Login



For PLUS+ subscription assistance, contact customer service.

Not a PLUS+ Subscriber?

Become a PLUS+ Subscriber today and you'll get access to all Supply Chain Management Review premium content including:

  • Full Web Access
  • 7 Magazine Issues per Year
  • Companion Digital Editions
  • Digital Edition Archives
  • Bonus Email Newsletters

Subscribe Today!

Premium access to exclusive online content, companion digital editions, magazine issues and email newsletters.

Subscribe Now.


Become a PLUS+ subscriber and you'll get access to all Supply Chain Management Review premium content including:

  • Full Web Access. All feature articles, bonus reports and industry research through scmr.com.

  • 7 Magazine Issues per year of Supply Chain Management Review magazine.

  • Companion Digital Editions. Searchable replicas of each magazine issue. Read them in any web browser. Delivered by email faster than printed issues.

  • Digital Editions Archives. Every article, every chart and every table as it appeared in the magazine for all archive issues back to 2009.

  • Bonus email newsletters. Add convenient weekly and monthly email newsletters to your subscription to keep your finger on the pulse of the industry.

PLUS+ subscriptions start as low as $109/year*. Begin yours now.
That's less than $0.36 per day for access to information that you can use year-round to better manage your entire global supply chain.

For assistance with your PLUS+ subscription, contact customer service.

* Prices higher for subscriptions outside the USA.

You have been logged out of PLUS+


For PLUS+ subscription assistance, contact customer service.

Need to access our premium PLUS+ Content?
Upgrade your subscription now.


Our records show that you are currently receiving a free subscription to Supply Chain Management Review magazine, or your subscription has expired. To access our premium content, you need to upgrade your subscription to our PLUS+ status.

To upgrade your subscription account, please contact customer service at:

Email: [email protected] Phone: 1-800-598-6067 (1-508-663-1500 x294 outside USA)

Become a PLUS+ subscriber and you'll get access to all Supply Chain Management Review premium content including:

  • Full Web Access. All feature articles, bonus reports and industry research through scmr.com.

  • 7 Magazine Issues per year of Supply Chain Management Review magazine.

  • Companion Digital Editions. Searchable replicas of each magazine issue. Read them in any web browser. Delivered by email faster than printed issues.

  • Digital Editions Archives. Every article, every chart and every table as it appeared in the magazine for all archive issues back to 2010.

  • Bonus email newsletters. Add convenient weekly and monthly email newsletters to your subscription to keep your finger on the pulse of the industry.

PLUS+ subscriptions start as low as $129/year*. Start yours now.
That's less than $0.36 per day for access to information that you can use year-round to better manage your entire global supply chain.

This content is available for PLUS+ subscribers.


Already a PLUS+ subscriber?


To begin or upgrade your subscription, Become a PLUS+ subscriber now.

For assistance with your PLUS+ subscription, contact customer service.

Sorry, but your login to PLUS+ has failed.


Please recheck your login information and resubmit below.



For PLUS+ subscription assistance, contact customer service.

Efficient Supply Chain Design for Highly-Perishable Foods

Faced with significant uncertainty, many untestable assumptions, and limited resources, choosing a network design can feel more like a shot in the dark than a rigorous, informed decision.

By ·
By ·

Editor’s Note: Every year, 40 or so students in the MIT Center for Transportation & Logistics’ (MIT CTL) Master of Supply Chain Management (SCM) program complete one-year thesis research projects.  The students are early-career business professionals from multiple countries with 2 to 10 years of experience in the industry.  The research projects are sponsored by and carried out in collaboration with multinational corporations.  Joint teams of company people, MIT SCM students, and MIT CTL faculty work on real-world problems chosen by sponsor companies.  In this series, we summarize a selection of the latest SCM research. 

Designing supply routes is a challenge for any large retailer, particularly under conditions of rapid growth. Faced with significant uncertainty, many untestable assumptions, and limited resources, choosing a network design can feel more like a shot in the dark than a rigorous, informed decision.
Working with a national retailer on its rapidly growing fresh food business, we developed a light-weight model to evaluate the costs and generate insights into the trade-offs between multiple supply network designs under a variety of future business conditions.

A Shot in the Dark
This retailer expects significant growth in its nascent fresh food business, which includes high-perishable items such as sandwiches, salads, and parfaits shipped in totes. Currently, the company receives freshly made product from the supplier at a distribution center, where it is immediately consolidated with non-perishable items and sent to stores.

