Food Logistics Sept 2015 by Supply+Demand Chain/Food Logistics

Food Logistics

TAKING A FRESH LOOK AT SPECIAL US-MEXICO TRADE Pg. 34 REPORT ®

Issue No. 170 Sept. 2015

Global Supply Chain Solutions for the Food and Beverage Industry

U.S. FOOD IMPORTS & EXPORTS Pg. 26 How new customer demands challenge the foodservice supply chain

Pg. 30

Food and Beverage Stands At A Crossroad

• Michael Moore of Lowes Foods in Winston-Salem, N.C. sees great benefits in providing customers an omni-channel shopping experience.

Pg. 18

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Editor's Blog: Kellogg's Kashi Missteps Call For Better Supply Chain Insight

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Guest Blog: Supermarkets Have A Role In Curbing Food Waste

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WEB EXCLUSIVES

Archived Webinars, including FL's Educational Webinar series WWW.FOODLOGISTICS.COM

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ON THE MENU SEPT EM B ER 2015 • ISSU E N O . 170

18 18

COVER STORY

The Omni-Channel Arrives In Force: F&B Stands At A Crossroad

E-commerce challenges the f&b supply chain to give continuity to both online and offline channels. By Elliot Maras

26 26

Navigating the risks and rewards of the global food supply chain. By Lara L. Sowinski

DEVELOPMENT 48 ECONOMIC Will The Northeast Be Ready

U.S. Food Imports & Exports

THIRD-PARTY & REFRIGERATED LOGISTICS

SPECIAL REPORT

Taking A Fresh Look At US-Mexico Trade

The longstanding bilateral trade relationship is ripe with new opportunities. By Lara L. Sowinski

Commercial fleets and vehicle manufacturers test add-on devices and other solutions. By Elliot Maras

FEATURE

Technology empowers consumers who want more options when eating out; supply chain players respond. By Elliot Maras

Research Points To Better Fuel Efficiency

& TECHNOLOGY 44 SOFTWARE Planning For The Unexpected

How New Consumer Demands Challenge The Foodservice Supply Chain 30

40 TRANSPORTATION California Mandates Aerodynamics:

SECTOR REPORTS

WAREHOUSING

How State-Of-The-Art Dock Equipment Improves Safety And Efficiency Warehouses find new ways to control temperatures and protect employees. By Elliot Maras

Continental Mills takes a proactive approach to supply chain disruptions. By Karin L. Bursa

For Post-Panamax?

The Panama Canal expansion project promises new opportunities for the U.S. East Coast. By Eric Sacharski

COLUMNS

STARTERS 6 FOR Grocery On The Go

Omni-channel is catching on for grocers. By Lara L. Sowinski

INSIGHTS 16 COOL Key Elements Of FSMA:

Sanitary Food Transportation Act

Companies in the food supply chain will have to deploy more temperature control and sanitation tools under proposed FSMA rules. By Patrick Brecht, Ph.D.

(AND MORE) 50 FOOD FOR THOUGHT IFDA: The Voice Of The Foodservice Industry

IFDA’s president and CEO Mark Allen talks “hot topics” with Food Logistics. By Lara L. Sowinski

DEPARTMENTS

8 Supply Scan • 12 Food on the Move • 49 Ad Index

Published and copyrighted 2015 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 ten times per year in Jan/Feb, March, April, May, June, July, August, September, October and Nov/Dec 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, PO 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: US, 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 on U.S. bank. Printed in the USA.

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Logistics for the fresh and frozen food industry! Brown Line provides reliable temperature-controlled transportation of less than truckload and full truckload freight. From fresh vegetables to frozen fish, we move temperature-sensitive commodities while maintaining the product in top quality condition. We offer scheduled service from the Pacific Northwest and Alaska to Boston, British Colombia, Chicago, Denver, Minneapolis, Phoenix, Salt Lake City, Spokane, and Northern and Southern California. In addition, Brown Line offers charter service to most locations in the US and Western Canada. Since Brown Line is part of the Lynden family of transportation providers, we can work with customers to solve their transportation challenges by offering solutions and expertise in handling even the most complex logistics challenges.

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FOR STARTERS FROM THE EDITOR’S DESK

WWW.FOODLOGISTICS.COM

Grocery On The Go

mni-channel is a hot topic in the retail world, but it seems the grocery sector got a late start compared to most other industry verticals.

That’s starting to change, however. According to BI Intelligence, online grocery sales are estimated to grow by a compound annual growth rate (CAGR) of 21.1 percent through 2018. By comparison, offline grocery sales are forecasted to rise by only 3.1 SOWINSKI percent during the same period. The obstacles aren’t new. Consumers still prefer to buy fresh produce and bread in person, while “last mile” delivery is still a dilemma. But as it turns out, the Millennial generation is at the forefront of driving change. They are more accustomed to online shopping, especially from their mobile phones, and it’s helping push conventional grocery chains to more quickly figure out delivery solutions and adapt to consumer demands. In fact, the preference for shopping via mobile devices is a big driver in the explosion of omni-channel. Criteo, a digital marketing firm, estimates that 40 percent of all e-commerce transactions will originate on mobile devices by the end of 2015. Furthermore, Gartner and Goldman Sachs are forecasting that total global mobile transaction volume will more than double by 2017, from $352 billion in 2014 to $721 billion in 2017. Our cover story on page 18 examines the multipronged impact omni-channel is having on the food and beverage sector. Like the grocery sector, the foodservice sector too is responding to changing consumer demands, technology innovations and e-commerce. The feature story on pg. 30 looks at this issue further, while this month’s “Food (and More) For Thought” column on page 68 is a Q&A with the International Foodservice Distributors Association’s (IFDA) president and CEO, Mark Allen. IFDA’s annual Distribution Solutions Conference takes place Oct. 26-28 at the Phoenix Convention Center in Phoenix, Ariz. This year’s conference sessions address key topics in the foodservice sector, including the Sanitary Food Transportation Act, technology innovations and cargo theft. I hope you’ll make time to stop by the Food Logistics booth and meet our staff. Enjoy the read.

LARA L. SOWINSKI, EDITOR-IN-CHIEF LSOWINSKI@ACBUSINESSMEDIA.COM

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Published by AC Business Media Inc.

201 N. Main Street, Fort Atkinson, WI 53538 (800) 538-5544 • www.ACBusinessMedia.com PRINT AND DIGITAL STAFF Publisher Jolene Gulley Editor-in-Chief Lara L. Sowinski lsowinski@ACBusinessMedia.com Managing Editor Elliot Maras emaras@ACBusinessMedia.com Assistant Editor Eric Sacharski esacharski@ACBusinessMedia.com Ad Production Manager Cindy Rusch crusch@ACBusinessMedia.com Creative Director Kirsten Crock Senior Audience Development Manager Wendy Chady Audience Development Manager Tammy Steller ADVERTISING SALES (800) 538-5544 East Coast Sales Manager Judy Welp (480) 821-1093 jwelp@ACBusinessMedia.com Midwest/West Sales Manager Carrie Konopacki (920) 542-1236; Fax: (920) 542-1133 201 N. Main Street, Fort Atkinson, WI 53538 ckonopacki@ACBusinessMedia.com National Automotive Sales Tom Lutzke (630) 484-8040; tlutzke@ACBusinessMedia.com EDITORIAL ADVISORY BOARD Smitha G. Stansbury, partner, FDA & Life Sciences Practice, King & Spalding Raymond J. Segat, director, cargo & business development, Vancouver Airport Authority Dr. Barbara Rasco, professor and interim director, School of Food Science, Washington State University Adriano Melluzo, vice president, national sales, Ryder CIRCULATION & SUBSCRIPTIONS PO Box 3605, Northbrook, IL 60065-3605 (877) 201-3915, Fax: (800) 543-5055 Email: circ.FoodLogistics@omeda.com LIST RENTAL Elizabeth Jackson, Merit Direct LLC (847) 492-1350, ext. 18, Fax: (847) 492-0085 Email: ejackson@meritdirect.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 Executive Vice President Kris Flitcroft CFO JoAnn Breuchel VP Content Greg Udelhofen VP Marketing Debbie George Digital Operations Manager Nick Raether Digital Sales Manager Monique Terrazas Published and copyrighted 2015 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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SUPPLY SCAN

D A I LY U P D AT E S AT WWW.FOODLOGISTICS.COM

NE WS FROM ACROSS THE F O O D SU PPLY C H AIN

Overcharging/Mislabeling Hammers Whole Foods Market Inc.’s Sales Whole Foods Market Inc.’s same-store sales cooled in the third quarter, hurt by competition and an overcharging scandal in its New York City stores, according to Reuters. The Austin, Texas-based chain’s same-store sales, a closely-watched performance gauge for retailers, were up just 1.3 percent for the quarter ended July 5, far less than the 2.8 percent gain expected by analysts polled by Consensus Metrix.

Supervalu Inc. Seeks To Spin Off Save-A-Lot Supervalu Inc. is exploring a separation of its Save-ALot business. As part of that process it has begun preparations to allow for a possible spin-off of Save-A-Lot into a

stand-alone, publicly-traded company. “We believe a separation of our Save-A-Lot business could allow Save-A-Lot, our independent business and our retail Foodbanners to better focus on their respective operations, and pursue strategies specific to their business characteristics and growth potentials, for the benefit of our shareholders, customers, licensees and employees,” said President and CEO Sam Duncan.

giant Empresas Polar and Nestle to distribute food and beverages, reported CNBC in early August. The move followed months of accusations by President Nicolas Maduro that Polar, the country’s largest private employer, is working to sabotage the economy. The company denies this. Maduro’s predecessor, Hugo Chavez, expropriated several warehouses from Polar, in some cases arguing that the space should be used to build houses for the poor.

Kellogg To Eliminate Artificial Ingredients In Cereals And Snack Bars Kellogg Co.’s Corn Flakes and Rice Krispies are set to turn all-natural soon, according to Reuters. The company, whose cereals have been a popular breakfast choice for decades, said

Venezuelan Troops Occupy Nestle And Empresas Polar Food Warehouse Complex Venezuelan troops occupied a Caracas warehouse complex used by local food

it was aiming to stop using artificial colors and flavors in its cereal and snack bars by the end of 2018. Kellogg is the latest in a string of U.S. food companies to bow to growing pressure to remove synthetic ingredients from products due to health concerns.

Supervalu Provider Wild Harvest Commits To 100% Cage-Free Eggs In order to help families live within their budgets, the Wild Harvest brand, part of the Supervalu family of private brands, announced plans to make 100 percent of its shell eggs cagefree by year end. Earlier this year, the brand introduced an 18-count cage-free egg, as well as a free-range, non-GMO Project-verified 12-count egg product.

U.S. REFRIGERATED IMPORTS

Refrigerated Imports

All data provided by Zepol. Visit zepol.com for a free trial

1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0

Refrigerated Container Imports 1.6 1.4 1.2 1.0

TEUs

2015 YTD (JAN-AUG 19)

2014 YTD (JAN-AUG 19)

Total U.S. imports are up 6 percent YTD (January-Aug. 19) this year, but refrigerated containers have actually declined by 5 percent. From 2012 to 2013, thermal container imports grew 8 percent and another 5 percent from 2013 to 2014. Is the United States importing less fresh and frozen foods this year?

