek we

18 ek we

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Basic Demand Plan

1,600

17 ek we

22

DEMAND PLANNING FIGURE 2

1,800

16 ek we

Henry Canitz is the product marketing and business development director at Logility. He brings more than 25 years of experience building high-performance supply chains. This experience includes evaluating, selecting, implementing, using and marketing supply chain technology.

he food and beverage industry is under extreme pressure to reduce costs, improve customer service and drive incremental revenue. To stay ahead of changing consumer tastes, capture new market share and grow revenue, food and beverage companies find they must introduce new products at a faster rate than ever before. More products distributed through more channels may improve customer satisfaction and increase revenue, while also creating unintended consequences such as lower forecast accuracy, higher total inventory, increased distressed inventory and lower in-stock availability. New product introductions often have limited demand histories to base future projections and can display both erratic and localized demand patterns. In today’s connected and always-on world, the impact

of a social post can quickly and significantly impact the demand for a new product. Celebrities, for example, often serve as arbiters of taste, style and public opinion. A positive tweet from one can send demand soaring, while a negative post can quickly drive a product out of the market. The effects of social media on business has led to an emerging practice of measuring the emotions behind social media mentions—social sentiment. Social sentiment measures the tone of the message and assigns a value or score to it based on several factors such as: is the comment very positive, positive, neutral, negative or very negative? Without sentiment, data can be misleading. Just because you receive a high volume of mentions following the launch of a new product does not necessarily mean the new product has been well-received. For any size company the process of manually sorting through large volumes of data to determine sentiment can be a significant time commitment. Through the use of artificial intelligence (AI), it is now feasible to capture and mine social media data to determine social

sentiment and then extend this information to show the impact on demand to help supply chain teams more accurately plan their operations. Today’s machine learning algorithms have the ability to correctly categorize the majority of social media sentiment. As these solutions work through more data, they are able to learn the differences between humor, sarcasm, irony and so on to improve their success. Examples where social sentiment can impact operations: • Evaluate the health of a brand: An understanding of how your target market feels about your company, product and services through analysis of overall sentiment can provide valuable insight into the health of your brand. • Address a crisis: Analysis of social sentiment might reveal a spike in negative posts and provide an early warning to a potential product or service issue. Through alerts and analysis, the root cause of the issue can be uncovered and corrected. • Research the competition: Social sentiment analysis can help you understand how you are positioned against the competition. • Improve demand prediction: Companies can now use the "Voice of the Consumer" to drive improvements in forecasting and inventory positioning.

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SENTIMENT COUNT FIGURE 1 PRODUCTS

POSITIVE

NEGATIVE

NEUTRAL

OVERALL

37 38 26 18 23 21 16 20 16 14 11 340

0 12 4 1 4 7 3 4 7 4 2 108

66 60 39 58 62 60 55 65 67 47 44 1,436

17.48 16.19 12.85 12.57 11.14 8.87 8.05 7.44 6.72 6.48 6.26 144.01

Another IPA Bedtime Dark Lager Once a Year Deep Stout Swinging Stout Porter Bailer Black Angry Ale Enlightened Tuesday Tipper All

Social Sentiment for Food & Beverage For a food and beverage manufacturer, social sentiment analysis can help influence and improve product forecasts and new product introductions. At first glance, looking at the conversations for a beverage category on Twitter can be quite daunting. The challenge is separating the noise, evaluating relevant posts and developing a sentiment score. Algorithms process each tweet, evaluate the sentiment of the text and then sort the tweets into positive, negative and neutral sentiment (see Figure 1). Over time the machine learning system gets smarter and more detailed in its understanding of this Twitter data. As more tweets are evaluated, the system automatically refines its categorization values and sentiment scores. This same data can be used to evaluate the potential sources of risk such as competitive new product introductions, supplier challenges or shifts in consumer tastes. The food and beverage manufacturer can now use the newly created sentiment score in the demand planning process to improve forecast accuracy and as an input to the development and launch of new products. For example, the forecast for a product with a highly positive social sentiment may be increased to reflect higher-than-expected demand (see Figure 2). Sentiment data is updated weekly to catch changes quickly. Sometimes all it takes is a famous person tweeting about a product to drastically change demand. When introducing new products, www.foodlogistics.com

FLOG0718_16-23_CoverStory.indd 23

these machine learning clustering techniques can also be used to identify existing groups of look-alike products. A new product is associated with an existing product cluster based on product attributes and assigned a starting sentiment score based on the product cluster score. Sentiment scores can then help to determine when and where a new product should be launched and the likely base demand and launch curve. The food and beverage industry is one of the world’s most highly competitive and socially visible business sectors. Creating accurate forecasts can be challenging as customer tastes change frequently forcing a constant stream of new product introductions. Small improvements in forecast accuracy can lead to big gains in manufacturing efficiencies, lower inventory, less distressed product and higher fill rates— all of which drive top- and bottom-line improvements. Although the use of social media to improve supply chain planning is still very new, the potential impact to highly competitive industries could be significant. Food and beverage supply chain leaders should actively investigate how social media and analytics can improve their operations.

Call us at 877.724.2327 or email info@ssi-schaefer.us to discuss.

JULY 2018 | FOOD LOGISTICS

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SPECIAL REPORT

BY AMY WUNDERLIN

CONSUMERS SHAPE NEW GROCERY FULFILLMENT STRATEGIES A growing mix of brick-andmortar and e-commerce options is forcing food retailers to consider an omnichannel approach to fulfillment.