The system works with relatively low fresh food volumes; however, the retailer expects demand to increase from 3x to 5x current levels. As demand increases, the company is concerned about the adequacy of this network design in every region. Will consolidation continue to make sense? Will shipping directly to stores increase freshness, and at what cost? Should the supplier be co-located with the distribution center? 

Bringing Light to the Situation
Optimization methods cannot provide useful insights given the numerous questions and unknowns about future conditions. Moreover, the company needs some initial guidance before it channels heavier investments into detailed research.

In collaboration with the retailer, we created four candidate supply routes to move fresh foods from a Northeastern supplier to regional stores: (1) dedicated supplier-to-store, (2) supplier and distribution center co-located for consolidated shipping, (3) supplier to city cross dock for van routing, and (4) distribution center to supplier for pickup while on route to stores.

Utilizing approximation methods, we developed a light-weight model to enable rapid cost estimate for each candidate design, including the current route.

Aligning the Sights
The analysis validated the current network to be about $3.15 per tote. The model was then applied across all candidate route designs, showing the delivery costs under existing demand would range from $1.75-$7.03 per tote, narrowing to $1.62-$2.68 as demand increases to 5x current levels. Co-location was consistently the least costly option, offering estimated savings of $120k per year under current demand, and increasing to $360k per year as demand increases. Aside from co-location, the current design remains the most cost-effective until 3.8x demand levels, when it is matched by Zone Skip and Direct-to-Store scenarios.

The model was also used to test the sensitivity of each networks’ costs to a variety of assumptions about future business conditions. This process generated important additional insights into route designs:

• Demand must increase before dedicated fresh food networks are viable due to the lack of economies of scale with shipping fresh food as a stand-alone product.
• Tote fill-rates significantly impact costs (can drive savings ranging from 17% to 43%)
• Vehicle selection is an important driver of cost and delivery time, allowing for savings of 15%-34%, or yielding savings of six hours for most network designs.
• Production policies influence freshness. A 12-hour shift in production policy will accelerate delivery to customers by 24 hours at an approximated cost of $0.01-$0.02 per item.
• Delivery interval shifts from 2 days to 3 days with a maximum 12-hour shelf-life extension, offers cost savings to offset the premium of more rapid deliveries.

Take Aim and Fire
These insights allow the large retailer to understand the key delivery cost drivers for its nascent fresh food business. The work also enables the retailer to hone further research as well as investment strategies pertaining to which route designs will best serve the company and its customers as demand soars.
Moreover, the model and approach can be applied in other regions and by other organizations attempting to efficiently evaluate route designs for any rapidly growing businesses, particularly for highly perishable items.

The SCM thesis authored Cyril Khamsi and Veronica Stolear evaluated efficient supply routes for highly-perishable foods under conditions of rapid growth. The sponsor was a major retailer, and the project was supervised by Dr. Chris Caplice, Executive Director, MIT Center for Transportation & Logistics.

For more information on the research please contact Dr. Chris Caplice at: .(JavaScript must be enabled to view this email address).

 

 


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Supply Chain Management Review Magazine!

Subscribe today. Don't Miss Out!
Get in-depth coverage from industry experts with proven techniques for cutting supply chain costs and case studies in supply chain best practices.
Start Your Subscription Today!

Latest Whitepaper
Best Practices for Seamless Integrated Transportation Management
Few companies are putting transportation management best practices to work in their supply chain operations. However, when executed correctly, a transportation management solution is an effective way to improve cost efficiency and serve evolving customer needs.
Download Today!
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!


Latest Webcast
New Attitudes for S&OP / IBP to Keep Pace with Evolving Markets
Have you ever wondered why so many companies struggle to implement an effective S&OP strategy? In this webinar we'll examine why it's time to view S&OP as an evolutionary process that is flexible, adaptable and forward thinking
Register Today!
EDITORS' PICKS
The Hackett Group Says Typical Procurement Organizations Need “Digital Transformation”
The potential cost take-out opportunity through digital transformation of the procurement function...
NAFTA Renegotiation and its Supply Chain Implications Explored
The first round of the negotiations among the United States, Canada and Mexico will take place in...

Resilinc Awarded Patent for supply Chain Risk Analytics and Vulnerability Maps
US Patent Number 9721294 protects the company’s unique supply chain risk analytics
Creating Holistic Supply Chain Sustainability: Not a Choice, a Given
When Oracle OpenWorld’s annual conference convenes in San Francisco this October, you can bet that...