Separating the signal from the noise

by Keith Nunes
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Risk management
Use of data analytics may help food manufacturers identify supply chain issues early.
 

KANSAS CITY — Portfolio diversity and evolving consumer trends are two issues putting pressure on supply chain managers. As companies seek growth in new market segments, managers must adapt operations to meet new needs. A new report from the consultancy Deloitte & Touche LLP, New York, titled “Supplier and service provider risk management” outlines how companies often discover they don’t have adequate policies and programs in place to identify and mitigate new risks to the supply chain.

“Supply chain managers in food are under a lot of pressure,” said Tom McGinnis, lead partner of Deloitte’s Safe Food Practice. “They are under pressure from the marketplace because consumers want more transparency, they want products that are local or fresh. Each of these issues can carry their own level of risk. Then you have cost pressures, or the 3G effect, which can have a major impact on margin and margin management.”

The Deloitte report emphasizes companies must understand the implications of cost reduction initiatives on food safety and balance the risk and reward equation.

“The 3G effect has a major impact on margin and margin management,” Mr. McGinnis said. “How do you maintain safe food while being under incredible cost pressure? Having the right level of diligence is important, but the ongoing monitoring of suppliers can be taxing. You have to know they are not cutting corners. We are finding one way to help is through the application of risk-sensing analytics.”

To develop the ability to mine data to highlight risks, organizations need to develop an integrated information management system that incorporates financial, supplier, quality and food safety data, according to Deloitte. With such a system in place managers may analyze supplier performance based on such indicators as on-time delivery, product quality and safety, and customer service response time. Then a system needs to be in place that monitors data and provides reports to line staff and management.

“There is a lot of use of spreadsheets to manage the risk factors associated with suppliers in the supply chain,” Mr. McGinnis said. “There is still a lot of use of paper-based reports for third-party inspections and field inspections. That data is valuable and companies need to analyze it using today’s technology. Using data science analysis can help companies anticipate issues with suppliers and issues in their supply chain.”

Mr. McGinnis added that the tools for data management exist today through such emerging concepts as the internet of things (I.O.T.) and blockchain.

“If you follow the train of thinking around visibility and transparency, the I.O.T. creates a whole new landscape of information,” he said. “I grew up in Detroit. I like cars, and there are an incredible number of sensors in cars today. With those same sensors built into the food value chain (we) can give operators real-time monitoring of what is going on.”

The current food industry supply chain is already inundated with sensors, whether it is related to temperature, packaging, cooking, etc. The challenge for managers is capturing the data generated and transferring it to a useful management tool.

“To me that goes back to our core point of view that we need to continue to look at this enterprise and the operational risks involved,” Mr. McGinnis said. “We need to bring the disciplines of risk management that we see in other industries like medical technology and life sciences and bring that to food and raise the line of site on the business issue we are trying to manage.”

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