The change in consumer demand is causing grocery to take another look at how to

meet consumer needs.” Matt Rivenbark, executive sales manager, SSI Schaefer Systems

24

E

merging trends and channels are changing the way shoppers buy groceries, and in turn, shaping how retailers approach fulfillment and distribution. According to Brian C. Neuwirth, vice president of sales and marketing at UNEX Manufacturing, today’s retailers and grocers increasingly must consider where and how consumers want to buy goods, where they want to receive food and how they want to receive food. “Stores are reacting and dealing with changing consumer behavior by asking, ‘does somebody want to walk into the store? Do they want to drive up to the store? Do they want to have the store drive it to them?’ And all of those realities  The Roller change how material Rack by UNEX is is distributed either to the customer or to the used in many store,” Neuwirth says. distribution centers to The approach to speed up the answering those order picking process. questions is unique to each retailer. While the majority of groceries are still purchased at brick-and-mortar locations, options such as meal kits and e-commerce (or a mix of all three) are growing. “The change in consumer demand is causing grocery to take another look at how to meet consumer needs,” says Matt Rivenbark, executive sales manager, SSI Schaefer Systems. “Food retail in general has worked seamlessly for decades, and now, e-commerce and meal-kit

FOOD LOGISTICS | JULY 2018

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delivery has everyone rethinking their fulfillment strategies to meet these new demands. “Plus, most retailers are looking at ways to streamline processes while they look at making these changes,” Rivenbark adds. “Trying to meet this e-commerce growth with traditional grocery distribution isn’t ideal. Most grocers today have to switch their fulfillment strategies to compete with large e-commerce players for customers who

want convenience and meet the demands of consumers who want complete meals delivered.”

An Omnichannel Approach Many traditional brick-and-mortar retailers have or are transitioning to an omnichannel approach, where they can maintain a pleasant in-store shopping experience while still competing with e-commerce and meal-kit providers. An omnichannel approach, however, creates a distinct set of challenges. For example it has introduced a new style of picking called piece picking, which can be extremely expensive. “Piece picking is something that retail and department stores have been doing some time

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for e-commerce, but it can be very foreign to grocers,” explains Rivenbark. “Grocers have to completely adapt the way they see fulfillment for e-commerce. Picking a case and getting ready for distribution to storefronts is a lot different than a traditional retail pick—and it’s much more expensive of a process. Grocers are having trouble figuring out how to best to deal with that.” So how can today’s grocery stores maintain an affordable yet efficient omnichannel fulfillment strategy? Rivenbark suggests a little bit of automation, specifically shuttle solutions. “Grocers can use shuttles for both case-picking operations as well as picking individual units,” he explains. “It’s the most efficient way because you’re able to utilize a small area to pick a lot of SKU’s and with a lot less people than in a traditional type of picking environment.” With traditional picking, Rivenbark explains, employees walk up and down a warehouse picking each SKU from a pallet on the floor or from handstacks. Shuttle solutions deliver the product directly to the operator for a faster more efficient pick, instead of the operator having to walk up and down warehouse aisles. An omnichannel solution is also effective in picking fresh foods,

 Retailers which is another can challenge driven by achieve an consumer demand omnichannel that is unique to the approach grocery store. with automated “Large clothing shuttle chains are not faced solutions. with having to keep items cold, frozen or fresh,” adds Rivenbark. “It is a special challenge that grocers have.” Currently, to fulfill orders from multiple channels, grocers use storefront employees to shop the floor with large totes and bins. This, Rivenbark says, negatively impacts consumer experience and even customer service. “Picking for e-commerce orders from the store isn’t an optimal use of in-store labor, but right now that’s what a lot of grocers are being forced to do in order to compete,” explains Rivenbark. “This is why many grocers are now searching for an omnichannel solution with smaller format distribution centers (DC) or wholesalers to put the picking back where it belongs— in the DCs.” Some grocers, he adds, are even exploring delivery from DCs or delivering to pick-up areas where items are stored appropriately. “This entire process is then moved away from the brick-andmortar storefront aisles, so that consumers’ shopping experience remains pleasant,” he says.

Increased Capacity and Fulfillment Whatever you’re approach to fulfillment, a revamped back room is a certainty. UNEX, which focuses on the grocery market because of its high number of SKUs, is seeing big changes in the back room as more inventory is stored at the actual retail location. “You’re putting more inventory in the back obviously because it’s going out in multiple channels,” explains Neuwirth. “Some stores are fulfilling online orders from DCs, while other stores are fulfilling from the actual retail stores, so the solutions of 20 years ago—bringing product in, www.foodlogistics.com

FLOG0718_24-25_GroceryFufillment.indd 25

putting it on a shelf and waiting for somebody to walk down the aisle— no longer exists. They need more capacity in the back to make sure they have inventory out on the shelves in order to fulfill what’s going through their door, but also through the dotcom channel as well.” Rivenbark adds that increased SKUs and inventory levels are due in part thanks to e-commerce channels such as Amazon, where shoppers can easily purchase the exact brand or item they want. “That’s causing grocers to expand their inventory and what they’re offering,” he says. “And as consumers have more and more say on the situation, you’re going to see a lot more piece picking. You’re going to see a lot of grocers offering more SKUs than they are traditionally doing, and that may even create more problems as they try to create big spaces for all these additional SKUs, and that’s something with piece-pick-type operations you’re really able to streamline.”

Picking for

e-commerce orders isn’t an optimal use of in-store labor, but that’s what a lot of grocers are forced to do in order to compete.” Matt Rivenbark, executive sales manager, SSI Schaefer Systems

JULY 2018 | FOOD LOGISTICS

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TRANSERVICE LOGISTICS, INC. COMPANY PROFILE

UNIQUE OPERATING MODEL LEADS TO SUCCESS T

Taking over shop operations and offering customized solutions make Transervice oneof-a-kind.

ranservice Logistics Inc., headquartered in Lake Success, NY, has perfected a formula for long-term relationships. It begins with decentralization: having people in the field working close to the customer. 1,150 of the 1,200 Transervice employees work at the customers’ locations, according to Wolfgang Marschhauser, senior vice president of sales and marketing. That was the company’s original business model 49 years ago when it took over the leasing and maintenance of beverage vehicles for 7-Up and Royal Crown Cola. “Our goal was to maintain those trucks and handle their preventive maintenance so they wouldn’t break down,” he says.

The Customer Always First in Line In 1977, Transervice took over the maintenance of Canada Dry Bottling’s 200 beverage trucks, servicing them out of five locations. “While Canada Dry (Transervices oldest standing customer) was performing maintenance in-house, it was vending out a substantial portion of its repairs,” Marschhauser says. “We were able to present a financial and operational solution to them where we maintained their owned fleet. They continued to own their trucks but we put in the technicians, shop tooling and inventories to maintain their trucks.” However, Transervice did not

displace the existing maintenance staff. Marschhauser explains, “Our model has always been to look at the people who are in place because they have experience with the equipment, the industry and are familiar with the customer’s operation.” Transervice empowers its on-site employees including managers with oversite responsibility. “Our managers are in the office next to their managers and our employees participate in strategic planning meetings with our customers,” Marschhauser says. Transervice brings process, efficiencies and buying power to the operations it takes over. Marschhauser says, “One big benefit of having Transervice manage a shop is that the dedicated shops serve that customer’s vehicles only.”