Millions

(2015 YTD vs 2014 YTD)

0.8 0.6 0.4 0.2 0.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Zepol, www.zepol.com

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www.foodlogistics.com

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SUPPLY SCAN

D A I LY U P D AT E S AT WWW.FOODLOGISTICS.COM

NEWS FROM A CROS S THE F O O D SU PPLY C H AIN Bumble Bee Foods To Pay Record $6 Million Settlement Over Worker Killed In Oven Bumble Bee Foods will pay a record $6 million to settle criminal charges filed after a worker burned to death nearly three years ago inside an industrial oven packed with canned tuna, reported the Los Angeles Times. The settlement represents the largest payout in the criminal prosecution of a workplace safety case involving a single victim in California, according to the Los Angeles County District Attorney’s Office.

Reported U.S. cases of laboratory-confirmed, domestically acquired Cyclosporiasis in persons with onset of illness since May 1, 2015. Image courtesy of the CDC at www.cdc.gov.

Cyclospora Infection Afflicts 457 People In 29 U.S. States The U.S. Centers for Disease Control and Prevention (CDC) reported 457 confirmed cases of Cyclospora infection from 29 states so far this year. Cyclospora is a parasite in feces most commonly spread by food and water, causing diarrhea, cramping and nausea. Most of those affected experienced onset of illness on or after May 1, 2015, and did not have a history of international travel within two weeks before illness onset, CDC reported, according to Food Safety News.

Infor To Acquire GT Nexus For $675 Million Infor has entered into an agreement to acquire GT Nexus, the world’s largest cloudbased global commerce 10

SEPTEMBER 2015

platform, for $675 million. Infor is one of the world’s leading suppliers of ERP software, which helps manufacturing companies orchestrate production inside the walls of the enterprise.

India To Seek Nearly $100 Million In Damages From Nestle Over Noodle Recall India will seek damages of 6.39 billion rupees ($99.3 million) from Swiss group Nestle after a food scare involving reports of excess lead in the firm’s Maggi noodles forced a nationwide recall, reported Reuters. Nestle, which has been accused of unfair trade practices, would

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be the first foreign firm to be asked to pay damages on behalf of consumers, said an official who declined to be named. The claim, made on behalf of Indian consumers, was not filed through the courts, but with the National Consumer Disputes Redressal Commission, which has semi-judicial powers and will decide the merits of the case and the size of any damages.

California Woman Sues Costco For Slave-Labor-Farmed Shrimp From Thailand A California woman has sued Costco Wholesale Corp. for selling farmed shrimp from Thailand, where slave labor and human trafficking in the fishing industry are widespread, and allegedly misleading U.S. consumers about it, according to Bloomberg. The plaintiff cited state laws that bar companies from making false claims about illegal conduct in their supply chain, including human rights violations. “Human suffering cannot be ignored to enhance a company’s economic bottom line,” plaintiffs’ lawyer Niall McCarthy, of Cotchett, Pitre & McCarthy LLP, said in a statement. www.foodlogistics.com

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Visit your local Isuzu dealer and you will leave in the best truck for your business! For a limited time, take advantage of 0.99% APR financing offered through Isuzu Finance of America, Inc.

www.isuzucv.com Vehicle is shown with optional equipment; some equipment is dealer installed. This vehicle is assembled from component parts manufactured by Isuzu Motors Limited and by independent suppliers who manufacture such components to Isuzu’s exacting standards for quality, performance and safety. Credit approval required for special financing offer. See your authorized Isuzu truck dealer for complete warranty and other details.

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FOOD ON THE MOVE LOGISTICS TRENDS IN OUR INDUSTRY

European Commission Probes FedEx/TNT Express Merger

Target Corp. To Test Grocery Home Delivery

The European Commission opened an investigation into FedEx Corp.’s EUR4.4 billion ($4.8 billion) deal to buy TNT Express NV, saying it was concerned about the merged company’s dominance in the international delivery of small packages in some European markets, according to MarketWatch. The commission, the European Union’s antitrust watchdog, said the two remaining international delivery companies, United Parcel Service Inc. and DHL Worldwide Express Inc., may not provide sufficient competition to the merged company.

Target Corp. plans to begin testing a grocery-delivery service as retail rivals stake out space in bringing food to customers’ doorsteps, according to the Minneapolis/St. Paul Business Journal. The Minneapolis, Minn.-based retailer isn’t offering many details about the effort, though the Star Tribune quotes Chief Marketing Officer Jeff Jones as saying a trial of the service will be offered “In the very near future.”

China’s Internet Giants Harness Order/Delivery Apps To Battle Western Food Chains China’s rapidly diversifying Internet giants

are taking on Western food chains at their own game—door-to-door delivery—and finding a huge appetite among urban consumers, according to The Wall Street Journal. Wooing customers with discounted dishes and the choice of thousands of restaurants, startups backed by Alibaba Group Holding Ltd. and Tencent Holdings Ltd. are enjoying brisk business as more diners opt to order in. The growing fleet of motorbike couriers on Chinese roads is the latest challenge to long-established but struggling Western companies such as McDonald’s Corp. and Yum Brands Inc., which owns KFC and Pizza Hut outlets.

DAT SOLUTIONS’ MONTHLY FREIGHT REPORT

Lower Diesel Prices Take Hold By Mark Montague

ou’d like to think that low diesel prices are good for truckers. Fuel is, after all, their No. 1 operational cost. But the downturn in fuel prices ultimately hurts revenue because of lower fuel surcharges. For example, when the average fuel surcharge for vans was down 21 cents a mile in July compared to July 2014, the national average “all-in” spot market rate was down 22 cents year-over-year. So let’s say you were moving van loads between Chicago and Atlanta last month. The average headhaul rate on that lane in July was $1.84 per mile (including fuel surcharge), while the backhaul was $1.50 a mile. That’s an average of $1.67 per mile for the 1,432-mile round trip or $2,391 total. In July 2014, that lane paid an average of $1.97 per mile roundtrip, or $2,821 total. Cheaper diesel saves the trucker money, but the lower fuel surcharge put

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430 real dollars in his pocket. Combined with lower freight availability overall (partly due to the slowdown in the oil and gas industry), and the lower fuel prices actually add to the challenges of trucking today. Lower fuel prices also affect truck capacity and demand. While it’s typical for spot market rates to increase when the number of load posts go up, the number of available trucks also is on the rise. As a result, there’s less pressure on rates. Contract carriers can raise line-haul rates to compensate, or find other efficiencies that save money to offset the missing surcharge. On the spot market, however, rates tend to adjust based on current market conditions, and most pricing combines line-haul and fuel surcharge seamlessly

into a one-time rate for each freight move. Lower fuel costs may seem like a boon to carriers. But they can also affect revenue and rates. Mark Montague is industry rate analyst for DAT Solutions, which operates the DAT network of load boards and RateView rateanalysis tool. He has applied his expertise to logistics, rates and routing for more than 30 years. Montague is based in Portland, Ore. For information, visit www.dat.com. www.foodlogistics.com

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Pallet Flow

Push Back

Wide Span

Selective Rack

Cantilever

Warehouse Racking

SolutionS 8 7 7. 6 3 2 . 2 5 8 9

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FOOD ON THE MOVE U.S. Postal Service Ramps Up Same-Day Delivery Service The U.S. Postal Service is ramping up same-day delivery of everything from bottled water to fresh fish as its new postmaster general tries to better compete with FedEx, UPS and even Amazon.com. according to The Wall Street Journal. In New York City, carriers load boxes of fresh and frozen seafood from the Fulton Fish Market onto small trucks and deliver them to restaurants by 11 a.m. They also do daily water deliveries from Nestle SA in Manhattan and Brooklyn.

GEODIS To Acquire OHL GEODIS, a France-based supply chain operator, has entered into an agreement to acquire OHL (Ozburn-Hessey Logistics) for an undisclosed amount. GEODIS is owned by SNCF. Founded in 1951, OHL is one of the leading 3PL companies in the world, operating more than 120 value-added distribution centers in North America with over 36 million square feet of flexible warehouse space, and providing integrated global supply chain management solutions including transportation, warehousing, customs brokerage, freight forwarding, and import and export consulting services.

Jungheinrich AG To Acquire MIAS Group Jungheinrich AG, an intralogistics service and solution provider with manufacturing operations, has agreed to acquire the MIAS Group, an equipment manufacturer in the fields of warehousing and transportation technology. The parties agreed not to disclose the acquisition price. Subject to the customary conditions precedent, the transaction is scheduled to be consummated in the fourth quarter of 2015.

Georgia Ports Authority/Stephen B. Morton

LOGISTICS TRENDS IN OUR INDUSTRY

Georgia Ports Authority Teams With CSX On New Inland Port

Georgia Gov. Nathan Deal, right, announces an agreeeorgia Gov. Nathan ment to establish the Appalachian Regional Port near Deal, the Georgia Chatsworth, Ga., along with, from right, Murray County Ports Authority, MurCommissioner Brittany Pittman, Georgia Ports Authority ray County and CSX Executive Director Curtis Foltz, CSX Senior Vice PresiTransportation signed a dent Clarence Gooden, Georgia Senator Charlie Bethel, memorandum of agreement estaband Georgia House Speaker David Ralston, Tuesday, lishing the Appalachian Regional July 28, 2015, in Chatsworth, Ga. The inland port, due to Port in Chatsworth, Ga. Its service open in 2018, will serve as a direct link from the Port area will include North Georgia, of Savannah to North Georgia, Alabama, Tennessee and Alabama, Tennessee and parts of parts of Kentucky. Kentucky. Operated by the Georgia Ports Authority, the Appalachian Regional Port will deliver goods to the GPA’s Garden City Terminal, the second busiest container port on the East Coast behind New York-New Jersey.

address the problem and help find targeted solutions. Almost half of the state departments of transportation surveyed reported that truckers were forced to park on freeway interchange ramps and shoulders of highways, which represents a safety issue.

Port Of Oakland Terminals Plan To Operate Terminal Gates On Saturdays The four international marine container terminals at the Port of Oakland announced they are developing a program to operate terminal gates on Saturdays to reduce weekday

congestion at the port. The program, called OakPass, is expected to begin in the fourth quarter of this year, pending review by the Federal Maritime Commission and other conditions. The terminals, through the Oakland MTO Agreement (OAKMTOA), have submitted a filing to the FMC describing the program. The terminals are currently working to ensure that an adequate supply of labor will be available to operate the new gates. OAKMTOA has established OakPass LLC, a not-for-profit company, to manage the Saturday gate program. Idle cranes at the Port of Oakland.

Image courtesy of Ingrid Taylar at Flickr.

Parking Space Shortage Plagues U.S. Truckers The U.S. Department of Transportation’s Federal Highway Administration released survey results that point to a lack of truck parking information and capacity across the nation and called for a national coalition to 14

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www.foodlogistics.com

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DELAYS CAN CHANGE EVERYTHING. That’s why Penske Logistics has customized supply chain solutions to help keep your business moving forward. Visit gopenske.com or call 844-868-0818 to learn more.

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COOL INSIGHTS B Y P AT R I C K B R E C H T, P H . D .

