As I vacationed in northern Michigan this summer, I watched the tart cherry crop being harvested. For a few weeks hydraulic tree shakers, conveyor belts, and trucks loaded with lugs of cherries continuously paraded past. The sheer volume of inventory being generated in such a short time made me acutely aware of the need for high quality, proximate processing and cold storage facilities.
Positioning fresh produce in production- and market-facing positions, goods are readily available when and where demand exists. Shorter lead times can be achieved, availability increased, and delivery costs reduced, increasing the effectiveness and efficiency of the supply chain network. Such capabilities can help growers and distributors enhance their competitive position.
In this installment of our ‘back to basics’ series, you’ll rediscover the importance of facilities to supply chain success. Insightful commentary from produce industry experts highlights the key roles, challenges, and facilitators of these activity nodes in the fresh produce network.
UNDERSTANDING ROLES AND REQUIREMENTS
Between the field and the retail shelf, facilities are strategically positioned to carry out five fundamental functions: accumulation, sortation, production, allocation, and assortment. Accumulation involves the consolidation of fresh produce from a variety of fields and growers. Sortation focuses on the assembly of like products for storage in a distribution facility or transfer to customers. Production focuses on the washing, cutting, mixing, and packaging of ready-to-eat fruits and vegetables. Allocation matches available inventory to orders, allowing customers to purchase needed quantities. And, assortment involves the assembly of multiple SKU (stock keeping unit) orders to minimize the number of customer deliveries.
To support these varying roles, fresh produce facilities must have the appropriate physical infrastructure. Required elements include proper climate control systems, adequate washing and processing equipment, sufficient lighting, and related features, notes Sandra Aguilar, marketing and strategic planning manager at Nogales, AZ-based Ciruli Brothers, LLC.
The climate control system must be designed to handle peak inventory requirements and external temperature extremes. Higher volumes of local produce, which are not precooled prior to arrival, boost the need for cooling capabilities according to Ed Treacy, vice president of supply chain efficiencies for the Produce Marketing Association. Proper sizing and design of the facility are also important infrastructure elements. Key considerations include the volume and variety of items that will flow through the facility.
“Each different item has an ideal storage temperature, humidity level, ethylene level, and consideration for odors,” explains Treacy. “The number and variety of items stocked at your facility will determine the number of temperature and humidity level chambers needed. In a retail distribution center, there may be as many as seven different chambers.”
The ability to manage water in a facility is also a critical design element. Any presence of water, including ice and cleaning products, increases the vulnerability of the facility to a listeria outbreak, notes David Gombas, senior vice president of food safety and technology at United Fresh Produce Association. Hence, it is imperative to have proper floor drainage and water collection capabilities, as well as an environmental monitoring program. “Otherwise, you’re just looking for trouble,” he adds.
Facility operations must promote safe handling and timely flows of fresh produce. Human resources and well-established procedures are the keys to operational success, according to Aguilar. Your people and processes must achieve consistent productivity, protect product integrity, and support customer requirements.
As I vacationed in northern Michigan this summer, I watched the tart cherry crop being harvested. For a few weeks hydraulic tree shakers, conveyor belts, and trucks loaded with lugs of cherries continuously paraded past. The sheer volume of inventory being generated in such a short time made me acutely aware of the need for high quality, proximate processing and cold storage facilities.
Positioning fresh produce in production- and market-facing positions, goods are readily available when and where demand exists. Shorter lead times can be achieved, availability increased, and delivery costs reduced, increasing the effectiveness and efficiency of the supply chain network. Such capabilities can help growers and distributors enhance their competitive position.
In this installment of our ‘back to basics’ series, you’ll rediscover the importance of facilities to supply chain success. Insightful commentary from produce industry experts highlights the key roles, challenges, and facilitators of these activity nodes in the fresh produce network.
UNDERSTANDING ROLES AND REQUIREMENTS
Between the field and the retail shelf, facilities are strategically positioned to carry out five fundamental functions: accumulation, sortation, production, allocation, and assortment. Accumulation involves the consolidation of fresh produce from a variety of fields and growers. Sortation focuses on the assembly of like products for storage in a distribution facility or transfer to customers. Production focuses on the washing, cutting, mixing, and packaging of ready-to-eat fruits and vegetables. Allocation matches available inventory to orders, allowing customers to purchase needed quantities. And, assortment involves the assembly of multiple SKU (stock keeping unit) orders to minimize the number of customer deliveries.