Customized Programs for the Food Service Industry Following successes in the beverage industry, Transervice branched out into the food market with transportation and fleet operations for Waldbaums and A&P. In 1989 it added Wakefern Food Corp., which is owned by and services ShopRite, as a customer. Transervice offers a full range

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FOOD LOGISTICS | JULY 2018

of options to customers including contract maintenance, leasing, warranty administration, safety training, equipment disposal and fuel tax reporting. Dedicated contract carriage is another of the company’s capabilities. In 1998, the company began servicing its first Kroger location in Indianapolis where it provided maintenance for the company’s tractors, trailers and MHE. Shortly thereafter, it began providing logistical services by employing drivers who distribute Kroger’s goods from the DC to the Kroger stores. In 2004, Transervice was awarded Kroger’s King Soopers’ Denver, CO location. “Many of the company’s trailers are parked off site, so we service them via specially designed mobile maintenance units,” Marschhauser explains. In 2007, Transervice added Kroger’s Louisville, KY facility where the company provides vehicle maintenance, repair and drivers and has created a full logistics partnership. Transervice added vehicle maintenance operations at the Melrose Park, IL operation of Jewel-Osco (a division of Albertsons) in 2011. It also handles maintenance for Western Beef, a grocery and meat distributor with stores in the New www.foodlogistics.com

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York metropolitan area and provides full-service leasing and maintenance for two California locations of Performance Food Group. Flexibility is another factor that differentiates Transervice. “We customize each operation to the needs of that location,” Marschhauser explains. “Some customers’ trucks are used on multiple shifts, some operate 24 hours a day/7 days a week and others work Monday through Friday. We will staff so maintenance can be done when it’s convenient for the customer.”

Technology Investments to Meet Ever-changing Needs Technology plays a huge role in ensuring a quality outcome, specifically being able to monitor things like reefer temperature to ensure the foods being transported are kept at the proper temperature throughout their journey. The trucking industry has responded to many changes related to emissions regulations that have added complexity to vehicles and have resulted in the need for technology investments in the shop in order to service these more complex vehicles effectively. Transervice helps its customers navigate the spec’ing process to ensure vehicles comply with regulations, are as fuel efficient as possible and operate in an optimal manner while remaining cost-effective. Once the proper equipment is procured, Transervice makes sure it is maintained properly and this has meant significant investments in diagnostic tools along with technician training. The final step in ensuring a cost-effective operation for its customers involves providing appropriate training for its drivers and investing in technology that helps drivers be safer. Transervice can also help with support services such as route optimization and asset utilization as well as data analytics. “Data is coming from everywhere,” Marschhauser says. “There www.foodlogistics.com

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are challenges coordinating all of the data in a meaningful way. Our systems and processes allow us to effectively obtain information and convert it into executable and beneficial actions.” Whether it is helping to optimize fleets, maintaining rolling stock and MHE, leasing equipment or providing drivers, Transervice has been dedicated to creating specialized

programs to ensure the success of its customers in the food and beverage industries, as well as those in a host of other industries. Transervice’s unique operating model – on-site, full disclosure, gain share operations – coupled with its ability to quickly react to changing market needs and customer demands leaves it well positioned to be successful for another half-century.

25,000 pieces of equipment owned, operated and/or maintained 1,200 field and corporate staff 120 dedicated locations in North America

Founded in 1969 Transervice has been the preferred choice of a growing number of North America’s leading companies who appreciate our approach to forming business relationships designed for long-term success. Transportation Fleet and Logistics Solutions Including: Contract Maintenance l Full-Service Leasing Dedicated Contract Carriage l Materials Handling Equipment Warranty Administration and Management Loss Control Initiatives and Programs

www.transervice.com 888.858.7570 l inquiry@transervice.com

JULY 2018 | FOOD LOGISTICS

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SPECIAL REPORT

EXCEPTIONAL SERVICE

A MUST IN TODAY’S COMPETITIVE RETAIL ENVIRONMENT Success will come to those retailers who address the dynamic online shopping experience and future consumer demands.

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he online shopper is changing, and a stellar customer experience from point of sale to post-purchase across all channels is now required to thrive in the competitive world of retail. The 2017 UPS Pulse of the Online Shopper survey reveals a changing retail landscape where online shoppers purchase more from international retailers, shop more on mobile devices and rely more on marketplaces. The sixth annual study, based on the input of more than 5,189 qualified comScore panelists who made at least two online purchases in a typical three-month period, found these behavioral shifts are driven by the desire for better prices, unique products and increased convenience. To meet those desires and ultimately succeed in today’s competitive environment, the authors of the survey say retailers must exceed service standards. According to the survey, exceptional service standards include

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logistics, which play an even greater ees are prepared to assist conrole in the consumer experience sumers throughout the shopping now as shoppers expect faster ship- experience. In fact, 42 percent of ping and flexible delivery options in- survey respondents rate the ability cluding in-store pickup to contact customer and traditional in-home service in checkout delivery, as well as an as important. equally efficient returns While technology process. has enabled online RATE THE “A winning retail shoppers to adopt model provides outa do-it-yourself apABILITY TO standing service with proach to customer CONTACT delivery superiority service, there is still CUSTOMER and features choice as room for improveSERVICE the guiding principle IN CHECKOUT ment. Only 55 throughout the shopAS IMPORTANT percent of shoppers ping experience,” the report satisfaction survey’s authors note. with access to customer service information and Customer Service finding contact options. Top-performing retailers recogTechnology also offers new nize that customer service matters resources for online shoppers, more than ever and can differsuch as social media and live chat. entiate their brand. While online According to the survey, 30 percent shoppers continue to gravitate to of shoppers surveyed use Faceself-service options, savvy organibook to seek customer service, 30 zations invest heavily in training to percent use Twitter, 22 percent use ensure all customer-facing employSnapchat, 15 percent use Instagram

42%

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CONTROLLING THE HEAT. More efficient temperature management.

