Oct 06, 2020 by Tom Swovick

Freshness Sells!

A focus on fresh returns big dividends.

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Food & Beverage Supply Chain Trends Automation
Freshness Sells!

I once had a grocery executive (now retired from Wegmans) explain to me that the primary focus of their cheese fulfillment operation was to maximize freshness. Seeing my puzzled look, he explained that to consumers freshness equals quality and quality equals sales. This equation absolutely applies to the meat and poultry industry as well — and not only does freshness sell, it also makes you more money!

A Bit of a Background

Appropriation submittals that meat and poultry producers use to justify automating their operations are treasure troves of useful information. One of the first I read surprised me with this: savings from reduced labor costs contributed only 30% to the return on investment (ROI). I would have guessed that a much larger percentage of the ROI would be attributed to labor savings. The next surprise was that improving freshness had such a significant impact, more than half of the contribution provided by labor. Since then I have seen how other producers justify their capex, and I have observed marketed similarity. In some instances, labor may have been a few percentage points higher, but freshness has consistently continued to grow.

ROI Contribution

Specifics About Freshness

To be most specific, freshness maximizes revenue (and therefore profitability) when an order fulfillment solution allows you to ship the oldest possible product that still complies with consumer requirements — also known as First-In First-Out (FIFO) with a twist. Order fulfillment efficiency becomes even more important when the operation serves a broad geographic area where product can spend several days in transit. When the order picking does happen, some percentage of product ages out meaning the product must either be discounted or in the worst case disposed of. Either scenario reduces revenue and profitability.

There are two primary contributors to product aging out. One is when the forecasted demand for product is misaligned with the actual demand — in this case, there’s not much automation can do to help. The other contributor is when newer product is picked instead of the older product, either due to flaws in system design or because of human error. The older product ages out, and future forecasts then need to be readjusted to compensate for the “fresh” product that will be required for future orders.

Managing Freshness

You may ask, so what can automation do to improve freshness management? Well, first and most obviously, it can reduce human error by taking manual picking out of the equation. The second is a little more subtle — it can postpone the palletizing of the product until it is time to fulfill an order.

Fresh meat and poultry inventory turnover at a rate higher than most any other food manufacturing product. Technologies such as the Dematic Multishuttle® provide a cost-effective means to hold inventory until it is time to fulfill an order. It provides the ability to always assign product to an order that best aligns to the specific requirements of each order.

Lesson for Today

Solutions based on the Dematic Multishuttle provides many other operational and strategic benefits, but let’s save that discussion for another post. For today just remember that Freshness Sells (especially for meat and poultry) and automation is the key to making fresh products available consistently and profitably to consumers.

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