Keeping it fresh: innovation in fresh produce supply chains

Date : 23 December 2019

Fresh produce supply chains are notoriously difficult to manage, facing unique challenges that are not always present in the supply chains of other goods.

The challenges begin in the field, with production yields and quality dependent upon factors beyond human control, such as weather.  Difficulties continue as the product moves downstream, with fresh produce being prone to deterioration and damage.  To add fuel to the fire, there are also huge sustainability challenges, as pressure on land resource increases with an ever-growing population and consumers become increasingly interested in living sustainable lifestyles.  This blog explores some recent innovations within fresh produce supply chains, how these address some of the challenges outlined above and their supply chain implications.  The blog is split into two parts, with this first part focussing on downstream innovations and the second part on upstream innovations, in particular, agri-tech.

Vertical farming: compressing the supply chain through micro-fulfilment

In our 2018 Supply Chains for Growth survey, 59% of respondents said they think there will be significant investment in urban/vertical agriculture facilities to supply fresh food with lower distribution costs.  Since then, vertical farming has been fast gaining momentum and earlier this month, M&S announced that it has rolled out vertical farming units to seven London stores to supply fresh herbs.  When vertical farming is applied in this way, that is locating the units on the premises where the consumer buys the product, it marries the production, packing and fulfilment processes and reduces logistics activities.

This model lends itself well to the newly emerged concept of micro-fulfilmentOcado is another retailer that has invested in vertical farming and sees the potential synergies of vertical farming and micro-fulfilment.  Ocado’s chief executive, Tim Steiner, said in June: “Our hope ultimately is to co-locate vertical farms within or next to our [distribution centres] and Ocado Zoom’s micro-fulfilment centres so that we can offer the very freshest and most sustainable produce that could be delivered to a customer’s kitchen within an hour of it being picked.”

For further information on micro-fulfilment, see our recent blog: “Reviewing 2019’s trends: Micro-fulfilment on a macro scale”.

Last month, we produced an introductory guide to lean manufacturing and it is interesting to analyse vertical farming at the retail unit in the context of lean.  Vertical farming eliminates some of the seven wastes that lean recognises.  Remember that by “waste”, we mean activities that do not add value in the eyes of the customer.  As long as customers don’t mind that the produce isn’t grown outside, on a traditional farm, they benefit from locally-grown, fresher produce, as it is harvested in-store.  A huge amount of transportation activity is removed from the supply chain, as the growing, harvesting and packing activities take place at one site - the retail unit.  Then there’s the reduction in inventory, as shopper demand is driving harvesting of produce at a very short lead time and all the inventory is held at a single location.  Other activities, such as administration, are now not required, for example, logistics planning to move product between different sites.  Also, instead of forecasting at the store level and the depot level, only the store-level forecast is required.

The below diagram depicts how vertical farming compresses the supply chain.

Source: IGD Research

This innovative model also helps to alleviate other supply chain concerns, particularly those surrounding sustainability.  Below are some of the ways vertical farming is considered to have a positive impact on sustainability:

  1. More food can be produced with less land.  Product can be grown in urban areas without the need to convert more of the natural environment into agricultural land.  Also, due to the vertical stacking of growing units, the yield per square metre is higher than with traditional farming
  2. Food waste can be reduced.  Produce can be grown close to consumers, improving product freshness and extending post-sale shelf-life.  shoppers may be able to purchase quantities more in-line with their consumption requirements
  3. New employment opportunities can be created in urban areas
  4. Reduced carbon dioxide emissions result from removing transportation from the supply chain
  5. Water usage is reduced, as water can easily be recycled.

However, when assessing the sustainability merits of this model, it must be considered that vertical farming has its disadvantages, for example, it is costly to build and requires large amounts of energy to run.

Innovative shelf life extension to reduce waste

One key characteristic of fresh supply chains is a high risk of product spoilage.  Products are highly perishable in nature, with short shelf lives and many require cold chain management in order to preserve quality throughout the supply chain.  Supply chain distances and times have increased, as companies source globally in order to maintain year-round supply, meaning consumers may have less time to consume imported produce before its quality deteriorates.  Food waste has become a hot topic in the last few years and there has recently been a lot of innovation in this area from manufacturers and retailers.

In September, Asda began trialling an innovation from Apeel Sciences to extend the shelf life of mandarins.  What Apeel Sciences developed is an edible plant-derived coating, which, when applied to fruits and vegetables, keeps moisture in and oxygen out, extending shelf life by two to three times.  Major US grocers have started selling avocadoes treated with Apeel and Asda has announced plans to sell avocadoes coated in Apeel in the New Year.  Avocadoes treated with Apeel can be good to eat for up to 30 days.  Extending shelf life through this innovative preservation mechanism means suppliers and retailers have longer to sell produce and customers have longer to consume the produce – a win-win situation for everyone.

In the past year, there have been many initiatives launched to tackle food waste.  However, a lot of these focus on redistribution or repurposing of food that would otherwise go to waste.  The use of Apeel coating goes one step further, reducing the likelihood that the produce will need to be redistributed or reprocessed, which, in any case, is difficult with fresh produce due to its fast deterioration.  This form of waste prevention can be considered most preferable, as outlined in the waste hierarchy diagram below.  To find out more about this topic, see our guide on managing and preventing waste.

Source: WRAP

Conclusion

In times of increasing competition and increasingly demanding customers, fresh produce supply chains need to innovate.  Luckily, there are a host of technologies out there, just waiting to be leveraged.  Some of these are not new, but they can be applied in new ways to create value

Technological innovation is also helping to address increasing food safety and sustainability concerns.  As businesses are finding it harder to differentiate themselves in competitive marketplaces, harnessing technology to address these concerns can provide a new form of differentiation and competitive advantage.

Players in fresh produce supply chains should stay up to date with the latest technologies and think flexibly about how they can form partnerships to create new supply chain models and disrupt the market.

Use our transformed by technology benchmarking report to see how well you are using technology in your supply chain.

Keep your eyes peeled for the second part of this blog, looking into how technology is being used to transform agricultural supply chains.

Kathleen McLoughlin

Senior Supply Chain Analyst

Synchronising the supply chain requires all partners to transfer and use the demand signal in a manner that is mutually supportive and seamless.

This is the second report of the vulnerabilities series, which explores the impacts that natural disasters and resource shortages have on food and grocery supply chains, and how we can take action to mitigate risk.

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