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• TES ABSORBS UP TO 85% OF HEAT INFILTRATION

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• MORE STABLE TEMPERATURES

protects against heat & reduces energy costs.

• PROVEN ENERGY REDUCTION OVER 25%

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SPECIAL REPORT

42%

CITE LIVE CHAT AS AN IMPORTANT OPTION WHEN SHOPPING ONLINE

continued

and 14 percent use Pinterest. Satisfaction with access to live chat in checkout is down from 48 percent satisfaction in 2016 to 44 percent in 2017. Live chat use is growing though, with 42 percent of surveyed shoppers citing it as an important customer service option when shopping online.

The Logistically Minded

In addition to myriad delivery In addition, the way shoppers options, today’s online shoppers also make returns is changing. Although demand speed. Sixty-three percent a majority of shoppers prefer to of shoppers surveyed say delivery return items to a store, the percentspeed is important when searching age of returners who shipped back for and selecting products, and 77 to the retailer grew seven points percent are willing to pay for expefrom 68 percent in 2016 to 75 dited shipping. The percentage of percent in 2017. orders where two-day shipping was Retailers Must Adapt used is on the rise from 10 percent in 2014, 16 percent in 2015, 20 percent Retailers who address the dynamin 2016 and 23 percent in 2017. ic online shopping experience and Increasingly same-day delivery future consumer demands will be the is gaining importance. Forty-one most successful. The authors of the percent of online shoppers have 2017 UPS Pulse of the Online Shopper ordered product for same-day survey recommend five key insights: delivery, and heightened interest in Make service a company same-day delivery is expected from priority: Revisit customer service both online and store policies, underscore the channels in the fuimportance of service ture. In fact, the perthroughout the organicentage of shoppers zation, and continually who find same-day measure to maintain high RATE delivery important performance levels. DELIVERY when choosing a Engage customers across SPEED retailer’s physical multiple channels: Explore store increased five a range of options for AS points to 36 percent IMPORTANT connecting with shoppers in 2017. to address customer service needs at their convenience via New Focus on Returns various channels. Online shoppers are increasingly Offer flexible delivery options: focused on returns policies and Include in-store pickup, alternate processes before making purchases, locations and expedited delivery to and retailers are listening. Satismeet consumers’ growing preferfaction with the ability to process ence for delivery options. returns or exchanges online grew Review return policies: Ensure from 62 percent in 2015 to 65 customer-centric return policies percent in 2017. are in place, are communicated Challenges still remain, howevclearly across channels, and are er, as 79 percent of shoppers rate executed flawlessly on all fronts. free-return shipping as important, Focus on efficiency: Develop and 44 percent of those who have return processes that favor speed returned online purchases cite and efficiency to accommodate having to pay return shipping as an time-sensitive shoppers. issue. Thirty-five percent even rank it the top issue.

63%

For today’s omnichannel shopper, logistics is about options and speed—and they want both. The 2017 UPS Pulse of the Online Shopper survey claims the best retail players are expanding service options and delivery capabilities to meet customer demands and be more competitive. Ship-to-store delivery is one of the fastest-growing options, with 50 percent of shoppers reporting they have used ship-to-store and 41 percent intending to do so more often in the future. Not only is the delivery option popular with online shoppers, but retailers stand to benefit as well. The survey reveals 44 percent of shippers have made additional purchases in store when using ship-to-store. To capitalize on the ship-to-store trend shoppers revealed their ideal pickup experience. Seventy-one percent expect quick service, 61 percent expect an easy-to-find counter/location, 55 percent want a separate pickup line, 53 percent would like to see the pickup close to the door, 46 percent expect helpful store associates, RATE FREE 38 percent find knowledgeable SHIPPING store associates most importRETURNS ant, and 22 percent desire AS IMPORTANT curbside pickup.

79%

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CCT SHIPPING FRAMES COMPANY PROFILE

NO MORE CRUSHING C CT Shipping Frames (Load Savers) was initially developed for the folding carton industry. There was an urgent need for a product that would eliminate the crushing and waste associated with shipping packaging from the manufacturer to the end user. Currently, when goods are packed upon a pallet it is common to find the bottom two layers crushed and virtually unusable by the time it reaches its destination. Attempts to thwart this issue have resulted in fewer layers being shipped and/or overcompensating on the strength of corrugated cases used to pack goods. Fewer shipped rows of product result in more truckloads being utilized and ultimately, higher fuel costs. Fuel prices are increasing (not decreasing) with no end in sight. The Load Saver shipping solution incorporates a two-tier vessel, comprised of a base and an upper tier, which can hold two standard pallets. The maximum load of the two-tier frame is 4000# (the upper tier can hold up to 2600#). It is compatible with most (if not all) current manufacturing processes for a wide range of products. The savings realized on just the truck capacity are impressive. Sending a half-filled trailer is no longer necessary since the bottom layers are fully protected. 25-30% more product can be stacked in a trailer resulting in fuel savings and general freight cost savings. The elimination of waste, claims and wood pallets round out the mounting benefits associated with using the Load Saver. This system will contribute substantially to the sustainability effort currently sweeping all industries in our global economy. Being able to weigh and cube out a trailer contributes significantly to the reduction of greenhouse gas emissions. The green, sustainability effort TM

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is being mandated by the big box industry. Every day there are more companies banding together in this effort. Their vendors are being judged (literally with a scorecard) on ways they can eliminate waste and contribute to their sustainability efforts. The unstable stacking of wood pallets will no longer be an issue (or potential worker’s compensation claims). It’s time to fill that truck or railcar. The Load Saver design (adjustable for ever-changing pallet sizes) allows you to double-stack product without the worry of damage while allowing you to maximize capacity in a truck/intermodal, or railcar. Well we’ve all heard about—and experienced—the transportation issues that make our day so frustrating. Capacity, driver shortages, government mandates, fuel costs and freight damage are not just buzzwords but real dilemmas that need solutions. Capacity is decreasing due to a stronger economy, aging fleets and retiring drivers. To increase capacity in existing trucks or railcars we need to fill the container and do so without sacrificing our product by damaging it. Utilizing Load Saver shipping frames gives you the opportunity to double stack your palletized product on 2 separate steel tiers, eliminating damage and worry, all while cubing out the truck. There is also the bonus of eliminating the need for costly dunnage. Driver shortages are not just predicted but are trending. The industry is not attracting the younger generation due to wages, lifestyle and regulations. Owner/Operators cannot afford to outfit their rigs with ELD’s or experience the downtime dictated by new regulations. A shipper who turns a truck away - for an hour or more - needs to understand