Key Elements Of FSMA: Sanitary Food Transportation Act

BRECHT

Companies in the food supply chain will have to deploy more temperature control and sanitation tools under proposed FSMA rules.

ew Food and Drug Administration (FDA) rules mandated by the U.S. Food Safety Modernization Act (FSMA) are forthcoming for the transportation of food. The FSMA represents the most significant expansion of food safety requirements and FDA food safety mandates since the original enactment of the Federal Food, Drug, and Cosmetic Act of 1938. The FSMA grants the FDA a number of new powers, including mandatory recall authority, which the agency has sought for many years. The FSMA requires the FDA to undertake more than a dozen rule makings and issue at least 10 guidance documents, as well as a host of reports, plans, strategies, standards, notices and other tasks. The law requires the FDA to implement, in part, the Sanitary Food Transportation Act of 2005 and to promulgate regulations requiring shippers, carriers by motor vehicle or rail vehicle, receivers, and other persons engaged in the transportation of food to use sanitary transportation practices to ensure that food is not transported under conditions that may render food adulterated. The following key elements are likely to be in play during the rule-making process for the Sanitary Food Transportation Act. These elements have not yet been finalized, but there is a strong chance that they will be part of the rule that food handling companies will be expected to follow. Temperature Monitoring and Control • Improper refrigeration or temperature control of food products (temperature abuse). Cross Contamination • Improper management of transportation 16

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units or storage facilities to preclude cross contamination, including improper sanitation, back hauling hazardous materials, improper disposal of wastewater, etc. • Segregating foods and non-foods in the same trailer/container/railcar to minimize the potential risk of cross contamination from nonfood items. Sanitation • Improper packing of transportation units or storage facilities, including incorrect use of packing materials and poor pallet quality. • Improper loading practices, conditions, or equipment, including improper sanitation of loading equipment, not using dedicated units where appropriate, inappropriate loading patterns and transporting mixed loads that increase the risk for cross contamination. • Improper unloading practices, conditions or equipment, including improper sanitation of equipment and leaving raw materials on

 Proper sanitation of loading equipment in storage facilities is required under the Food Safety Modernization Act.

loading docks for extended periods of time. • Trailer/truck washing requirements. • Food sanitation procedures for air and equipment surface contacts. Training • Training management and employees on the basics of food safety. Validation • Environmental monitoring programs to verify effectiveness of pathogen controls in processes where food is exposed to a potential contaminate in the environment. • Supplier verification that relates to food safety. Food Safety Plan • A food safety plan that is documented and being followed. • Current good manufacturing practices (GMPs).

Revisit your plan to ensure compliance Although the final rules are unlikely to be exactly the same as the proposed rules, there is no time like the present to revisit your transportation and logistics food safety program and to get a head start on the forthcoming rules and regulations. The opportunity to take action is now for those who are likely to be impacted directly or indirectly by the FSMA and the Sanitary Food Transportation Act. The industry has a golden opportunity to help shape the very rules that will govern food transportation operations and impact its success and bottom line. Patrick Brecht, Ph.D., president of P.E.B. Commodities, Inc. in Petaluma, Calif., provides services for managing perishable food. Portions of this article were included in an advisory Dr. Brecht wrote for the Global Cold Chain Alliance. www.foodlogistics.com www.foodlogistics.com

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Is your business exactly the same as your competitor’s business? Do you have exactly the same processes and procedures in place? Of course not! Your business is unique to your organizational style and the team that runs it. Developing a food safety program that allows you the flexibility you need within your daily routine, yet meets the criteria of your customers, FSMA, GFSI, and your internal culture is probably very important to you. Choosing a standard that provides practical and flexible, yet strong methods of meeting safety requirements is as important as meeting the requirements themselves. With the right standard, you get to choose how the standard operates within your walls, how your team culture is influenced to provide more efficient and safer processes.

The implementation of the right standard, a flexible standard, provides value to your organization. If you are not a food processor, why would you put food processing criteria to work in an environment meant for storing and distributing or transporting food? Building a strong food safety program for your warehouse, distribution, or transportation organization is critical to your customer’s needs, and to your ability to ensure the delivery of a safe product. Why not build a program that suits you – as you are today, and not how someone else wants you to be! When you select a standard, select one that works for you. But consider the proven, published benefits of each standard before you choose. And choose a standard designed for your business!

Global Food Safety and Quality Standards IFS Family of GFSI Benchmarked Certification Standards for the food supply chain

IFS Food

IFS Logistics

IFS PACsecure

IFS Broker

IFS safety and quality standards are global leading standards accepted anywhere GFSI is requested. »Certification to the IFS standards go above the low bar of regulatory compliance to improve product quality and safety and promote brand protection.« The Acheson Group – from a comparison of IFS standards to Existing and Proposed FSMA Regulations

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C O V E R

S T O R Y

E-commerce challenges the f&b supply chain to give continuity to both online and offline channels. BY ELLIOT MARAS

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Did the event have any relevance uly 15 – Amazon Prime Day – didn’t go down as a red letter date in food industry circles. While the event surpassed Amazon’s Black Fri- for e-commerce in the food and beverday records, the sale didn’t move a lot of food. The same was true for age (f&b) sector? Walmart, which responded to Amazon and produced the highest single- Jim Tompkins, a veteran supday volume of online orders ever and witnessed the biggest day of the ply chain consultant, says that the e-commerce testing will help both year for same-day click and collect orders.

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• Lowes Foods uses its e-commerce Web site to engage customers in special promotions. Customers can shop the entire product catalog using a number of filters.

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companies expand into the more difficult arena of f&b e-commerce. He says f&b plays an important role in both companies’ efforts to establish e-commerce dominance. “F&b plays a significant role in creating high-density delivery,” says Tomkins, who operates Raleigh, N.C.based Tompkins International. Both Amazon and Walmart wanted to see if their supply chains could withstand the test of the massive promotions, he says, and both companies succeeded. Amazon’s goal was not to make money on July 15, but to make members aware of the breadth of their offering, Tompkins says. As for Walmart, “Walmart clearly demonstrated their ability to hang with Amazon as an online retailer and have the supply chain capability to deliver.” www.foodlogistics.com

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Consumer product goods companies need more flexible and robust supply chains as retail commerce expands to multiple sales channels. Mobile commerce, a more tech-savvy consumer and more powerful computers are all driving an omnichannel selling environment. E-commerce represents the fastest growing sales channel, one that accentuates the importance of the emerging omni-channel. Rich Aberman, co-founder of WePay, a provider of application programmer interfaces (APIs) in Redwood City, Calif., says omni-channel is about providing continuity of experience across offline and online channels.

F&B trails other consumer goods

that Walmart is holding more inventory in distribution centers rather than stores to meet omni-channel demand. The article noted the strategy presents a challenge, as it increases the chances that brick-and-mortar customers won’t find what they want. “The supply chain needs to be redefined from that of a traditional brick and mortar supply chain and become an integrated customer-centric supply chain,” says Gary Allen, vice president of supply chain solutions at Miami, Fla.-based Ryder. “Alignment between sales, customer service, Web front end, store operations, and supply chain is critical. A change in logistics network and systems might be needed if you do not have the ability to handle same day and next day delivery within the current footprint.”

in and out of stores as consumers make greater use of e-commerce. In addition to the growth of e-commerce, traditional sales channels are becoming more fragmented as consumers shift toward smaller store formats, according to Nielsen. Large supermarkets account for just over half (51 percent) of global food sales, but smaller formats such as small grocery, drug and convenience outlets have outpaced large supermarkets. Walmart, according to Tompkins, has developed three brick and mortar formats and will have one store within five miles of 85 percent of the U.S. population in two years.

F&B players step forward

Food Logistics found several examples of The f&b industry has been one of the these trends. slowest consumer goods industries to Casella Family Brands (CFB) is an Auschange its traditional commerce model. Grocery e-commerce expands tralia-based wine exporter based in Yenda That’s because f&b faces some unique chalHow fast are customers making f&b NSW. The company has historically focused lenges when it comes to e-commerce. One purchases online? One-quarter of global on domestic retail and export trade, but being that the f&b buying experience is respondents to a Nielsen survey of e-comthe acquisition of Peter Lehmann Wines, more personal for the consumer. Hence, a merce consumers are already ordering which also has an e-commerce business, merchant has less room for error in delivergrocery products online for home delivery. means CFB requires both B2B and B2C ing a positive buying experience. There are And more than half (55 percent) are willing supply capabilities. The integration has led virtually no refund opportunities for dissatto use it in the future. to the introduction of a supply chain comisfied f&b customers. The merchant doesn’t The Nielsen research points to an omnimerce solution in response to the expanding get a second chance to “right” the sale. channel f&b retail environment rather than channels. “To help manage and maximize In addition, profit margins in f&b are a replacement of the existing brick and our warehouse space we made the decision among the lowto invest in a supply chain est of any concommerce software solusumer product tion,” says Sam McLeod, industry. The distribution manager ORDER ONLINE FOR DELIVERY TO HOME USE ONLINE AUTOMATIC SUBSCRIPTION added cost of for CFB. “The need to GENERATION Z product delivery maintain a high level of 55% 28% 20% 55% (15-20) makes profitabiltraceability over our prodMILLENNIALS ity all the more uct also was a contribut57% 30% 19% 60% (21-34) difficult for ing factor.” The supply GENERATION X f&b merchants. chain solution improved 57% 22% 11% 56% (35-49) Perishable food warehouse utilization, BOOMERS carries the addidecreased labor costs and 6% 48% 17% BABY(50-64) 40% tional cost of increased traceability. 9% SILENT GENERATION 5% temperature and Lowes Foods, a Win35% 21% (65+) quality control, ston-Salem, N.C.-based further challenggrocer with locations in ALREADY USING ing the profitNorth Carolina, South WILLING TO USE Source: Nielsen ability of f&b Carolina and Virginia, e-commerce. recently completed an But technology providers are investmortar option. omni-channel pilot. Shoppers can now ing heavily in an omni-channel future for E-commerce is part of a bigger digital view the entire product catalog by any f&b. Software developers have introduced picture, according to Nielsen. A digital combination of filters, including “previousnumerous systems to support omni-chanstrategy includes interaction at every point ly purchased,” “on sale,” “organic,” “gluten nel fulfillment. Venture capital firms have along the path to purchase, including findfree,” “local” and more. They can also sort invested hundreds of millions of dollars in ing stores, making lists, checking prices, through products based on popularity, perf&b e-commerce startups. researching products, sharing content and sonal relevance, date of last purchase, pricA recent Wall Street Journal article noted purchasing. Such touch points occur both ing and more. “We are confident that the

PERCENT USING/WILLING TO USE E-COMMERCE OPTIONS

www.foodlogistics.com

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FOOD LOGISTICS

• SEPTEMBER 2015

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continuous improvement within our digital shopping experience will result in even stronger guest satisfaction, deeper loyalty and larger baskets,” says Michael Moore, Lowes Foods’ chief marketing officer.

