Tag Archives: warehousing

Bob Bentley, Crisp
FST Soapbox

Predictions: Planning for Increased Demand with Limited Supply

By Bob Bentley
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Bob Bentley, Crisp

We are seeing the beginning of a limited supply of certain products as containment of the COVID-19 pandemic keeps manufacturers, processing plants, and other suppliers in global stasis. But what does that mean for these manufacturers and other members of the supply chain? It means continued planning of master resources such as demand management, sales and operations planning and production scheduling, but with a greater focus on efficiency.

This process of master resource planning results in a detailed blueprint for manufacturing products to meet anticipated demand, accounting for various constraints such as limited supply of raw materials and purchase parts.

So what should manufacturers do if they run into serious shortages of raw materials or purchase parts? What can retailers do to cover operating expenses if they don’t have enough products to sell? We’ll take a look at these anticipated complications and possible methods for solving them.

Limited Supply

The current COVID-19 crisis has led to mandatory business closures that have already caused a shortage of supply. So far, we’ve gotten by with inventories that had already been sitting in various places up and down supply chains prior to the shutdowns, not just on warehouse and retail store shelves. Once all inventories within supply chains are depleted, we will start to notice more stockouts.

Some businesses can endure long-term production cessations without stockouts. For example, manufacturers in critical industries such as pharmaceuticals have a policy of stockpiling inventory in case of unforeseen events. Most businesses, however, cannot afford to miss months of production time because the lean manufacturing principles they adhere to include keeping minimal inventory.

For instance, automobile manufacturers and retailers do not hold excess inventory due to the expected annual product line changes from the previous year’s models, which are typically sold at a large profit reduction at the turn of the year. Clothing and other fashion-related businesses also keep inventory minimal due to a yearly change in styles.

Another source of upcoming shortages will be the sell-off of supplier facilities due to the downturn in revenue caused by emergency closures. Food is a particularly interesting case. Farmers are reconstructing the way their supply chains work to better serve their new target consumers—grocery retail. Some farmers may run into issues with transporting livestock or may need to repurpose crops that are nearing their harvest. Many of those that are pushing to endure and come out of the pandemic disruption with minimal casualties are starting to get creative by creating small farmers’ markets (pop-ups) or marketing directly to the consumer via direct subscription boxes.

It will take some time to re-establish farms, manufacturing plants, and other suppliers who were hit hardest during the months without revenue. However, refocusing on demand planning and forecasting could aid in spurring a regeneration of these industries.

Demand Management

Demand management is the first of three steps taken during the master resources planning process. Demand management includes demand forecasting, distribution channel planning and customer demand management.

Both suppliers and retailers need to know what demand they can expect, especially during uncertain times. After COVID-19, consumer demand will be high, supplies will be limited, and accurate demand forecasting will be especially important to getting businesses back on their feet.

Inaccurate forecasting will cause waste when businesses overestimate future demand for items that have a short shelf life. For instance, a grocery store that overestimates how much produce they will be able to sell within a certain time frame will end up throwing some of that produce away due to spoilage.

Consumer behavior during a crisis can complicate demand forecasting, though. In an earlier phase of the COVID-19 pandemic, worried customers over-purchased toilet paper and paper towels. This caused a shortage for everyone else, and the demand for those items was much higher than anticipated/forecasted. More recently, the same buyers bought up meat when they heard about the disruption in the food supply chain, and they expected the prices for meat to go up. Demand spikes like these cause lost sales for stores that don’t anticipate them.

Demand forecasting will remain tricky in the short-term for both suppliers and retailers whenever a retailer re-opens to the public with the imposed 25% capacity constraint. Overhead expenses will likely remain relatively the same, but 25% of the normal revenue may not cover expenses. Whether a full 25% of a retailer’s former customer base would return during a pandemic is also an unknown factor.