its impact on that driver and his hours of service for that day. That same shipper will be branded as an undesirable pick-up and will be in worse shape. The ideal solution is to fill both tiers of the Load Saver and forklift it to the staging area of your dock. When this truck arrives you have a quick, efficient loading process. Government mandates put in place for safety purposes is good for the general public but is wreaking havoc on the daily logistics of drivers, shippers and those juggling the planning for each load. The costs to the drivers and ultimately the shippers contribute to bad will and eventually results in customer dissatisfaction. Being ready and maximizing each trailer with Load Saver frames is the solution. Fuel costs continue to fluctuate so sending out too many trucks or railcars only adds to this cost. You can make your day easier by having to schedule and monitor less outgoing loads. Freight damage used to be the expected norm. You can eliminate damage by filling a steel frame adjustable to fit your required height - without beefed up corrugated or excess dunnage. Damage can be an issue of the past helping maintain customer expectations. Now you are equipped with the solutions to smooth out your logistical nightmares. Visit www.CCTShippingFrames.com.

25-30% MORE PRODUCT CAN BE STACKED IN A TRAILER

JULY 2018 | FOOD LOGISTICS

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SPECIAL REPORT

BY AMY WUNDERLIN

THE GROCERY STORE OF TOMORROW Consumers are shifting away from the weekly trip to the grocery store. The food retail industry is responding with investments in e-commerce, prepared meals, a wider assortment of goods and reconfigured grocery stores.

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onsumer shopping preferences are changing, and grocery stores aren’t immune. The $1.4 trillion industry has stepped up its efforts in recent years to meet these evolving demands, but challenges still remain. A November 2017 report by IDC, The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure, cites a grocery industry in transformational turmoil, providing data from two web-based surveys of 200 food retailers and 3,000 shoppers. According to the survey results, grocers and other food retailers have lost 29 percent of their market share since 1991, or $310 billion in lost annual revenues. Today, consumers are turning to takeout and fast-casual dining, forgoing cooking at home with ingredients purchased from a grocery store. According to the report, food from grocery stores to be prepared at home only makes up 35 percent of food spend, while 65 percent is spent on home delivery, mail order and out-of-home meal choices. As a result of these changing consumer preferences, the largest grocers (Walmart, Kroger and Target) have unleashed price wars. Prices of supermarket items declined by 1.3 percent in 2016, according to the Agriculture Department’s Economic Research Service, cutting further

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STORE LOYALTY:

into already tight shoppers value more WHAT’S IMPORTANT food retail margins. options in home products Further compliand health and beauty cating things, Eurocare (HBC). The report pean supermarkets adds that they are also Aldi and Lidl have BETTER PRICES more likely to purchase stolen a share of items online. the U.S. market “Retailers face the with radically challenge of satisfying different and more shoppers’ desires for efficient financial narrower assortments models, while the CONVENIENCE in some areas, with their impacts of Amamore varied preferences zon’s $13.7 billion and tastes in others. In Whole Foods addition, established Market purchase national brands are more have yet to come important to older genPRODUCT to fruition. Meal kit erations; new products, VARIETY competitors like environmental products Blue Apron and Fresh Direct have and niche products are more imalso introduced an entirely new food portant to younger generations,” the retail category. report’s authors note. Store loyalty is not as important Understanding to the modern consumer, and though the Consumer better prices are still a top priorTo get a handle on today’s evolving ity (75 percent are searching for grocery store, it is important to unbetter prices), shoppers also value derstand today’s consumers. While convenience (23 percent) and prodwe often focus on how millennials uct variety (60 percent). The IDC are altering the market, the baby report says that today 25 percent of boomer generation still makes up a shoppers prefer shopping at multiple considerable share of the economy— stores to satisfy their grocery needs, and they have completely different with that number growing to 32 needs. According to the IDC report, percent by 2019. the older generation values a lot of To win over today’s shoppers, IDC options and an assortment of fresh recommends building on the basics, fruit, vegetables and meat. Younger while driving the differentiators.

75% 23% 60%

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raising the minstraints, and concerns remain about imum customer the high price and limited variety expectations. of meal kits and prepared meals. Established playTo meet the challenge IDC says ers like Peapod grocers must “make intelliCONSUMER FOOD have met the gent assortment and space SPENDING challenge. Home decisions across the entire delivery will store and within individual become more categories.” widespread IDC also recommends as consumers coordinating in-store and GROCERY experiment and online assortments to comSTORE like it.” plement one another, driven Fresh meats, by how, why, where and poultry and fish what customers prefer. are the least Of the 200 retailers surpopular grocery veyed for the IDC report, 68 HOME items purchased percent found the category DELIVERY, online, the reof prepared meals/food/deli MAIL ORDER ports says, with the most important. And only 13 percent 79 percent said the center AND OUT-OFof shoppers turning to alternative store/shelf-stable category HOME MEAL channels, which can include a retail- is the section of the store CHOICES er’s website, mobile they are most RETAILERS: apps, Amazon and focused on changing WHAT’S IMPORTANT auto-replenishment. their assortment and HBC products are space strategies. the most popular at As you can see, it’s 38 percent, followed a tough road ahead by home products THE CATEGORY for food retailers, (29 percent), salty the challenges OF PREPARED but and sweet snacks are not insurmountMEALS/FOOD/ able. Investments in (25 percent), canned DELI goods (23 percent), e-commerce, prepared frozen and fresh ready-to-go meals meal and meal-kit options, and an (21 percent), and fresh fruit and intelligent assortment of products vegetables (15 percent). will be key in meeting the demands of today’s consumers.

35% 65%

“Younger shoppers are more interested in value-added services, prepared foods, plated meals and meal kits, and e-commerce,” the report’s authors say, but “consumers in all age groups are interested in personalized price promotions and in-store experiences.” Shoppers of all ages also value fresh foods like fruits, vegetables and meats and are less interested in the center aisles, which often consist of processed foods such as canned goods, cereals, snack foods and more.