Supply chains must adapt With commerce becoming more digitalized and sales channels increasingly diverse, the supply chain will have to become more flexible. Supply chain software specialists say the supply chain will not exist in isolation from other sections of the business enterprise. Inventory management, order fulfillment and delivery functions will have to integrate with purchasing, marketing, and customer relationship management. “The ability to integrate systems and physical operations can be an obstacle,” says Ryder’s Allen. “It is difficult to provide visibility, order allocation and inventory control across the various channels. Making the omni-channel sell accretive is also proving difficult for the majority of retailers.” The biggest omni• Pedicab trichannel fulfillment cycles are more challenge for f&b time efficient than motorized vehicles companies is demand sensing and responding in downtown Manhattan. They are effectively, says Shyam also more environKrishna, executive vice mentally friendly. president of Softeon, the Reston, Va.-based software provider. Multiple commerce channels present the need to understand order fulfillment preferences and constraints. “The fulfillment rules, preferences or options for each of these channels are different,” he says, noting that not all WMS systems being used are up to the omnichannel challenge. “Omni-channel requires a lot more information sharing between supply chain planning and fulfillment in order to determine the most optimum execution strategy.” When e-commerce enters the picture, additional questions arise, Krishna notes. Does the fulfillment center want to drop ship the order directly to the customer instead of 20

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Pedicab Rickshaws Provide A Reliable, Sustainable Delivery Option

ustainability plays a big role for many food e-commerce merchants. Therefore, several have incorporated freight-moving pedicab rickshaws as an effective, environmentally friendly, brand-building way to deliver meals and meal kits to customers in crowded urban areas. Revolution Rickshaws has forgone thousands of gallons of fuel and freshened the streetscapes of Brooklyn and Manhattan since Gregg Zuman established the logistics service 10 years ago. A long-time “capitalist with a conscience,” Zuman welcomes growing partnerships with e-commerce food merchants, many of whom promote sustainable food. Revolution Rickshaws uses 30 pedicab rickshaws – many branded with client messaging – made by Bath, U.K.-based Cycles Maximus. He has two full-time and 10 part-time employees. “In the streets (a branded freight rickshaw) screams ‘responsible operator’ to the community,” Zuman says. Revolution Rickshaws provides last-mile logistics solutions to restaurants, caterers, bakeries and food e-commerce merchants. While some customers choose the trike for its environmental bona fides, Zuman confirms its most important advantage over motorized vehicles remains reliability. Studies have shown that freight rickshaws deliver cargo faster than motor vehicles in urban areas, Zuman says. One reason is they don’t get stalled in traffic, which can delay customers’ meals or meal kits for hours in Manhattan. A 2014 report by The City College of New York found trucks experience considerably more delay as a percentage of total travel time than do freight tricycles. Within Midtown, the median freight tricycle spent 26 percent of its travel time in stopped-time delay compared to about 40 percent for trucks. Between Midtown and the Upper East and West sides, similar ratios of 23 percent for freight tricycles and 42 percent for trucks were observed. For both trip types, very few tricycle delayto-travel-time ratios greater than 0.6 were observed. Freight tricycles spend considerably lower shares of their travel time in stopped-time delay than trucks, although higher than average delay-to-travel-time ratios are observed for freight tricycles in locations with high intersection densities, the study found. Additional stopped-time delay for trucks is likely due to traffic congestion that freight tricycles can often bypass. Freight tricycles also have greater flexibility in terms of parking; as a result, they can often park on a sidewalk directly in front of a pickup or delivery location. When freight tricycles park on the sidewalk, they are relatively immune to parking restrictions, and there is less delivery time from the vehicle to an end location. ◆

picking and delivering from the fulfillment center? Choices like these can dictate specific transportation options and also the need to maintain the “right” days of supply in the fulfillment centers despite varying degrees of demand from these channels. “The physical supply chain is converging with the digital supply chain,” observes Prasant Bhatia, vice president of product marketing at Scottsdale, Ariz.-based JDA Software. “Now the WMS has to be more flexible.” For many f&b product suppliers, the omni-channel brings them into the business-to-consumer (B2C) market rather than just business-to-business (B2B). Order fulfillment for B2C requires individual item picking versus pallet and case picking.

These requirements, in turn, impact warehouse configuration, warehouse size, overall day-to-day operations and the need to consider alternate methods like automation. Ross Elliott, chief strategy officer at HighJump, agrees omni-channel can include both B2B and B2C. Most e-commerce focuses on B2C, he says, since historically companies used EDI for B2B fulfillment. But as companies add e-commerce, they are finding it can also be used for B2B fulfillment. HighJump recently acquired Nexternal, an order management system that captures both B2B and B2C orders, via standard and mobile Web browsers. The system acts as a hub for all pricing, promotions, status www.foodlogistics.com

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and customer care related to the order management lifecycle.

Retailers lead f&b e-commerce While retailers are leading the e-commerce charge in f&b, many product manufacturers will find that they too need to have an omnichannel strategy that encompasses both B2B and B2C. For product manufacturers, the B2C market brings a growth opportunity. Yet, there are factors for manufacturers to consider before expanding into B2C. “You better have a good B2B strategy and a strong brand before B2C,” says Jim Barnes, CEO of Enspire Commerce, a division of enVista, the Carmel, Ind.-based supply chain consultancy. “For many wholesale distributors it is imperative that they have a strong brand presence before jumping into the world of direct-to-consumer. Expanding into B2C can be and is expensive. B2C requires a different internal focus and organizational talent: marketing, supply chain planning and execution and the customer experience are vastly different.” When a company expands into home delivery, the cost structure has to be scrutinized carefully, says JDA Software’s Bhatia. “The larger that customer base is, the delivery cost starts to magnify exponentially,” he says. This is one reason that e-commerce delivery models are volatile and need to be efficiently managed. Vikas Aron, director of product management for Distributed Order Management and Available to Commerce suites at Atlanta, Ga.-based Manhattan Associates, says an f&b e-commerce solution must be able to select a product from inventory that has the shelf life acceptable to the customer. “It’s an extremely hard problem to solve when it comes to grocery,” he says. When a brick-and-mortar store performs the fulfillment for an e-commerce order, the person filling the order can understand the customer needs and demographics more personally, Aron says.

Standardized data One of the biggest challenges companies encounter in expanding into omni-channel commerce is having standardized data attributes. The number of SKUs has increased over time, and as a company expands into new sales channels, the SKU count often increases even more. As SKU counts increase, companies must manage more product data such as package measurements, 22

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Organic E-Commerce Grocer Promotes Its E-Commerce Grocery Software

ne online natural and organic grocery retailer, AbesMarket.com in Chicago, developed its own e-commerce software which it now markets to other retailers as a one-stop solution under the name Storepower.com. “Stores have the advantage (over pure-play Web merchants) of real estate and we want to help them leverage that advantage,” says CEO Richard Demb. “We’re handling all the software to make sure online orders can happen.” AbesMarket.com uses couriers for its deliveries. StorePower.com provides a branded e-commerce site and proprietary software enabling picking, packing, payment, pickup or delivery. New York City-based Fairway Market and Encino, Calif.-based Gelson’s Market recently signed on as Storepower.com customers. ◆

Product information exchanges also serve as a mediator between product manufacturers and retailers who often conflict over what specific information a product should have. In Europe, retailers get fined for having incorrect product information in advertised product listings, Piatt says. In the U.S., some local governments have enacted similar laws. “To have a chance of winning the sale, retailers need to ensure the products they sell are accurately and consistently represented on their websites and mobile apps,” says Susan Sentell, president and CEO at Gladson. “An online representation of each product – including product images and comprehensive product details – needs to be available to shoppers whether the actual purchase takes place in a store or via an e-commerce Web site. Accurate, up-to-date and comprehensive product content has become a must-have for B2C and B2B enterprise processes, ranging from e-commerce and marketing, to shelf space management and logistics.” Product information exchanges also help product manufacturers make sure that different retail organizations are using the same product data, adds Mike Lapchick, CEO of Shotfarm. Inconsistent product information has become a bigger problem for manufacturers with the growth of the Internet, he observes.

The digital universe expands • A picker at Abe’s Market fulfills an online order placed via a mobile app.

nutrients, allergens, organic, gluten-free, etc. Peapod, one of the first “pure-play” Web e-commerce providers, recognized the need for a reliable database of product information. The company’s efforts in this area resulted in a spinoff business called itemMaster. Chicago-based itemMaster and a handful of competitors – including Kwikee, Gladson and Shotfarm – now gather product attribute information and images for f&b supply chain customers. These product information exchanges take on the cumbersome task of securing and updating “meta data” and images from product manufacturers, says Tom Piatt, president of itemMaster. His firm uses GS1 data standards, but also has data for products not yet covered under GS1’s Global Data Synchronization Network.

As e-commerce has grown, specialized software solutions have emerged to help manage online orders and delivery. E-commerce software can improve a customer’s interaction with a merchant. By integrating data sources – loyalty programs, e-circulars, and e-commerce – a merchant can create a holistic view of each customer across their entire shopping journey, says Chris Bryson, CEO and founder of Toronto-based Unata, an e-commerce software provider. A merchant can use that information to initiate a unique conversation with each customer. Existing f&b supply chain data usually does not include user-friendly details required for consumer websites, such as product names, images and other information Bryson says. MyWebGrocer, another grocery e-commerce solution, has introduced a suite of solutions built on an API-driven architecture to integrate customer, product and www.foodlogistics.com

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order data. One suite builds and executes digital marketing campaigns. Another suite enables grocers to connect their brand partners directly to shoppers with contextually relevant, personalized advertising. Yet another suite manages the massive amounts of data produced by shoppers as they navigate a grocer’s digital channels. Because the platform is built on API architecture, grocers can combine third-party data and loyalty program data with the shopping data collected within the platform.

F&B e-commerce evolves F&b e-commerce continues to evolve. Venture capital firms have invested millions of dollars in f&b e-commerce, resulting in some innovative concepts. The November/December Food Logistics reviewed the different f&b e-commerce business models, including subscriptionbased prepared meal delivery, subscriptionbased ingredient delivery, grocery/packaged goods delivery, and pickup options. One of the biggest uncertainties about f&b e-commerce in the U.S. is whether home delivery or store pickup will dominate. Most observers agree that both options will be available. Some see home delivery more prevalent in more rural areas.

For more information: ENSPIRE COMMERCE, encspirecommerce.com ENVISTA CORP., envistacorp.com HIGHJUMP, highjump.com GLADSON, gladson.com ITEMMASTER, itemmaster.com JDA SOFTWARE, jda.com KWIKEE SYSTEMS, kwikeesystems.com MANHATTAN ASSOCIATES, manh.com MYWEBGROCER, mywebgrocer.com PARAGON SOFTWARE, www.paragontruckrouting.com REVOLUTION RICKSHAWS, revolutionrickshaws.com ★RYDER, ryder.com SHOTFARM, shotfarm.com SOFTEON, softeon.com STOREPOWER, advancingretail.org TOMPKINS INTERNATIONAL, tompkinsinc.com UNATA, unata.com WEPAY, wepay.com 24

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• Artizone places hundreds of brick and mortar food merchants on its online mall, for which it manages delivery.

In the U.K., where e-commerce is more established, store pickup and home deliveries are both the norm, according to Will Salter, CEO and president at Dallas, Texasbased Paragon Software Systems. Store pickup still dominates, but demand for online shopping continues to grow rapidly. Retailers are giving shoppers a wider delivery choice, which includes home delivery, click-and-collect in the store and collection from other venues, including purpose-built lockers. Salter concurs with observers who believe brick and mortar stores will remain a key fixture in f&b commerce. “Consumers still want to go to the store and look at products in-store,” he says, “but the challenge for retailers is to find new ways of making brick and mortar pay. For example, retailers are introducing more food service and complementary retailers into their larger store formats to increase footfall and spend.” Another lesson that the U.S. seems to be taking from Europe is that brick and mortar retailers – not “pure-play” Web retailers or product manufacturers – are leading the foray into e-commerce.

