Jason Kay, CCO of IMS Evolve, explains the role that digitisation and smart supply chains are playing in transforming the cold food chain to help eradicate waste, improve food safety, and mitigate the risk of a global food crisis.
The world today has a vast problem with food, from a lack of biodiversity to excessive waste, from poor health linked to over consumption to massive food poverty.
We grow enough food to feed 12 billion – far in excess of the seven billion population – and yet more than one billion people are underfed. The UN estimates that, on our current path of food consumption and waste, by 2050 we will reach a tipping point and there will be a global food crisis.
The problems extend from agriculture all the way through the food supply chain to the home, where food wastage – in more economically developed countries at least – is excessive.
The UN target calls for the world to cut per capita food waste in half by 2030. But while changing consumer education and expectations is essential, as is the drive to increase biodiversity, it is within the food supply chain that these changes will come together.
Without democratising the consolidated food supply market, it will be impossible to reduce waste, embrace innovation, and change consumer behaviour. Systemic change is essential.
Unsustainable model
The way in which consumers have been educated to purchase food, both in store and in restaurants, has changed radically over the past few decades. Following mass consolidation, both retail and restaurant markets are dominated by a small number of organisations delivering a consistent and stable customer experience, one that offers products of identical size, shape, and price, irrespective of season or country of origin.
Of course, a sizeable proportion of fresh produce will never meet these unrealistic criteria. By creating a consumer expectation of blemish-free goods and specific sizes, food purveyors have built a market predicated on waste. Even if these ‘non-perfect’ items can be reallocated to sauces or ready meals, damage will occur at each stage of sorting and sifting, resulting in further waste.
Yet what has been achieved by this approach? Economically it is flawed, with subsidised agriculture and low margins for producers and retailers alike. Consumer populations – certainly in more economically developed countries – are less healthy.
This is due in no small part to excessive consumption and the increased use of processing. Ironically, this situation was originally brought about to address food safety concerns, especially regarding fresh food, and to extend shelf life. It has had the reverse effect.
Yet, while much of the population feasts on unhealthy, processed food, by 2027 the world could be facing a 214 trillion calorie deficit. Something has gone awry with the global model of food production and consumption.
Lack of innovation
Over the past 50 years, the economies and ethics of food production have fallen out of sync. Farmers don’t want to produce food that’s wasted, but every aspect of this low-margin model results in precisely that. Fears regarding food safety combined with failures of cold chain equipment inevitably lead to food being destroyed.
But basic process failures are just one aspect of the problem.
The sheer cost of managing suppliers to ensure product consistency and safety makes it difficult for retailers to embrace new, innovative providers. Meanwhile, those with existing contracts can’t afford the risks associated with late delivery or under supply, and so build in significant contingency.
The result is not only more waste, but also minimal opportunity to invest in innovation, to explore opportunities for new, healthier food options, or to embrace automation.
Sensors and sensibility
Clearly the systemic change required if the world is to avoid the predicted food crisis can’t be achieved overnight. In a difficult, low-margin market, with small numbers of players fighting hard to retain share, it is incumbent upon innovators and disruptive market players to use digitisation to drive that change.
The obvious role of digitisation is in minimising avoidable waste. When one in three freight journeys is food, the use of real-time information to improve routing and distribution planning is key to improving resource usage.
In addition, using existing sensors on refrigeration units, heating units, and air conditioning systems to raise alarms when problems occur (to enable immediate rerouting or allocation of items) can have a significant impact on food waste. Plus, the use of predictive maintenance technologies can help avoid equipment downtime.
This approach is already being adopted by forward-thinking organisations that are using digital and automation strategies to reduce the avoidable loss of food, achieve huge reductions in reactive maintenance costs, and even reduce customer complaints.
Factor in the use of real-time data to support a comprehensive energy management strategy – incorporating a range of different metrics, from seasonal differences to equipment reliability – and organisations can radically reduce annual power consumption.
Together, these changes could result in a reduction in expenditure of tens of millions of dollars. In large estates, the percentile point gains on the capital employed could run into hundreds of millions.
Critically, this is being achieved by layering digitisation over existing infrastructures. Clearly it isn’t feasible for retailers to rip out and replace control infrastructures across hundreds or thousands of locations. The impact on both profit and customer experience would be hugely damaging.
Instead, by using edge-based processing to ensure that data from existing equipment throughout the supply chain is both actionable and actioned, retailers are able to achieve IoT capacity at pace and with minimal downtime.
It is this frictionless approach to digital adoption that will be key to releasing measurable value.
Democracy and innovation
With this approach, organisations can achieve a significant revenue uplift, without the need for massive investment.
Indeed, it is the compelling ROI from deploying existing equipment that will be key to providing the investment to underpin the next level of digitisation: the use of traceability systems to manage the advocacy, source, and safety of food.
With the ability to confirm not only that products have been correctly produced, but also that they have followed the correct processes at every stage from farm to retailer, digitisation provides a full audit trail of trusted information.
This delivers low cost governance, radically reducing the cost of supplier ownership for retailers, and opening up new opportunities for suppliers to enter the supply chain and create the democracy that is essential to enable innovation.
And it is this innovation that will be key to moving away from the entrenched practices of food procurement that have embedded both consumer expectations and misunderstanding.
A democracy of participation within the food market will help to give consumers an informed choice, and improve education about food quality and the implications to health. It will also facilitate the introduction of new products and practices, including biodiversity, that will deliver a better consumer experience.
A more predictable marketplace will also encourage investment, enabling SMEs to enter and embrace automation to replace the reliance on cheap labour to improve productivity.
The result should be not only less waste and a fairer distribution of food globally, but also a better consumer experience with access to fresher, healthier, and less processed food.
In effect, the adoption of IoT to minimise avoidable waste within the retail cold food chain is the essential first step towards full digitisation throughout the food production lifecycle. That digitisation will underpin the global response to the developing food waste crisis.
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Internet of Business says
A fundamental change to the global supply chain will take time. But there are significant changes that can be made today that will not only begin to address the waste that’s endemic throughout the food chain, but also release the investment needed to support the adoption of digitisation throughout the infrastructure. This will be key to transforming the end-to-end business model.
Embracing digitisation will improve food safety and advocacy, so that the market can democratise access and innovate.
Automation, enhanced productivity, improving consumer education, and supporting essential change in global food production and consumption: all this can be achieved thanks to the IoT.
Read more: “Monolithic supply chains are dead”: Exclusive interview with JDA Software CEO, Girish Rishi
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