Companies will see high demand when the world opens their doors for business. The most efficient way for companies to plan during these times is by utilizing high-performance, demand forecasting software that will offer the best information available to deal with volatile demands, given the various known and predicted factors.

Sales and Operations Planning

After demand management is performed, manufacturers go through a sales and operations planning process that integrates sourcing, manufacturing, sales, marketing and financial plans, and resource planning. This process results in the creation of an approved production plan (at the product family level), purchase plan, sales plan and backlog plan that satisfies the anticipated level of demand within supply constraints.

In the early days following the end of the pandemic, some manufacturers won’t have the initial supply to meet the high demand for their goods. Some may find contingencies for creating their goods and products, while others may run into supplier issues when it comes to recreating their products and goods post-closure.

Getting manufacturers back up to speed will depend on building up the supplies of raw materials and purchase parts. Sometimes out-of-the-box solutions such as part designs can eliminate the need for some unavailable purchase parts and dependency on some suppliers. Additionally, accurate demand planning information will enable manufacturers to accommodate their retailer customers as much as possible without overpromising incoming goods.

Master Scheduling

In the master scheduling phase, the production and purchasing plans are taken from the family level into a specific product level. This process involves a computer repeatedly simulating production and purchasing as planned during the S & OP step until optimal bills of materials are created. This process includes testing of the plans against constraints of critical resources (rough-cut capacity planning) until a master production schedule is derived.

Fortunately for the retailers, manufacturers who have done accurate demand planning and have taken their production plans through the master scheduling stage will know the maximum number of goods they can ensure without overreaching.

Conclusion

The current COVID-19 pandemic required many business closures to help contain the spread of the virus. As a result, many consumer goods are in limited supply. When the crisis ends, the demand may very well overtake the supply. Businesses will need to practice patience while supplies build back up. Thinking outside the box, using accurate demand forecasting, preventing waste, and executing good demand planning will be crucial steps in reinstating a synergistic supply chain model.

Megan Nichols
FST Soapbox

How Will AR and VR Improve Safety in the Food Industry?

By Megan Ray Nichols
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Megan Nichols

The food and beverage sector is a huge presence in the U.S. economy. As of 2017, the industry employed 1.46 million people across 27,000 different establishments. Total food and beverage sales stand at around $1.4 trillion and add $164 billion in value to the economy as a whole.1 This presents significant opportunities and risks alike. Companies that trade in food products are held to some of the highest regulatory standards. With globalization ongoing and a higher demand than ever for variety and niche products, companies find they need to expand the mobility of their services. They must also broaden their product choices without missing a beat when it comes to quality.

Augmented reality (AR) and virtual reality (VR) have emerged as unlikely allies in that quest. These technologies are already having a positive impact on food and worker safety in the industry.

Improves New Employee Training

Onboarding and training new employees is a costly and time-consuming endeavor in any industry. Moreover, failure by companies to impart the necessary skills, and failure by employees to retain them, can have ghastly consequences. Errors on assembly lines may result in faulty products, recalls, worker and customer injuries, and worse.

The stakes in the food and beverage sector are just as high as they are in other labor- and detail-oriented industries. VR provides an entirely new kind of training experience for employees, whether they’re working on mastering their pizza cutting technique or brewing the perfect cappuccino. Other times, “getting it right” is about much more than aesthetic appeal and immediate customer satisfaction.

Animal slaughtering and processing facilities represent some of the more extreme examples of potentially dangerous workplaces in the larger food and beverage industry. Between 2011 and 2015, this U.S. sector experienced 73 fatal workplace injuries. Excepting poultry processing, 2015 saw 9,800 recordable incidents in animal processing, or 7.2 cases for every 100 full-time employees.

Some adopters of VR-based employee training claim that virtual reality yields up to an 80% retention rate one year after an employee has been trained. This compares extremely favorably to the estimated 20% retention rate of traditional training techniques.