‘Pure-play Web’ food retailers on the rise While brick and mortar grocers expand e-commerce operations, “pure-play Web” competitors continue to emerge. Several Web-based concepts showing promise make use of existing f&b infrastructure. In 2009, Artizone began an “online mall” concept for specialty food retailers in Dallas, Chicago and Denver. The Dallasbased company manages home deliveries for participating merchants in each of the markets – 90 in Dallas, 115 in Chicago and 15 in Denver, the newest market. Customers can select a 2-hour delivery window. The $5.95 delivery fee is waived for orders of $120 or more. The merchants package their own orders for delivery. The Artizone software gives local, specialty food merchants access to an e-commerce tool they would not be able to

manage on their own. Securing the right home delivery arrangement has proven to be the most challenging part of the puzzle, says Amber Dietrich, vice president of market operations. Artizone has its own delivery fleet in Dallas and uses a courier service in Denver. It contracts with a 3PL in Chicago. San Francisco-based Handpick has come up with a model that makes use of supermarkets’ physical assets in fulfilling e-commerce grocery orders. Handpick’s employees pack ingredient orders at the grocery store, assisted by store employees. This saves the cost of operating a separate packing facility. Couriers deliver the orders. Payman Nejati, co-founder, claims this app-based system results in prices that are 25 percent to 50 percent lower than other e-commerce subscription services. Zone Manhattan, another subscription e-commerce service, offers a personalized approach. The New York City-based company has a staff dietitian who creates recipes for individual customers based on their personal profiles, says owner Steve Lindner. Zone Manhattan employees buy ingredients daily for customers at local markets and prepare the meals at their own facility. The company contracts with a delivery service that delivers the day’s meals between midnight and 5 a.m. New York City-based HelloFresh is among the faster growing meal-kit delivery services in the U.S. The company currently offers delivery nationwide. The “we shop, you cook” mission is to manage the customer’s shopping at a reasonable cost, says CEO Seth Goldman. The company delivers weekly meal kits including curated recipes and farm-fresh, seasonal ingredients to customers’ doors. Customers can select from either a meat/ fish classic box or a vegetable box, including three meals to serve either two or four people per delivery. HelloFresh this year raised $126 million in financing. Goldman says educating customers about the service is still a challenge. ◆ www.foodlogistics.com

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F E A T U R E

Navigating the risks and rewards of the global food supply chain. BY LARA L. SOWINSKI

griculture imports and exports are a constant bright spot for U.S. foreign trade. Exports of bulk commodities such as wheat and rice continue to remain in high demand, while high value products such as dairy, meats, poultry, live animals, oilseed meals, vegetable oils, fruits/vegetables and beverages are growing in response to an expanding middle class and changing diets in emerging markets. China is now the top export market for U.S. agriculture products, along with Canada, Mexico, Asia and Latin America. The caveat is that while U.S. agriculture exports are growing, so too are non-tariff barriers in foreign markets. In March, Robert Guenther, senior vice president, public policy at the United Fresh Produce Association, told the U.S. House of Representatives Committee on Agriculture that non-tariff trade barriers are a growing problem. “As tariff levels have been brought down, there has been a corresponding increase in non-tariff barriers. Examples of non-tariff barriers include, but are not limited to, restrictive import and administrative procedures or product or processing specifications. Exports of commodities such as apples, pears, peaches, citrus and potatoes to countries including Korea and Mexico have been limited due to non-tariff barriers, among other examples,” he said. In 2012, China surpassed 26

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Canada as the leading export market for American farm goods. However, according to the U.S. Trade Representative’s 2015 National Trade Estimate on Foreign Trade Barriers, “China remains among the least transparent and predictable of the world’s major markets for agricultural products, largely

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because of uneven enforcement of regulations and selective intervention in the market by China’s regulatory authorities.” Inconsistent practices by Chinese customs and quarantine agencies delay or halt shipments of agricultural products into China, states the USTR’s report. “In addition, SPS (sanitary and phytosanitary) measures with questionable scientific bases and a generally opaque regulatory regime frequently create difficulties and uncertainty for traders in agricultural commodities, who require as much certainty and transparency as possible.” China’s increased domestic subsidies for its cotton farmers as well as for producers of hogs

and pork were also cited in the report. It’s not just American pork exporters who are negatively affected, but beef and poultry producers too are feeling the impact of questionable SPS measures implemented by China’s regulatory authorities. Last year, for example, “China continued to block the importation of U.S. beef and beef products, more than seven years after these products had been declared safe to trade under international scientific guidelines established by the World Organization for Animal Health (known by its historical acronym OIE), and despite the further fact that in 2013 the United States received the lowest risk status from the Loading grain for export from the U.S. Pacific Northwest.

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OIE, i.e., negligible risk. China also continued to impose some unwarranted state-level Avian Influenza import suspensions on poultry. Additionally, China continued to maintain overly restrictive pathogen and residue standards for raw meat and poultry,” the report states.

Taking advantage of GTM software As globalization drives the expansion of U.S. agriculture imports and exports, the interest in global trade management (GTM) software is likewise growing. Simply put, GTM software helps companies improve sourcing and procurement, vet foreign suppliers, manage global transportation and streamline the import/ export process. Anthony Hardenburgh, vice president, global trade content at Amber Road, notes that food imports and exports are subject to a very complex regulatory environment, much more than existed 10 or 20 years ago. “Something as simple as an avocado can have different duties based on seasonal rates,” that can vary from country to country, he explains. This is in addition to other considerations, such as if it is organic or non-organic or if any chemical applications were used, all of which can involve several government agencies, resulting in more complexity. Amber Road boasts an extensive team of highly skilled international trade specialists in 145 countries who monitor a variety of regulatory rules and changes for the agriculture sector along with many other verticals, including automotive, electronics, chemicals and pharmaceuticals. This massive global knowledge is a competitive advantage for Amber Road and the company’s GTM software, says Hardenburgh. Last year alone, 28

SEPTEMBER 2015

Will The Thawing U.S.Cuba Relationship Heat Up American Food Exports?

he recent move to begin dismantling decades-old trade and diplomatic barriers between the U.S. and Cuba is whetting the appetite for American agriculture exporters, but there is still much work ahead. For one, the U.S. has lost market share to foreign competitors. Prior to the Cuba trade embargo, the U.S. was the biggest supplier of rice, but Vietnam is the top supplier today. And, Europe and Canada provide most of Cuba’s wheat, despite the U.S. being the world’s largest global exporter of wheat. Even U.S. poultry exports to Cuba, previously a star performer, are losing market share. The overall losses are significant. During the first quarter of 2014, U.S. agriculture exports to Cuba were valued at $160 million. But so far this year, they’ve only reached $83 million. To many of those involved in the U.S. agricultural community, the only way to effectively compete with foreign suppliers for a share of Cuba’s $2 billion annual market is to remove the 53-year-old U.S. trade embargo against Cuba. An executive with Cargill Inc., the Minnesota-based agribusiness giant and co-founder of the U.S. Agriculture Coalition for Cuba, says the opening of a new export market means a new source of revenue. Not only that, with Cuba a mere 90 miles away, American food shipments can reach Cuba much quicker than those from competing countries, said the executive. The cash-only requirement imposed on Cuba by the U.S. also hurts U.S. agriculture exports. Typically, most purchases are therefore made by credit, with Cuba going to a third country for a loan. The additional bureaucracy and fees associated with this type of purchase dampens the attractiveness of buying U.S. farm goods. Although recent developments aimed at improving relations between the U.S. and Cuba are promising, it’s going to take more time before the U.S. agriculture interests reap the full reward. ◆

the company performed 13.5 million updates to its software due to ongoing changes in trade regulations. At the same time, “It’s something that takes years to build because it’s more than just a monitoring software. We’ve developed talent and built a team, and made sizeable investments in automation and automation tools. Our GTM is literally the culmination of tens of millions of dollars invested over a decade,” he says. And it’s not just Fortune 500 companies who are candidates for GTM software, Hardenburgh says, but small- and medium-sized companies too.

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Today’s GTM software customers also demand service level agreements that facilitate quick turn times from customs agencies and other government agencies and exceptionally high levels of accuracy. Customers are also savvier, observes Hardenburgh, which ultimately forces vendors to create higher quality software and truly demonstrate—not just say—that it delivers what it claims. Furthermore, GTM software is getting more recognition from the C-suite than in prior years. “Today we’re increasingly reaching a different audience,” says Hardenburgh. “CFOs are

looking at the supply chain more holistically. They are interested in more than just compliance risk and transportation management. They’re looking at free trade agreements like the TPP (Trans-Pacific Partnership) and others, they’re thinking about duty drawback, and they’re asking big questions from ‘how does this impact my business?’ to “how do I realize savings?’” The trends away from manual processes to those that are automated are also driving business. In May, Marine Harvest ASA, the world’s largest supplier of farmed Atlantic salmon, announced it had selected Amber Road’s Restricted Party Screening solution to monitor its worldwide trading partners. According to Amber Road, “With international authorities imposing more, and increasingly tough, trade regulations, Marine Harvest realized it was time to upgrade from manual to automated screening. In particular, with Russia specifically targeted for additional sanctions and security, the Oslo-based company moved quickly to boost its compliance assurance.” Johan Sorensen, manager of business systems at Marine Harvest, said, “Amber Road provides a straight forward and fast solution to screen our customers and suppliers, providing the security that we don’t do business with anyone on a denied party list. Additionally, the U.S. banks we work with require us to screen our suppliers and customers in order for us to make use of their financial services.” ◆

For more information: UNITED FRESH PRODUCE ASSOCIATION, www.unitedfresh.org AMBER ROAD, www.amberroad.com MARINE HARVEST ASA, www.marineharvest.com CARGILL, INC., www.cargill.com www.foodlogistics.com

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3 P L & R E F R I G E R A T E D L O G I S T I C S

Sea To Table gathers supply chain information about fish shortly after they are caught .

How New Consumer Demands Challenge

The Foodservice Supply Chain Technology empowers consumers who want more options when eating out; supply chain players respond. BY ELLIOT MARAS

hen it comes to finding new and better ways to serve the consumer, the foodservice industry never sleeps. Nowadays, diners can find out where their meat was processed and what farm the animal was raised on before placing an order on their smart phone. And as technology innovations emerge, the foodservice supply chain has to respond. Social and cultural forces create new preferences, and technology gives customers new ways to order their meals. How well is the supply chain responding to these changes? E-commerce, mobile commerce, and a host of new consumer preferences are placing more demands on the f&b supply chain, and at a faster pace than ever. This past summer, in an 30

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attempt to clarify the changes currently taking place and how the foodservice industry has to adapt, a pair of research organizations released a white paper, “Food Industry Logistics: Trends That Matter.” This report by Chicago-based Technomic Inc. and New York City-based Deloitte & Touche claims changing consumer needs are making logistics a competitive differentiator in the food supply chain. “We are witnessing an explosion of consumer interest in

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locally-sourced, fresh, organic, natural and sustainable products,” the Technomic/ Deloitte white paper states. “Furthermore, consumers are increasingly expecting food companies along the value chain to be responsible environmental stewards and corporate citizens.” Amplifying these changes will be innovations that offer fast, accurate fulfillment of customized orders. “The ability to deliver new logistics solutions to meet the supply-chain challenges of the ‘new demand’ will become a key strategic differentiator for companies that want to remain competitive and gain market share,” the paper states. “This is a real and material threat to the underlying assumptions that food industry business models and food supply chains are built on.”

In late August, The Wall Street Journal reported how securing fresh blackberries has become the biggest supply chain struggle for Wendy’s. Wendy’s, McDonald’s, Chick-fil-A and other foodservice chains are facing competition from rising fast casual players like Chipotle Mexican Grill Inc. who have gotten the jump on fresh-prepared food. Fresh ingredients present a challenge for big foodservice players because of their sprawling supply chains and rapid, repeatable preparation processes.