E-commerce’s Increasing Role Interest in buying groceries online continues to grow, with 36 percent of shoppers voicing a desire to purchase food and household items outside of the store, IDC reports. Also of note, IDC says 20 percent of shoppers already purchase groceries online at least once a month. Millennials and urbanites (50 percent, respectively) make up the largest segment of online grocery shoppers, followed by families (40 percent) and high-income earners (30 percent). “Shoppers are already experimenting with various home delivery services,” the IDC report’s authors note. “Services like Amazon Prime, Google Express and Instacart are www.foodlogistics.com

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68%

Make Room for Prepared Foods and Meal Kits

To compete with direct-to-consumer services such as online ordering and meal-kit providers, more grocery stores are offering prepared foods and meal kits. In fact, consumers report that they buy 86 percent of meal kits from grocery stores and other retailers. This has created, however, space conJULY 2018 | FOOD LOGISTICS

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SPECIAL REPORT

BY JOHN R. YUVA

PACKAGING CONTINUES TO EVOLVE Marketplace trends are playing a pivotal role in the continued development of packaging materials and technology.

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P

ackaging is everywhere, serving many different purposes. Often, it’s a container that also advertises the contents prior to consumption. In other cases, it’s merely material to protect the primary product during transport. Packaging has also evolved as a consumable in devices with built-in technology transferring critical data. With such myriad uses, it’s not surprising that Statista reports the total value of the food packaging market in the U.S. is expected to reach $31.7 billion in 2022 (compared to $23.9 billion in 2012).

www.foodlogistics.com

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Global Supply Chain Solutions for the Food and Beverage Industry

Each year, Food Logistics recognizes individual and corporate leaders in the food and beverage industry. Plan now to enter your company — or a cutting-edge client or vendor — in one of these industry-leading recognition programs:

2018

FL100+ TOP SOFTWARE & TECHNOLOGY PROVIDERS

TOP 3PL & COLD STORAGE PROVIDERS

Recognizing top software and technology providers supporting the global food and beverage supply chain

Honoring the leading 3PL and Cold Storage Providers that support the food and beverage supply chain

Nomination deadline: Sept. 21, 2018 Winners announced in Nov/Dec 2018 issue

Nominations Closed Winners announced in August 2018 issue

8

TOP GREEN PROVIDERS In recognition of companies demonstrating leadership in sustainability in the food and beverage supply chain Nominations Closed Winners announced in June 2018 issue

CHAMPIONS AWARD: ROCK STARS OF THE SUPPLY CHAIN Recognizing individuals whose vision is shaping the future of the global food supply chain Nominations Closed Winners announced in March 2018 issue

Online nominations open approximately eight weeks before the deadlines listed above. Award results, information and nominations posted on:

FoodLogistics.com/Awards Nomination dates and issues may change. Consult the call-for-entries email and nomination survey for confirmation Nomination dates and issues may change. Consult the call-for-entries email and nomination survey for confirmation

FLOG0718_34-41_Packaging.indd 35

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SPECIAL REPORT

continued

Over the last several years, there’s been significant change in food and beverage packaging, particularly in the conversion of metal and glass to plastic. This occurred in nearly every food and beverage segment and is now reaching into the highend liqueur category, where you’re seeing a migration to plastic bottles and plastic closures, says Jeff Minnette, senior director of technology and strategic development for Jabil Packaging Solutions. Other markets have made the switch as well, including carbonated soft drinks and condiments. More recently, shelf-stable foods

Key learnings and developments have enabled technology for brands to convert away from epoxy-lined metal and steel cans.” Jeff Minnette, Jabil Packaging Solutions

and extended-life foods are moving into plastic packaging. “Key learnings and developments have enabled technology for brands to convert away from epoxy-lined metal and steel cans,” says Minnette. “In some cases, the canned lining had Bisphenol A (BPA) in the

material and can be toxic. The technology in plastic packaging allows brands to convert their lines from steel and glass to plastic packaging, while still retaining the structural strength and other attributes.” As the organic movement accelerates, consumers no longer

EUROPE’S ANSWER TO FRESH FOOD DELIVERY The convenience of online shopping is not Consumers just a U.S. trend. Across Europe, consumers can look forward are opting for home delivery of food and other to fresher items. However, the challenge for food has produce always been maintaining freshness following at an delivery. One company has a solution for this affordable predicament. price.” In June, Richard Ettl, CEO of Swiss-based Smart Containers Group, a leading manufacRichard Ettl turer of temperature-controlled containers for food products and pharmaceuticals, discussed the partnership of its FoodGuardians division and Belgium-based Schoeller Allibert, a leading European provider of reusable and returnable transit packaging. Ettl was excited to announce its collaboration with Schoeller Allibert, saying the initiative will go a long way in addressing the wasteful, throwaway solutions that currently characterize the online delivery market—which is growing more popular by the day. “Consumers can look forward to fresher produce at an affordable price. We want to ensure it costs less than €1 EUR (US$1.17) per day to protect the Richard Ettl, products that come to people’s

CEO

homes when they shop online,” says Ettl. “Combining Schoeller Allibert’s long history of innovation in packaging with our cutting-edge container technology, we are poised to bring something truly exceptional to the industry, all at an affordable cost.”

SEEKING A SOLUTION The launch of Amazon Fresh was an innovation in the U.S. market, but left a gap for something similar in Europe. In Switzerland, two large supermarket chains dominate the grocery market, with one investing heavily in new trucks designed for home delivery. “Consumers in Europe don’t want to spend time in the supermarket anymore; they want the convenience of Amazon where a week of shopping is done with a click of the button and it’s delivered to your doorstep,” says Ettl. “However, the current food delivery system lacks a container to keep food cold and fresh. A truck drops off your bags where they spend potentially hours without protection.” Current delivery solutions (such as one-way Styrofoam packaging, insulated bags, etc.) in Europe cost approximately $5 to $15 per unit. With minimum order requirements between $116 and $174, supermarket chains are making a profit and the investment for home delivery. Ettl saw an opportunity to innovate the system and solve the food delivery dilemma by designing a box with a per-unit-cost of less than $1. And with that $1 investment, food would remain cold and fresh for 24 hours within the container once delivered.