Training via VR headset can help companies get new hires up to speed faster in a safe, detailed and immersive environment. Food processing and service are high-turnover employment sectors. The right training technology can help workers feel better prepared and more engaged with their work, potentially reducing employee churn.

Helps Eliminate Errors in Food Processing

Augmented reality is already demonstrating great promise in manufacturing, maintenance and other sectors. For instance, an AR headset can give an assembly line worker in an automotive plant detailed, step-by-step breakdowns of their task in their peripheral vision through a digital overlay.

The same goes for food and beverage manufacturing. AR headsets can superimpose a list of inspection or processing tasks for workers to follow as they prepare food items in a manufacturing or distribution facility.

In 2018, there was an estimated 382 recalls involving food products. Augmented reality alone won’t bring that number down to zero. However, it does help reduce instances of line workers and inspectors missing critical steps in processing or packaging that might result in contamination or spoilage.

Eases the Learning Curve in Food Preparation

There are lots of food products in the culinary world that are downright dangerous if they’re not prepared properly and by following specific steps. Elderberries, various species of fish, multiple root vegetables, and even cashews and kidney beans can all induce illness and even death if the right steps aren’t taken to make them fit for consumption.

In early 2019, inspectors descended on a Michelin-starred and highly respected restaurant in Valencia, Spain. The problem? A total of 30 patrons reported falling ill after eating at El País, one of whom lost her life. Everyone reported symptoms similar to food poisoning.

The common element in each case appeared to be morel mushrooms. These are considered a luxury food item, but failure to cook them properly can result in gastric problems and worse. Augmented reality could greatly reduce the likelihood of incidents like this in the future by providing ongoing guidance and reminders to new and veteran chefs alike, without taking the bulk of their attention away from work.

Brings New Efficiencies to Warehousing and Pick-and-Pack

Consumers around the globe are getting used to ordering even highly perishable foodstuffs over the internet—and there’s no putting that genie back in the bottle. Amazon’s takeover of Whole Foods is an indicator of what’s to come: Hundreds of freezer-equipped and climate-controlled warehouses located within a stone’s throw from a majority of the American population.

Ensuring smooth operations in perishable food and beverage supply chains is a major and ongoing struggle. It’s not just a practical headache for companies—it’s something of a moral imperative, too. The World Health Organization finds that around 600 million individuals worldwide fall ill each year due to foodborne illnesses.

Augmented reality won’t completely solve this problem, but it may greatly reduce a major source of potential spoilage and contamination: Inefficiencies in picking and packing operations. Order pickers equipped with AR headsets can:

  • Receive visual prompts to quickly find their way to designated stow locations in refrigerated warehouses after receiving refrigerated freight.
  • Locate pick locations more efficiently while retrieving single items or when they already have a partial order of perishable goods picked.

In both cases, the visual cues provided by AR help employees navigate warehousing locations much more quickly and efficiently. This substantially lowers the likelihood that food products are stuck in limbo in unrefrigerated areas, potentially coming into contact with noncompliant temperatures or pathogens. The FDA recognizes mispackaged and mislabeled food products as a major public health risk.

For food and beverage companies, AR should be a welcome development and a worthy investment. FSMA recognized that 48 million Americans get sick each year from compromised foods. The act required these entities to be much more proactive in drawing up prevention plans for known sources of contamination and to be more deliberate in standardizing their processes for safety’s sake.

AR and VR Boost Food, Worker and Customer Safety

Augmented and virtual reality may seem like an unusual ally in an industry where most consumers are primarily focused on the aesthetic and sensory aspects of the experience. However, there’s a whole world that lives and dies according to the speed and attention to detail of employees and decision-makers alike. Augmented realities, and entirely new ones, point the way forward.

Reference

  1. Committee for Economic Development of The Conference Board. (March 2017). “Economic Contribution of the Food and Beverage Industry. Retrieved from https://www.ced.org/pdf/Economic_Contribution_of_the_Food_and_Beverage_Industry.pdf.