Technology plays a growing role Technologies that enhance execution and performance capability can help the foodservice industry cope with the radical changes that are upon www.foodlogistics.com

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Sea To Table delivers frozen food directly to chefs nationwide via courier services.

it, the white paper notes. These include: • Real-time visibility: Centralized distribution management via “control towers” is becoming popular. Mobile computing for track-and-trace capability is increasing. • Technology/analytics: Organizations are expected to continually right-size the distribution network through advanced modeling. Advanced analytics platforms coming online have led to improvements in forecasting. Automation and advanced execution platforms such as WMS and TMS will gain dominance. • Communication and collaboration: Crossfunctional, enterprise-wide collaboration to ensure operational visibility and forward-looking demand will expand. • Performance management: Comprehensive performance management plans with strict lines of accountability and robust reviews and audits will be prevalent. 32

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More collaboration among supply chain players In order to meet the demand for fresher food, all segments of the foodservice supply chain are realizing that a more collaborative system is needed. A restaurant will not want put food on its menu if it doesn’t have the assurance that the attributes noted on its package are accurate. Consumers want to know where food comes from, whether it has GMOs, etc. Some industry observers see a changing of the guard taking place in the foodservice supply chain. Food Logistics found evidence of both large, established players and newer upstarts rising to the challenge. In all cases, technology plays a big role in enabling new service delivery systems.

Chipotle partners with suppliers Chipotle Mexican Grill Inc. offers one of the best examples of a new foodservice company recognizing consumer demands and using technology

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to improve its supply chain in meeting the new demands. The need to find food manufacturers who can help Chipotle meet its fresh, environmental and socially responsible goals has pushed the company to strengthen its relationships with suppliers. Last year, Chipotle partnered with Durham, N.C.-based FoodLogiQ, to provide a cloud-based supply chain solution that enables it to track and manage data. Chipotle’s product suppliers and distributors provide GS1’s Global Trade Item Numbers (GTINs) for each product destined for Chipotle kitchens. Chipotle can trace a piece of produce back to the packing house from which it was shipped, or even to the field where it was grown. Product suppliers and distributors must have the US1 GDSN network to participate, says Angela Fernandez, vice president of retail grocery and foodservice at GS1 US, which assisted Chipotle and FoodLogicQ in deploying the traceability system. According to Chipotle, the system improved efficiencies in quality assurance and logistics and real-time visibility of food and other products at each point in the supply chain.

Startup focuses on seafood supply chain Sea To Table, a Brooklyn, N.Y.-based distributor of fresh seafood nationwide, offers an example of a startup that is using supply chain technology to improve efficiencies in a foodservice niche – seafood. Cloud-based technology has helped the 8-year-old company establish a network of independent fishermen and processors, all of which are certified for environmentally-sustainable fishing practices. Sea to Table’s delivery process starts when a fresh catch lands on a dock, from which the system collects

detailed information about the incoming fish – species, location of catch, catch methods and quantities. The dock verifies the fisherman’s compliance with environmental requirements. The Netsuite cross-enterprise software lists the catch on a Web site. Customers then place orders over the phone or email, and the system creates a purchase order. Couriers then deliver the packages. Customers can view the available catches, place orders online, and check their order’s status as needed. “We ship directly from the point of capture as opposed to creating a warehouse,” company founder Michael Dimin says. “Under this system, a diner can know where the fish he orders was caught.” “It (the Netsuite software) has allowed us to scale from a single location to two dozen shipment points and many hundreds of customers in a few years.” Dimin, a longtime seafood veteran, claims the cloud-based system is far more efficient than the traditional seafood delivery model, which he describes as “convoluted.” Fish shipments traveled along a string of processors, wholesalers and brokers before arriving at a final destination. The foodservice supply chain faces the need to change some processes to meet new market realities. New players are emerging as a result of these changes, but established players are also responding. ◆

For more information: DELOITTE TOUCHE, deloitte.com FOODLOGIQ, foodlogiq.com GS1 US, gs1us.org NETSUITE, netsuite.com TECHNOMIC INC., technomic.com www.foodlogistics.com

9/8/15 9:59 AM

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9/8/15 9:59 AM

Photo: Kansas City Southern

SPECIAL REPORT

Taking A Fresh Look At US-Mexico Trade

The longstanding bilateral trade relationship is ripe with new opportunities. BY LARA L. SOWINSKI

he U.S. and Mexico share an enduring bilateral trade relationship that has only gotten stronger in recent years due to the free trade benefits of the North American Free Trade Agreement (NAFTA) coupled with resurgence in nearshoring.

China’s allure as a low-cost manufacturing mecca for U.S. companies continues to erode. Labor rates are steadily climbing right along with transportation costs. In addition, quality control issues, language barriers, IPR infringement, currency fluctuations and long transit times are pushing companies to reevaluate their supply chain strategy and take a hard look at the total landed cost of manufacturing products in China that are intended for U.S. consumers. A recent survey by AlixPartners gauging executives’ thinking regarding manufacturing and sourcing found that more than 40 percent of those polled indicate that nearshoring is a possibility whereby their companies could better serve U.S. demand. Of that 40 percent, 86 percent said they’ve already started the process or expect to within two to three years. While NAFTA has boosted total trade between the U.S. and Mexico by 476 percent since its implementation in 34

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1994, Mexico’s efforts to establish free trade agreements (FTAs) with other economies too is remarkable—with 145 free trade agreements in place and counting, Mexico holds more FTAs than any other country in the world. The considerable portfolio of FTAs is attractive to companies in the U.S. that view Mexico not only as an attractive manufacturing hub for U.S.-bound goods, but also as a gateway to other countries in every global region.

economy, and an increasingly market-oriented agricultural sector, Mexico remained the U.S.’ third-largest agricultural trading partner in 2013, accounting for nearly 13 percent of total American agricultural exports. The U.S. remains Mexico’s principal agricultural trading partner, receiving almost 80 percent of Mexico’s total exports. Specifically, Mexico exported a record $17.7 billion worth of agricultural products to the U.S. in 2013.”

Autos and agriculture

Rail provides the transportation backbone

U.S. auto manufacturers, as well as German and Japanese carmakers, are increasingly building manufacturing plants in Mexico to supply countries in Europe, Asia and the Americas. The industry has emerged as one of the primary pillars of Mexico’s economy, contributing over 20 percent of the total manufacturing sector’s GDP and employing more than 15 percent of the total industrial labor force in the country. It is also one of the top per capita wage employers. As for agricultural trade, the U.S. is the world’s leading supplier of poultry, soybeans, apples, pears and grapes to the Mexican market. According to the U.S. Commercial Service: “With a growing population, an expanding

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Mexico’s improving transportation infrastructure is also helping support its expanding manufacturing industry. Rail plays a key role in that mix, including Union Pacific Railroad and Kansas City Southern de Mexico (a unit of U.S.-based Kansas City Southern), whose more than 3,100 miles of track connect industrial areas in northeastern and central Mexico with the port cities of Lazaro Cardenas, Tampico and Veracruz. In July, Kansas City Southern opened a $64 million, state-of-the-art intermodal terminal in Wylie, Texas. “We are very pleased to offer our intermodal customers this new, world-class terminal for U.S. domestic, U.S. international and U.S.-Mexico cross-border

shipments,” says KCS president Patrick J. Ottensmeyer. The new Wylie Intermodal Terminal has an automated gate system with high definition imagers, optical character recognition and biometric driver identification. It also has an annual lift capacity of 342,000 containers, 1,500 parking spaces, and 400 container stack spots. The terminal also has enhanced traffic signals, specific turn lanes and two 5,000-foot intermodal tracks. Mexico’s booming auto industry is spurring business for Union Pacific Railroad, which owns a sizeable stake in Ferromex (FXE), one of the country’s leading railroads. Automobiles transported via FXE are switched to UP’s locomotives at the railroad’s gateways to the U.S. UP currently transports two out of every three new automobiles Mexico exports to the U.S. ◆

For more information: ALIXPARTNERS www.alixpartners.com U.S. COMMERCIAL SERVICE, www.trade.gov/cs KANSAS CITY SOUTHERN DE MEXICO www.kcsouthern.com UNION PACIFIC RAILROAD www.uprr.com FERROMEX www.ferromex.com.mx www.foodlogistics.com

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SECTOR REPORTS

WARE HOUS E : DOCK E QUIPME NT

How State-Of-The-Art Dock

Equipment Improves Safety And Efficiency Warehouses find new ways to control temperatures and protect employees. BY ELLIOT MARAS

s the global cold chain expands, dock equipment that enables warehouse crews to maintain product temperatures is playing a bigger role. New cold storage facilities employ a variety of tools for managing temperatures in dock areas. These include high-speed doors, seals, vertical dock levelers, thermal walls and other equipment.

Warehouse managers should keep in mind that managing indoor temperature control is only one consideration when evaluating a dock environment. Other considerations include worker safety and how easily dock equipment accommodates the load sizes the company manages.

Automated doors assist Florida foodservice distributor Automated doors, while more expensive than manual doors, better ensure temperature consistency. Cheney Brothers, an Ocala, Fla.-based foodservice distributor, has deployed state-of-the-art automated doors in its 480,000-square-foot headquarters warehouse and 325,000-square-foot Riviera Beach, Fla. warehouse. The company is also building a 345,000-foot warehouse in Punta Gorda, Fla. High-speed doors from Jackson, Wis.based Rytec Corp. provide rapid storage and retrieval of product from the freezer and chilled storage rooms for Cheney Brothers, which operates 24 hours a day, six a days a week. The company maintains 38to 40-degree F docks, with product going in and out of -5-degree F freezer storage areas and 34-degree F cooler rooms. The company’s WMS system monitors the path of products, from the racking to 36

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the dock to the customer. At the Ocala location, 26 forklifts and 105 pallet jacks roam the warehouse floor. Workers can access the 16-foot-tall door on the freezer in less than two seconds as it opens and closes at a speed of 100 inches per second. The door’s speed ensures that it is not prone to forklift collisions. Should there be a collision, however, the door’s panels harmlessly release from their guides. Employees can then insert the panel back into the guides by simply opening and closing the door. In the past, door damage required taking a door out of operation for repair. This was a problem because of the high volume of product. It also interfered with the company’s ability to provide emergency orders for restaurants or hotels that forgot to order some-

thing or ordered an inadequate quantity. “We cannot afford to have a door down – ever,” says Danny Wells, senior director of engineering at Cheney Brothers. The door speed plays a role in saving energy too. The differential between the freezer and the dock is at least 43 degrees F. Conventional wisdom once dictated that freezer doorways called for heavy panel sliding doors to prevent heat transmission. However, these solid panel doors would cause two problems. The slow speed could severely cripple product flow through the facility. Moreover, because the doors slide from side to side, they take up wall space equal to the doorway area. The facility

• Cheney Brothers maintains 38- to

40-degree F docks, with product going in and out of -5-degree F freezer storage and 34-degree F cooler rooms.

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• High-speed doors provide rapid

storage and retrieval of product from the freezer and chilled storage rooms for Cheney Brothers.

needs all the wall space it can get for product racking for its 19,000 SKUs. With an operation that sees thousands of cycles per day per door, heat transmission isn’t an issue because the door is rarely closed. Plus, the door’s high speed minimizes doorway exposure, reducing cold air infiltration out of the freezer. When the door closes, it seals tightly. The door’s vertical edge becomes encased in the side guides to prevent cold air from escaping. Brush seals along the top of the panel, and a floor-hugging gasket, also prevent air release.

vehicle restraint and visualization warning system enables lift truck operators to see when it is safe to enter and exit a trailer.