Continues to next page 

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SPECIAL REPORT

All of our sustainability programs in packaging

incorporate the three ‘Rs’ because they can be accomplished without changes to material construction.” Joe Stodola, CCO and vice president, global business unit, Jabil Packaging Solutions

continued

want unnatural ingredients in their foods and products that they drink. Thus, there’s been a shift in the last 10 years to healthier alternatives, meals on the go and food portion control. All of these placed a greater priority on the package to help deliver the experience for the consumer, says Joe Stodola, chief commercial officer and vice president, global business unit for Jabil Packaging Solutions. Today’s consumers are interested in three major trends: e-commerce, direct to consumer and sustainability. E-commerce. With Amazon’s purchase of Whole Foods, that’s

quickly turning to ready meals and the convenience of e-commerce shipping directly to the consumer— and packaging must accommodate e-commerce needs. Direct to consumer. While part of e-commerce, food companies now want to direct ship to the customer, either through subscriptions or promotional shipping. This change is occurring rapidly. Sustainability. Sustainability has transitioned from being a trend to now a driving force in the marketplace. Millennials are driving this

movement, but it’s also the general environment we live in—the oceans of plastic—that compel us to pay more attention.

 Continues from previous page “Because we’re talking about massive volumes of food delivered by truck, we needed a partner with a shared vision,” says Ettl. “What we bring to our collaboration with Schoeller Allibert is the technology and R&D, while they bring connections to the Walmarts of the world. It has the manufacturing capabilities of mass-producing a product that includes scale, quality and cost. Our vision is to bring a container to market with a structural level that accommodates roughly 110 uses per year at the cost of $1.”

DESIGNING THE SYSTEM How will the delivery system work? Ettl has a couple options. Once an order is placed, the container is filled at the warehouse and delivered by truck to the customer. However, the customer must then have the box returned. Ettl is considering a standard pickup location for the containers. All the containers in a surrounding area with regular deliveries would be collected and transferred back to the warehouse. Another option is to involve the postal service and return the boxes by post using a peel-off return label. “There will also be consumers who decide to own the container rather than return it. The non-return value of the box is $150 to $200,” says Ettl. “These are high-end, stand-alone coolers that store energy for 24 hours. A number of containers will be kept by the customers, who would rather own the containers as they perform better than those you can buy in stores.” Regardless of what the consumer decides, Ettl explains that the boxes are tracked with Internet of Things (IoT) technology. Each container is tracked using IoT providing a profile of its lifecycle. This is one of the key aspects Schoeller Allibert was interested in teaming with Smart Containers Group—to better understand the cooling technology of the containers but also the information technology that went into them.

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“We rely on a decentralized system for the tracking of our boxes,” says Ettl. “With a Wi-Fi connection to the cloud, the supermarket has access to all its boxes. And boxes can be branded or unbranded. In the case of unbranded boxes, if 150 boxes enter a sovereign state, they can be shared among other supermarket chains. Our initial concept is solely branded containers, but the long-term potential is to pool them with outside grocery chains for wider circulation.”

FUTURE IMPACTS While the containers meet the needs of an untapped market in online grocery shopping, are there other industries that can benefit? Ettl says overnight grocery delivery is certainly one trend that is likely to occur. However, outside of grocery, the hospitality industry could serve as an emerging market. Ettl says on average, hotels receive one week worth of fresh meats, vegetables and fruit because a minimum order quantity is needed for a delivery to be cost-effective—whether all the supplies are in demand or not. With the new box units, he wants to accommodate hotel demand with the freshest food deliveries. “Rather than having the freshest food delivered once per week, supplies can be delivered multiple times during the week and in the quantities that a hotel or restaurant needs,” says Ettl. Another potential market is farm-to-fork. A farmer or farmer cooperative can rent or buy containers to supply their produce. The same principle applies to the fish industry. “Fisheries want to target high-end markets like hospitality and restaurants, and the containers can provide the safest and best-quality seafood,” says Ettl. “There has not been very much cold chain innovation in the fishing industry. With competition from refrigerated trucks and Styrofoam containers, we see great potential.”

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Answering the Sustainability Call Jabil Packaging Solutions is always striving for materials that are capable and renewable as well as compostable. It’s important to always look at it from a development and design point of view, emphasizing the reduction, reuse and recycling of materials, says Minnette. “Our designers are looking at package design and making decisions based on those factors,” he says. “And this occurs with every package. It’s become a way of life for us.” Many of the packaging projects coming through the company are driven by the millennial market buyer. Beyond millennials, Stodola is seeing municipalities and countries instituting regulations around sustainability. It’s changing the way Jabil designs its packaging, because everything it builds is disposed of eventually—thus the mantra reduce,

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reuse and recycle. “We reduce the amount of material going into the packaging while still making it effective. Reuse is a newer concept that examines packaging and how to keep it from entering the landfill,” says Stodola. “And recycle is becoming increasingly important because there are many products already coded for recyclability. We look at every design and advise our customers around the ability to recycle. All of our sustainability programs in packaging incorporate the three ‘Rs’ because they can be accomplished without changes to material construction.”

“We’re on the front lines trying to develop the chemistry of those materials so they can offer equal performance as well as the benefit of sustainability,” he says. There are emerging polymer technologies that are compostable and renewable but are not mainstream materials, says Stodola. Issues still remain around availability and component material costs. Some of these classes of polymers are gaining the attention of major brands for new products entering the market. “It remains a challenge because these materials are expensive,” Stodola adds. “We make decisions every day around the product and material based on cost and the efficiency of using standard materials versus newer compostable, biodegradable or made-from-renewable-energy material using emerging technology that has yet to become mainstream.”