To support these varying roles, fresh produce facilities must have the appropriate physical infrastructure. Required elements include proper climate control systems, adequate washing and processing equipment, sufficient lighting, and related features, notes Sandra Aguilar, marketing and strategic planning manager at Nogales, AZ-based Ciruli Brothers, LLC.
The climate control system must be designed to handle peak inventory requirements and external temperature extremes. Higher volumes of local produce, which are not precooled prior to arrival, boost the need for cooling capabilities according to Ed Treacy, vice president of supply chain efficiencies for the Produce Marketing Association. Proper sizing and design of the facility are also important infrastructure elements. Key considerations include the volume and variety of items that will flow through the facility.
“Each different item has an ideal storage temperature, humidity level, ethylene level, and consideration for odors,” explains Treacy. “The number and variety of items stocked at your facility will determine the number of temperature and humidity level chambers needed. In a retail distribution center, there may be as many as seven different chambers.”
The ability to manage water in a facility is also a critical design element. Any presence of water, including ice and cleaning products, increases the vulnerability of the facility to a listeria outbreak, notes David Gombas, senior vice president of food safety and technology at United Fresh Produce Association. Hence, it is imperative to have proper floor drainage and water collection capabilities, as well as an environmental monitoring program. “Otherwise, you’re just looking for trouble,” he adds.
Facility operations must promote safe handling and timely flows of fresh produce. Human resources and well-established procedures are the keys to operational success, according to Aguilar. Your people and processes must achieve consistent productivity, protect product integrity, and support customer requirements.
Training and scheduling are the keys to deriving maximum value from a facility’s staff. Managers should guide new hires through a facility orientation, emphasizing proper operating techniques and safe product handling. However, training should not be limited to the first few days on the job. “Staff should be continuously developed as changes to the operation take place or new customer requirements emerge,” suggests Aguilar.
Operating procedures in a fresh produce facility must be based on good manufacturing practices (GMPs). Adopting GMPs will help facilities conform to regulatory agency guidelines and ensure product does not pose any risks to consumers. The key principles include maintenance of hygiene at all times, creation of clear process definitions and controls, avoidance of cross contamination, and strong recordkeeping for traceability.
“Any kind of holding area for fresh produce needs to follow CFR [Code of Federal Regulations] Title 21, Part 110 [promulgated under the Food Safety Modernization Act],” recommends Gombas. “The important part for facilities is Subpart B related to full preventative control rules. This includes a food safety plan, a supplier approval program, environmental monitoring, and more.”
It is also sensible for supply chain facilities to promote food safety through a management system like hazard analysis and critical control points (HACCP). Companies must analyze and control the biological, chemical, and physical hazards that can harm product.
“You absolutely need to be HACCP compliant or HACCP certified,” states Treacy. Some of which goes into the very design specifications of the building, he notes. “Make sure you have the right setup so you support pest control, sanitation, and safety.”
OVERCOMING CHALLENGES
Production and distribution facilities are dynamic operations. Each day brings new challenges, varying customer requirements, and expectations for perfect order fulfillment. Chief among these challenges are proper sanitation, labor availability, and fluctuating demand.
As a former grocery distribution center manager, I fully recognize the many challenges related to maintaining sanitary facility conditions. Product spills, temperature excursions, and pest infestation are the tip of the iceberg. Fresh produce facilities must also control allergens, avoid product cross-contamination, and prevent opportunistic pathogens from causing foodborne illnesses. The solution is a strong commitment to proper cleaning, food safety training, and periodic audits.
“Sanitation is always going to be a problem, especially for a warehouse that is operating 24/7,” acknowledges Gombas. “But it’s important to find environmental issues like listeria and respond before they get entrenched in your facility.”
Regulatory compliance is another facility management issue. Nobody enjoys those unannounced government inspections that seem to happen at the most inopportune times. However, facility leadership must prepare for the unexpected by developing appropriate strategies, executing the plan, and maintaining operational controls to ensure a secure and safe environment. Internal audits and assessments are also beneficial.