The system uses LED lights mounted directly in the forklift driver’s line of sight as they enter and depart the trailer. The system provides status of the vehicle restraint, alerting the driver when the vehicle restraint has secured the trailer and it is safe to enter. The system has reduced the need for dock workers to chock wheels or check trailer status to unlock full trailers. “Forklift drivers can get tunnel vision and not notice the lights on a standard control box,” says Troy Bergum, product

Distributor teams with door maker to fine tune efficiency Cheney Brothers fine-tuned the system to further improve temperature control. Eric Andrews, a company engineer, developed a zipper pocket along the bottom bar on the freezer doors. The bottom bar on freezer doorways can accumulate ice, and the pocket enables door contact along the floor. The zipper pocket facilitates the ability to clean the ice off of the bottom bar to keep it pliable. Rytec Corp. assisted Andrews in developing the zipper pocket. The team also installed a Plexiglas window in the door’s side column to allow for easy inspection. This saved time and improved safety for performing periodic inspection of the door’s counterweight. Inspection previously required removing the vertical side guide that covered and protected the counterweight. For the 16-by-10-foot doors that provide access into the high-rack freezer, inspection meant bringing the scissor lift over to the door and lifting someone up to the top of the side column to remove the screw.

Visual detection and warning systems aid food operations Visual detection and warning systems are also improving safety and efficiency in food and beverage warehouses. Ocean Spray Cranberries improved safety for lift truck operators at nine loading dock bays in its Tomah, Wis., facility while increasing efficiencies by installing a vehicle restraint and visualization warning system. The recently-installed Rite-Hite www.foodlogistics.com

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FOOD LOGISTICS

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manager of Rite-Hite Products Corp. “We bridge the communication gap.” More recently Sartori, the Plymouth, Wis.-based cheesemaker, focused on improving the loading dock environment on account of the Food Safety and Modernization Act (FSMA). According to FSMA, docks are a highrisk zone for food defense and facility security. To prevent theft, reduce contamination and improve dock worker safety, Sartori installed Rite-Hite’s latest automatic vehicle restraints – the SHR-5000 Shadow

Hook Dok-Lok. This vehicle restraint wraps around a trailer’s rear-impact guard, securing the trailer to the loading dock. It reduces trailer separation accidents while deterring theft.

Leaders in

COLD STORAGE Design & Construction

As a national leader in designing and building cold storage facilities, Ryan understands the end-to-end supply chain process and the key role that distribution plays in efficient and timely movement of product. Whether it’s designing energy efficient thermal envelopes, refrigeration or lighting systems, our focus is on building solutions for your business.

RYAN COMPANIES US, INC.

Bob West at bob.west@ryancompanies.com or 904.237.3629 www.RYANCOMPANIES.com 38 SEPTEMBER 2015 • FOOD LOGISTICS

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The strong con- • Rite Hite’s vehicle restraints and visunection between alization warning the trailer and system with lights improve safety and the loading dock reduces holes, gaps increase efficiency and other openings with clear communication. where dirt, debris, insects, and other environmental contaminants can enter the building. Vehicle restraints, along with Rite-Hite’s Dok-Commander controls panel, can interface with a company’s security system as well. Sartori deployed Rite-Hite’s vehicle restraints and vertical-storing leveler at the dock, and high-speed doors inside its facility. The vertical leveler allows the loading dock door to close directly onto the pit floor, rather than onto the leveler, which minimizes outside air infiltration and prevents contaminants from entering the building. The high-speed doors minimize temperature changes and air particulate contamination between the facility’s rooms.

How insulated walls play a role on loading docks Flexible, modular walls are also finding application on loading docks. Randall Manufacturing’s insulated curtain wall system, InsulWall, helps warehouses maximize space, protect inventory, conserve energy and move easily when business needs change. InsulWall provides temperature separation up to 40 degrees F (22 degrees C). It is constructed with recycled insulation, making it a LEED contributing product. It is available in a variety of R values, thicknesses, and weights. This flexible, thermal curtain wall installs easily from ceiling joists or roof decks and can be stationary or on a roller track. Kristine Grudis, Randall Manufacturing sales manager for warehouse products, says InsulWall’s thermal properties, flexibility and modularity enable easy installation around the inside perimeter of a dock. When certain areas have to maintain a temperature that is well below the outside temperature, compressors have to work overtime to maintain the inside temperature. This is highly energy intensive. www.foodlogistics.com

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One foodservice distributor had to maintain a dock temperature of 49 degrees F while the outside temperature on many days exceeded 100 degrees, Grudis notes. The strip doors in the bays, which the company used to keep dirt, bugs and debris from entering the dock area, were not effective thermal barriers. To create an effective barrier, the company installed InsulWall inside the dock area on a roller track. Windows sewn within the InsulWall kept the dock area bright and safe. When the trucks arrived, the warehouse workers rolled back the InsulWall from the bay door and closed the door. The InsulWall helped maintain the temperature on the dock while the rest of the building remained cool. For the first time, the compressors were clicking off between 2:30 and 3 p.m. daily, which reduced electricity use. The InsulWall achieves three goals: 1) maintains dock temperature and product integrity, 2) conserves energy, and 3) eases the toll of excessive heat and humidity on the compressors.

How dock levelers improve warehouse efficiency Vertical storing hydraulic dock levelers are a fairly new development for improving warehouse efficiency, says Tim Bauer, director of industrial architecture at Ryan Companies, the Minneapolis, Minn.-based builder, designer and real estate management firm. Vertical storing levelers are more efficient energy-wise and protect the door from damage and allow “drive through” door design where the operator can control the trailer door. An extended lip chamfer – a beveled edge connecting two surfaces – provides

• Randall Manufacturing’s InsulWall enable easy installation around the inside perimeter of a dock.

a smooth transition from the trailer bed to the dock leveler. A smooth transition between the loading dock and trailer reduces jolts to forklift operators, thereby minimizing product and equipment damage. The overhead door closes all the way to the pit floor, providing better environmental control over temperature and humidity extremes. New food safety regulations are encouraging food warehouse managers to take a closer look at docking equipment. Fortunately, they have a host of options. ◆

For more information: FMH, fmhconveyors.com RANDALL MANUFACTURING, randallmfg.com ★RITE HITE PRODUCTS CORP., ritehite.com ★RYAN COMPANIES, ryancompanies.com RYTEC CORP., rytecdoors.com

Flexible Conveyors Enable Truck Loading And Unloading

lexible Material Handling (FMH) Conveyors, based in Suwanee, Ga., offers flexible, gravity-powered, telescopic and rigid-belted conveyor systems for truck loading and unloading. FMH designs each conveyor to expand, contract and flex as needed. FMH’s Nestaflex two-stage, gravity-expandable conveyor is specifically designed for truck loading. The 10-inch, steel frame and the 18-inch tires, coupled with a 1.5HP drive system make the TL-2 easy to use and long lasting. The MAXX rigid, extendable-belt conveyors are available in telescopic, drive-out multiand single-stage booms. They can be used for high-volume, automated shipping and receiving applications. Users can automate loading and unloading areas and convey a variety of products from large to small cartons. A VFD-controlled, belt-drive system provides transitions from belt starts and stops at speeds up to 250fpm. Each telescopic conveyor also includes a VFD-controlled extension drive providing smooth operation when extending and retracting the conveyor. ◆ www.foodlogistics.com

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SECTOR REPORTS

TRA NS P ORTATION: F UE L E F F ICIE NCY

California Mandates Aerodynamics:

Research Points To Better Fuel Efficiency Commercial fleets and vehicle manufacturers testing add-on devices and other solutions. BY ELLIOT MARAS

erodynamics, the study of the way air and gases affect motion around solid objects, has gained interest from the transportation industry as a fuel-saving technology. Research has confirmed that aerodynamic solutions can improve fuel efficiency and the transportation industry has introduced numerous aerodynamic devices. Trailers entering California are required to use EPA SmartWay-certified trailers or technologies, such as side skirts, gap fairings, trailer tails or rear fairings, and must achieve a 4 or 5 percent improvement in fuel consumption. This regulation is significant in its influence as fleets must now re-evaluate their daily operations and consideration in using trailer aerodynamics. The U.S. Department of Energy (DOE), meanwhile, continues to support research to further improve the aerodynamics of heavy vehicles. DOE is partnering with Frito-Lay, Navistar, Kentucky Trailer, Freight Wing, Michelin and Spirit Fleets to perform track and on-the-road tests. Add-on devices such as trailer tails, side skirts, gap fairings and extenders have been available to fleets for some time. There are plastic or composite devices that attach to the vehicle and direct the air flow in a way that reduces air pressure while the 40

SEPTEMBER 2015

 Heartland Catfish driver Dennis

Jones, left, and James Sorrels, director of transportation, appreciate the savings from aerodynamic features in the Kenworth T680.

vehicle is in motion. Ryder, for example, has been introducing side skirts into its fleet for several years, says Scott Perry, vice president of supply management and global fuel products. The aerodynamic tools are one of several improvements the company has introduced, along with engine down speeding, axle ratios, low viscosity engine oils, low rolling resistance tires and automated transmissions. Penske Logistics uses fairings on its tractors and side skirts for its 53-foot trailers, says Doug Macolley, vice president of fleet operations. “We work to manage the drag resistance and air flow around the vehicle,” Macolley says. “Our company sees the value of aerodynamics in our fleet because with the proper specs, there is less energy needed and that improves our MPGs.” Vehicle manufacturers are

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incorporating these features in newer models. Some food and beverage fleets are already using aerodynamic devices built into their newer trucks. Brian Tabel, executive director of marketing for Isuzu Commercial Truck of America Inc., says aerodynamics makes more sense. His company offers a variety of models, one being

the NPR, an ECO-MAX lowcab-forward truck with an air dam that provides reduced drag on the vehicle. But Isuzu recognizes that government regulations could mandate aerodynamic features, which is already the case in California for some trucks and trailers. “Those (rules) will be moving across the country and could become standard,” he says. “You’re going to see more and more medium duty trucks move in that direction to reduce fuel costs and lower cost of ownership.”

Catfish processor finds savings Heartland Catfish, based in Itta Bena, Miss., recently

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converted its fleet of 22 highhood trucks into a fleet of Kenworth T680s that have factory-installed aerodynamics in addition to other fuel efficiency features. The current Kenworth T680 Advantage has longer 76-inch sleeper side extenders, lower cab fairing extenders, front air dam, aerodynamic mud flaps, rear fairing without steps coupled with an air deflector, exhaust cut-out covers, and optional wheel covers for drive tires. The model has gained Heartland Catfish 2.3 mpg over its previous long nose, which means a fuel savings of more than $2,000 per truck per month, a $44,0000 monthly fleet reduction. But the existing aerodynamic devices have limitations. Penske Logistics, for instance, does not use side skirts on trailers to retail locations. “The reason why is the increased possibility of damage to the skirts due to the nature of the deliveries,” Macolley says. “The only exception would be California where it is mandatory on all 53-foot trailers.” As sensor technology evolves, so have opportunities to improve the capabilities of aerodynamic devices for trucks and tractor trailers.