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SPECIAL REPORT

continued

Packaging Interconnectivity As materials evolve, technology is evolving at an equal rate. Under development is packaging that has the ability to communicate with the brand or the user through data storage, collection and communication. Jabil leverages its vast experience with electronics, which is a core business strength since the company’s founding more than 50 years ago. This extensive electronics knowledge, combined with strong technology and packaging expertise, has given Jabil a head-start in merging devices with consumables. “Using a consumable that operates with a device makes it possible to reduce the amount of recycled and waste material that comes out of a house,” says Stodola. “Consider a coffeemaker HOW MANY freight claims that uses do you file per month? single-serve capsules, which If it’s more than 10, MyEZClaim present Freight Claim Software can tremendous reduce your filing costs: sustainable Mine claim data to identify problem carriers or products

and eco-friendly opportunities. While you’re disposing of a capsule with each cup, it’s far more energy and consumption efficient to produce exactly what you want and need before recycling it.” At the same time, the consumable can interact with the device in smart ways such as relaying information about freshness, replenishment and the like. It serves as a potential supply chain game-changer by eliminating the middleman (the retailer in some cases). “Understanding when a product is being used can lead to understanding consumption patterns around the product and replenishment needs,” says Stodola. “Technology enables those devices to track interactions that provide real-time data back to consumers and brand companies. When the package helps you understand data about consumption and replenish-

ment, you transform the customer’s experience with the brand. We’re unique in applying those technologies to bring innovative smart packaging to market.” What does the future state of packaging hold? That depends on the emerging marketplace. Stodola believes there’s going to be a call to move products directly to the place of home or business use and to design efficient packaging solutions intended for movement directly to the point of use by e-commerce. “It’s a different requirement than what was originally intended for a retail primary package,” says Stodola. “Supply chain partners are going to quickly work together to find new solutions that are more sustainable than current boxed, taped and labeled secondary packaging wrapped around primary packs being sold.”

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FOOD (AND MORE) FOR THOUGHT

BY SCOTT NELSON

How Blockchain Can Improve

TRADE FINANCE IN FOOD SUPPLY CHAINS Blockchain technology is known for its ability to track and trace products across the supply chain, but its potential to free up trillions of dollars worth of economic value is less discussed.

T

he use of blockchain techsolutions, the true transformative nology to confirm the prove- potential of blockchain has been nance of goods and to track less discussed: freeing up the trilthem from producer to consumer lions of dollars-worth of economic is becoming a ubiquitous theme value frozen in working capital at across the food supply industry as any given time around the world. large companies and Liquidity problems social enterprises Reducing the are at the root of the eye the technoldependence on supply chain, especialogy for efficiency in the developing large centralized ly and social impact world. Farmers and financial purposes. distributors with intermediaries Billed by propolittle access to banking that only extract value nents as “trust proservices are often paid from supply chains is a tocols,� blockchains 60-90 days after delivcritical step toward an are distributed and ering product, or have ethical, traceable and decentralized as imto accept a 50 percent healthy food supply. mutable databases to 60 percent price that can be accessed cut if they want their by different parties operating in buyers to front them liquidity. This a given supply chain. Whenever a results in a working capital squeeze product changes hands, that correon those who can least afford it. sponding transaction is permanent- They then are forced to take out ly recorded on a shared database high-interest loans in order to pay that cannot be edited or deleted. for the next season’s seed or feed. While this ability to track-andThe value-adding participants trace agricultural and food prodof the food supply chain struggle ucts across a supply chain offers to cover other financials costs that significant improveadd zero value to the business. This ments and efficiency creates a situation where farmers gains over current frequently realize 6 percent or less of the value of the crops they sell. In the rice trade, for instance, as much as 40 percent of the end price comes from financial intermediation. The potential benefits of lowering these costs would be life changing for rice farmers and consumers since many of the largest rice exporting countries also happen to be the largest rice consuming countries. Thus, producers and other value-adding intermediaries are more

concerned about actually getting paid than about ensuring consumers can verify via a blockchain the origins of their food. Blockchain might be able to solve the trust and traceability issues facing food supply chains today, but this will only happen after solving the problem of access to liquidity for capital-constrained actors at the far ends of the chain. Stable cryptocurrencies offer alternative solutions for cost-effective, low-risk trade finance. One service being developed allows supply chain participants to extract liquidity from typically illiquid assets using an asset-backed, stable virtual currency. Thanks to its stable exchange rate against a major fiat currency, this kind of virtual currency functions as a cash equivalent and can be easily traded and exchanged. Using this solution, farmers and other value-adding participants could lend themselves money against the value of their existing assets and then pay themselves back once their invoices are settled. Reducing the dependence on large centralized financial intermediaries that only extract value from supply chains is a critical step toward an ethical, traceable and healthy food supply. Farmers who are paid fairly and on time can reinvest that working capital toward better production methods, like new blockchain-based track-andtrace solutions, resulting in greater quantities and better quality products for end consumers at a better price.

Scott Nelson is the CEO of Sweetbridge, a global alliance that is leveraging blockchain to accelerate trade-financing and offer low-interest loans. Prior to Sweetbridge, Nelson founded and led Trax Technologies as CEO as it evolved from a small logistics consulting and software firm into a global SaaS and services company.

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he need to keep frozen products at cold, stable temperatures in the food and beverage industry requires massive energy usage, and electricity consumption is one of the leading sources of greenhouse gas emissions in the United States. Additionally, energy is the second highest expense for these cold storage operators. Facilities that store frozen food maintain the highest energy demand per cubic foot of any industrial electricity load with over $30 billion USD worth of energy consumed globally every year. Viking Cold Solutions is the leading thermal energy storage (TES) provider enabling flexibility and savings for the energy-intensive low-temperature cold storage industry. Their customers (from small grocery freezers up to large commercial & industrial frozen warehouses) see improved temperature stability, greater refrigeration efficiencies, and energy costs reduced by up to 35%. Viking Cold TES systems are currently in use at retail, commercial, and government facilities in numerous countries.

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Viking Cold’s TES system was installed inside a 96,000 square foot facility owned by Dreisbach Enterprises in Richmond, California. The facility faced 13 hours of peak period energy pricing. Prior to installation they were sub-cooling their freezer every day and hoping to float without refrigeration for up to six hours of the peak period. After installation they were able to float for the full 13-hour peak period while maintaining stable temperatures. The results during the peak period include a reduction in energy consumption of 43% and a reduction of peak demand of 29% (872 kW to 621 kW). TES is the only technology that can reduce energy costs by extending your float or fly wheeling phase up to 13 hours without the risk of temperature abuse.

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Food Logistics July 2018  

Food Logistics is the only publication exclusively dedicated to covering the movement of product through the global food and beverage supply...

Food Logistics July 2018  

Food Logistics is the only publication exclusively dedicated to covering the movement of product through the global food and beverage supply...