March 18, 2018

Making our value chain more efficient, transparent, and sustainable

By Nancy Appelquist, Director of Operations

I enjoy following the winter Olympics, and as often as possible in February I tuned in to watch the athletes perform incredible (and sometimes mind-boggling) feats on the snow and ice-packed slopes, tracks, and half-pipes. 

The night of the women’s mogul skiing event, I settled in with my popcorn and watched the competitors bump their way down the course to see who could make it to the finish line with the fastest time and stay upright after performing their aerial maneuvers. And I couldn’t help but think how much it reminded me of what it’s sometimes like to move product along the ag value chain—there’s always a way to get from point A to points B, C, and D, but it’s not always smooth. 

Through years of practice and strength training, the mogul skiers learn how to hold their own on those jarring courses despite the bumps and bobbles that slow them down and try to knock them off course. It works the same way in supply chain—you get pretty good at finding your way through the bumps and obstacles to get the job done, albeit not very efficiently. And you’ve often got to perform some fancy stunts before you cross the finish line and hope you land on your feet.

Fast forward to the downhill skiing competition, and the ease with which the skiers race down the hill is simply awe-inspiring. Sure, there are sharp turns along the run, but there are no mounds to disrupt the flow so the skiers’ speed builds as they race down the hill. And each athlete has trained to handle the course so efficiently that the difference between the gold medal champion and the 12th place finisher is mere seconds.

The stark contrast between these two skiing events brings to mind the difference between a supply chain that operates as a well-oiled machine vs. one that has unnecessary road blocks that interrupt the flow of business. And as I’m watching Lindsey Vonn glide down the twists and turns of the slope at 80 mph, I’m thinking, “This is what it could look like in the ag value chain if we all spoke the same language so we could communicate better.”

Better Supply Chain Communication with Digitization

Better communication makes things move more smoothly and efficiently along the track. This really isn’t earth-shattering news, but it’s easier said than done.

The high velocity of today’s agriculture industry is requiring more processes and information to be digitized so it’s easier to store, share and track product information. Better digitization enables processes to be more automated and product data easier to wrangle—and all of these are mission critical to creating an even better supply chain.

One variable that causes frequent hiccups along the supply chain is the naming conventions organizations adopt to identify products in their systems. Most manufacturers have their own set of proprietary product codes (SKUs) that they use to identify their products. As those products are moved through the distribution channel each trading partner potentially has their own set of SKUs to identify those products as well.

So when product XYZ leaves the manufacturer, it often takes on a whole new identity once it enters the distribution channel. And it may take on yet another ID when it lands with the retailer. This causes headaches when trying to backtrack because the numbers don’t reconcile and therefore each entity has to hunt information down and translate the codes for each other.

But imagine if product XYZ kept the same unique identifier from the time it originated with the manufacturer to its final destination with the grower. Things like rebate processing and product exchanges would go so much more smoothly. Sounds like a fantastic and simple idea, right? But it’s more than just a good idea. Universal adoption of unique identifiers is essential for enabling companies to trade information electronically up and down the value chain.

Using the Same Unique Identifiers

To make shipping, storing and sharing information simpler along the chain, the best approach is for trading partners to use the same identifiers when referring to a product. Otherwise, the chain is full of roadblocks and detours and other impediments that derail the process. It becomes fraught with confusion, errors, and inefficiency.

Unique identifiers are basic and foundational for all e-commerce transactions. Using unique identifiers to track products makes it possible for electronic communication to occur seamlessly throughout the entire value chain. Think of the time lost and delays that occur when you have to stop to translate and reconcile your code to another entity to arrange shipping or process rebates.

Having a unique identifier is like a GPS tracker combined with a social security number for your product. It follows a product for life and contains useful data and information about its history. It’s how you can ensure the right products are getting into the right hands in the right locations. Without it, your product can fall right off the radar.

There are many ways unique identifiers are good for the companies who use them:

  • Data and information/knowledge—more efficiently stored and shared—enables companies to identify, capture and share information about products, business locations, and more
  • Accuracy of delivery, billing, and other transactions among trading partners
  • Automation of business processes
  • Risk mitigation—fewer errors in compliance reporting

E-commerce in agriculture must be more buttoned up, for many reasons. First, increasingly complex operations require us to be more efficient in the way we conduct business. Second, you have consumers’ growing interest in where their food is coming from, strict regulatory requirements and building market pressures—all requiring more transparency and traceability. Finally, tracking products with unique identifiers could also be a way to make a dent in Big Data, because it streamlines product information. Without it, you have multiple entries of the same product and duplicate information being stored.

Overall, what unique identifiers bring to the supply chain is more efficiency, greater transparency and more sustainable best practices. With a single code, anyone along the supply chain can track a product or pull up a comprehensive record of product information. This is better for operational efficiency, but it’s also better for customer service.

So why isn’t the use of unique identifiers widely adopted throughout the ag supply chain in this age of globalization? The industry is still lagging perhaps because implementation would require a serious upgrade and some trading partners aren’t yet compelled to justify the expenditure. The economy is tight and our system is working just fine, they say. Others might feel they don’t have the technical expertise or the bandwidth of their technical staff is already stretched to its limits. But the investment is relatively small compared to the benefits that result—and it could mean the difference between bumping down a mogul track vs. gliding down the alpine slope maintaining speed and building momentum at every curve.

When we helped one of our clients secure and begin using unique identifiers it instantly made them more valuable to their trading partners since they could begin trading electronically. But it also had the added benefit of a much more efficient month end inventory reconciliation process at their own locations and locations where they were using third parties to store product. 

When we’re all speaking the same language, communication within the ag supply chain can glide effortlessly down the slope of e-commerce and avoid the interference of moguls along the way.

If you would like to talk about how your company can communicate better within the supply chain, contact Nancy Appelquist at nappelquist@entira.net or 914.456.6984.