Startup secures research funds Actasys Inc., a Watervliet,

 Price Chopper is testing the

active aerodynamic solution from Actasys Inc. in partnership with Logistics One.

www.foodlogistics.com

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EPA’s SmartWay Technology Program Expands To allow Trailer Aerodynamic Verification

PA’s SmartWay Technology Program verifies fuel savings from aerodynamic devices and low-rolling resistance tires that can be used on 53-foot box dry and refrigerated vans in longhaul operations. EPA verifies individual devices or combinations of devices tested using SmartWay’s protocols; these devices are known as “SmartWay-verified” devices. SmartWay aerodynamics test protocols create consistent, comparable fuel-savings estimates under high-speed cruise conditions for long-haul tractor-trailers. If trailer aerodynamic devices demonstrate fuel savings in SmartWay testing, they are identified as SmartWay-verified and are listed, along with

N.Y.-based company, has been working to adapt an active aerodynamic technology developed in the aerospace industry to improve fuel efficiency of tractor trailers. The company has secured funding from the New York State Energy Research and Development Authority in addition to private funds. The Actasys kit consists of a set of actuators on existing tractor fairings or extenders, and of a control/electronic unit that connects to the tractor computer and battery, says Daniele Gallardo, Ph.D., company co-founder and vice president of business development. The actuators create a “virtual wall” of high-speed air connecting the tractor to the trailer, preventing the incoming air flow to infiltrate the gap between the two. By doing so, the system reduces turbulence, thereby improving fuel efficiency. By connecting to the tractor’s electronic control unit (ECU) and to a set of sensors that will come with the kit, Actasys’ product will be able to adapt to changing environmental and driving conditions autonomously. Gallardo claims wind tunnel experiments demonstrated potential fuel savings

SmartWay-verified low-rolling resistance tires, on the SmartWay website’s technology verification page (www.epa.gov/smartway/forpartners/technology.htm). EPA also replaced device-based verification categories with performance-based categories for all aerodynamic device testing. Aerodynamic devices that fall into these new performance thresholds are demonstrated to achieve fuel savings of 1 percent, 4 percent, 5 percent and 9 percent or more. Fleet managers can select individually-verified aerodynamic devices from any of the performance thresholds and combine them to meet to the total fuel savings threshold required to qualify as EPA-designated SmartWay or SmartWay Elite trailer. A listing of SmartWay-verified devices can be found on www. epa.gov/smartway/forpartners/ technology.htm. ◆

of 6 percent to 18 percent obtained by applying Actasys technology in several locations that are a source of drag. The system in its present form polls information on the vehicle’s acceleration, braking, velocity, load weight and

geospatial location, Gallardo says. Actasys is also working on adding sensors that will gather environmental data such as side wind speed, temperature and humidity. Gallardo claims “the system will represent the first aerodynamic kit capable

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of adapting autonomously to changing environmental and driving conditions and to stream in real time the fuel savings that are achieved.”

Passive versus active solutions The most commonly adopted add-on aerodynamic kits include side fairings, extenders, roof fairings, trailer skirts, and, to a lesser extent, trailer tails. The problem with these devices is they are passive in nature, Gallardo says. They cannot adapt to changing environmental and driving conditions, and they can enhance the aerodynamic performance only to a certain extent. Roof fairings can sometimes adjust to match the height of the trailer, but the adjustment is manual and often relies on truck drivers to perform it. Several customers, especially in the Northeast, have said trailer skirts present problems with ice and dirt

Among Major Fleets, Aerodynamics Leads Fuel Efficiency Technology Adoption

recent report from the North American Council for Freight Efficiency (NACFE) indicates aerodynamics is one of the most promising areas for improved fuel efficiency. The NACFE 2015 Annual Fleet Fuel Study investigated the adoption of various products and practices for improving freight efficiency among 14 major North American fleets, and identifies benchmark competencies of those companies in many different areas. Fuel-saving technologies were grouped into seven categories: tractor aerodynamics, trailer aerodynamics, powertrains, tires/wheels, idle reduction, chassis, and fleet practices. The results were presented at the Alternative Clean Transportation (ACT) Expo in Dallas, Texas this past May. The study revealed that the select fleets adopting freight efficiency products experienced improved miles per gallon (mpg). The NACFE fleets reported an average 7.0 mpg compared to 6.1 mpg for other fleets. This amounts to a fuel savings of $9,000 per year per truck. This report, the NACFE’s fourth annual fleet fuel study, accumulated data on the purchasing habits of 14 fleets, operating more than 53,000 tractors and nearly 160,000 trailers. ◆

buildup during the winter months and can add mass to the vehicles and cause breakage. Gallardo is planning a beta test for fleets equipped with a retrofit device. He is also working with vehicle OEMs that will build the device into tractor trailers. He is planning to commercialize a retrofit kit to sell to fleets. In the near term, he will work with truck OEMs to integrate the technology into

the design of new vehicles. Gallardo’s next step is to start beta testing with local fleets. “We are looking for partner fleets to do trials together as early as fall 2015,” he says.

Price Chopper partners with Logistics One Currently, Actasys is conducting road tests with Price Chopper, the Schenectady, N.Y.-based supermarket chain,

on day cabs. It has also started to coordinate experiments on “sleepers” with Logistics One, the Saratoga Springs, N.Y.-based 3PL, testing longer routes. Gallardo says results to date are promising. From an R&D perspective, Gallardo says Actasys’ next step will be a unit that will be installed on the back of the trailer, generating a virtual boat tail.

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Visit us at IFDA Booth #844 • Join us for a Complimentary Webinar! Visit www.vai.net/events “Currently, the sharp edge of the trailers generate a significant turbulence on the incoming air flow that generates a negative pressure on the back of the trailer, which literally holds the vehicles back while they are running. In order to improve the problem, some companies provide physical trailer tails that are added to the back of the trailers to be deployed. Our unit will be fully automated and won’t require any physical change to the trailer’s back, providing unprecedented fuel savings, even in regions where there are limits on the overall length, such as Europe.” “We’ll no longer be tied to a physical form of aerodynamic improvement devices,” says Dave Schmitz, Price Chopper’s director of transportation. “It is intelligent aerodynamics that manages air flow without changing the form factor of our current fleet. This technology www.foodlogistics.com

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has the potential of being a game changer. This will result in improved fuel economy, reductions in greenhouse gases and lower maintenance costs as compared to traditional aerodynamic devices.”

Benefits go beyond fuel savings The benefits go well beyond fuel savings in Schmitz’s view. “This could improve the drivability of the trucks by altering the effects of cross winds and other inclement weather situations.” Logistics One is testing the Actasys system for its fleet of 300 tractor trailers and 61 trucks. “We were interested in working with a local company to see how we could improve the fuel efficiency of our trucks,” says Graham Goffin, CFO at Logistics One. Goffin estimates the company spends $150,000 to $250,000 per month on fuel.

“A small efficiency savings could be a big savings for us,” he says. “It’s very high-tech technology and very minimalist in terms of the equipment involved,” he says of the Actasys solution. “This equipment can be easily adapted to a leased truck without any add-on equipment. It should be fairly flexible in terms of our fleet.” Goffin considered the EkoStinger aerodynamic system made by Palymra, N.Y.-based EkoStinger. Goffin felt the Actasys system involves less equipment and is easier to install.

EkoStinger is SmartWay and CARB approved The EkoStinger system consists of an undercarriage unit that moves in conjunction with the rear wheel tandem and an undercarriage cross-member cover, which enhances air flow while contributing to the

protection and increased life expectancy of the trailer. The system is SmartWay verified and CARB approved. As tests continue to indicate the important role aerodynamics plays in making vehicles more fuel efficient, researchers are finding ways to make aerodynamic devices more flexible. Aerodynamics could well become one of the vehicle manufacturing industry’s more significant fuel economy measures. ◆

For more information: ACTASYS INC., actasysinc.com EKOSTINGER, ekostinekostinger.com EPA SMARTWAY, Epa.gov/smartway ★ISUZU COMMERCIAL TRUCKS, isuzucv.com LOGISTICS ONE, logisticsone.com ★KENWORTH, Kenworth.com ★PENSKE LOGISTICS, penskelogistics.com ★RYDER SYSTEMS, ryder.com

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SECTOR REPORTS

SOF TWA RE /TE HCNOLOGY: S UPPLY CHA IN MGMT

Planning: to arrange a method or scheme BY KARIN L. BURSA

any challenges are known. We can plan for them. But is it really possible to plan for unexpected events, unforeseeable factors? With the size and complexity of today’s supply chains growing at an exponential rate, anticipating the unexpected—or, more accurately, putting your team in the most advantageous position to respond to the unexpected—is of paramount importance. Food and beverage industry supply chains face a unique set of challenges: specific customer requirements, expectations of always-on-time deliveries, packaging impacts, formulation changes, seasonal product launches, promotional planning and price sensitivity, among others. Food and beverage companies also work with a diverse group of partners from packaging and ingredients suppliers to logistics and distribution parties. In that context, how can the food and beverage supply chain team “plan” for natural disasters, supply disruptions and unexpected spikes in demand that can be caused by anything from a volcanic eruption to a celebrity tweet? These things can have a profound impact on your supply chain and your ability to meet Dried eggs are a key demand, but they ingredient for dry may strike with little bakery mixes made by or no warning and Tukwila, Wash.-based require managers to Continental Mills.

beforehand for any work, enterprise, or proceeding.

make the right decision right away. So, while we understand that we must prepare ourselves to react to unexpected events (“the only thing you can bank on is the unexpected”), can we proactively plan for them? Can we turn the unknown into the known? The answer is almost. The key is to lay the foundation for success. As part of this,

every supply chain organization should have a playbook of high-level scenarios in place that can be modified to fit the current situation. This playbook is just the start, though. Seasoned supply chain organizations have the ability to rapidly model multiple “what-if” scenarios and assess the merits of each. For example, if we change suppliers, how will it impact lead times, costs, product quality, or service levels? If there is a spike in demand, what is the impact to our bottom line if we source from a second supplier or leverage a contract manufacturing partner? To successfully answer these questions, you need the ability to quickly understand the options available to your business and the impact of each scenario you are likely to evaluate as you consider possible courses of action. Interestingly, these initial scenarios may drive more options or potential changes to satisfy market demand while working around the disruption. Therefore, you will need to run and rerun scenarios as you identify the best option for the business.

A case in point – Continental Mills Continental Mills, a leading producer of dry bakery mix products, has several popular consumer facing brands including 44

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the Krusteaz and Ghirardelli family of dry mixes, as well as a large foodservice business serving many of the leading restaurant chains in North America. Continental Mills’ number one priority is customer service—to deliver the right products to its customers when and where they need them. In early May 2015, Continental Mills became aware the North American Avian Flu might disrupt its supply of eggs in the coming weeks. An outbreak of the avian flu in the Midwest U.S. had the potential to impact nearly 90 percent of the national dried egg supply, a key ingredient for a company that produces dry bakery mixes and uses nearly 2.2 million pounds of the product annually. At the same time, Continental Mills had started its seasonal process to ramp up production for the 2015 holiday season. While the egg-shortage rumblings were still in the preliminary stage, there was enough concern within the company to initiate alternative plans that might enable the company to supply customers even with the Avian Flu disruption.

Through its close collaborative relationships with key suppliers along with the marketing, product development and manufacturing teams, Continental Mills was able to determine the egg supply would not reach normal levels until March 2016. The company had to act quickly to ensure it was able to meet its forecasted demand without a disruption in service. First and foremost, the internal team wanted to know what suppliers were affected and how that would impact their operations. The team then reprioritized production and simulated how far the current supply would go. Continental Mills’ response was born out of its sales and operations planning (S&OP) process with clear communication across the company to leverage a variety of creative thinking, process innovation and formulation expertise. All core functional areas within the business (research and development, supply chain, sales, marketing, etc.) were involved from the very beginning to fully understand the impact this event would have to each group and

how everyone could play a significant role in turning the situation around. Continental Mills determined it would need to make up a 250,000-pound shortfall in this key ingredient. The coordinated effort identified four questions to be answered: 1) Additional Sources: Are there additional suppliers to source dry eggs? 2) Modify the Formula: Can we adjust the formulations for current products? 3) Alternative Ingredients: Are there suitable substitutes for dried eggs? 4) Product Rationalization: How do we prioritize the product portfolio? Each question has the ability to significantly impact Continental Mills’ operation. As suggestions and ideas came in, Continental Mills was able to quickly model the impact of each and then readjust its assumptions to determine the impact on service and production. This rapid scenario development and comparison meant they were able to identify the appropriate actions to take and communicate these with suppliers and customers.

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