Aguilar recommends that companies conduct scheduled facility risk assessments, both from an operational risk management perspective and from a food safety and food security perspective. “This will determine if the proper policies, procedures, and resources are in place for the facility to conduct its operations to the suitability of its stakeholders including management, customers, regulatory agencies, and employees,” she notes.
Labor availability is a chronic issue for supply chain facilities. Distribution is people-intensive but it is growing increasingly difficult to hire and train high-quality operations personnel. The work is physically demanding, schedules can be erratic, and while wages are competitive with other hourly positions, there is limited opportunity for income growth. Collectively, these issues make it challenging for fresh produce facilities to avoid turnover.
Finding capable employees, training them to be productive, and retaining them requires great effort—but it can help reduce turnover and improve performance.
“I can’t say enough about training,” reaffirms Treacy. “Training your people on product knowledge, order assembly methods, and proper pallet-building techniques so product arrives safely at the store is crucial. I’ve seen facilities boost productivity 25 to 30 percent by having a robust training program.”
Demand variation is problematic for fresh produce facilities. During peak harvest, storage capacity and processing capabilities are maxed out. In the offseason, large portions of these facilities are idled. Labor issues can also arise—for example, not enough help is available to fulfill orders during the critical season but little work is available at other times. Facility managers must smooth out the flows when possible or they will find it difficult to effectively utilize the space, equipment, and labor throughout the year.
An alternative to sizing a facility for peak volume is to temporarily leverage the capacity of third-party processors and storage facilities. “Using a third party allows you to shave off that peak volume and avoid the capital investment and fixed costs of a larger facility,” notes Treacy.
Collectively, these strategic responses help facility managers win those daily battles. The outcome is safe, productive, and profitable production and distribution operations.
FACILITATING RESOURCES
While strong processes executed by well-trained people provide the foundation for facility success, additional support is required. Technology plays a pivotal role in accurate, timely throughput. External auditors help companies avoid costly compliance errors. And logistics service providers (LSPs) create contingent capacity and value-adding services. Collectively, these resources promote facility excellence.
As regulatory and customer requirements increase, produce facilities can no longer be managed with pencil and paper. Technology is needed to maximize performance. For example, a warehouse management system captures inventory arrival and departure information, manages stock rotation, and synchronizes fulfillment activities within the facility. “Technology helps us find ways to streamline our processes, to get trucks in and out sooner, and to help produce arrive fresher at its destination,” explains Aguilar. “It has changed the way we communicate with customers through EDI (electronic data interchange), the way we transmit traceability data for Produce Traceability Initiative compliance, and how we receive and account for inventory.”
Understanding complex and changing regulations is no simple task. Even the most compliance-savvy facility managers can get tripped up on occasion. The expertise of an external auditor can be highly beneficial. The auditor’s job is to ensure the facility’s internal controls, processes, guidelines, and policies are adequate, effective, and in compliance with governmental requirements, industry standards, and company policies.
A good auditor sees more operations than any facility manager in a given year, according to Gombas, so “auditors are in the best position to provide guidance to operations when they see something that could be done better. The auditor should offer assistance freely to make the operation run better, safer, and easier.”
In addition to their ability to offload peak volume from a facility, LSPs can provide supplemental labor resources, storage capacity, and technological support. Investments are leveraged across multiple clients who use LSP capabilities on an as-needed, variable cost basis. The logical time to use an LSP is when your company does not have a core competency in operating facilities or the capital to do it right, suggests Treacy.
SUMMARY
Facilities are the critical nodes in a fresh produce supply chain. They play an essential role in serving customers as growing seasons and consumption are not perfectly balanced, the market for pre-cut or packaged produce is growing, and demand is geographically dispersed. Properly positioned facilities allow companies to process and temporarily store fresh produce for subsequent distribution.
As discussed, capable facilities are not simple sheds or basic warehouses. Instead, they are climate-controlled buildings whose management teams follow GMPs and deploy technology to ensure a safe, secure, and productive operating environment. The infrastructure, along with appropriate policies and well-trained employees, help facility managers overcome key challenges and minimize product risks. Ultimately, these facilities contribute to supply chain excellence and customer satisfaction.
