Retail grocers are already feeling the squeeze on margins. New market entrants like Amazon and Aldi have ignited a price war, with Walmart and Kroger further fueling the blaze. Then there’s new shopping models including online, click-to-collect and home delivery of groceries and meal kits for grocers to deal with. And now, to top it all off, grocers also must deal with rapidly increasing transportation costs.
While rail and barges play a role in delivering food to grocery stores, the industry is still dependent on truckers. Not only do they cover the last mile, they also are responsible for a huge portion of transporting goods across the country, especially perishable goods like produce and meats that need to be refrigerated as there are not yet a lot of refrigerated rail cars.
A recent article in Southwest FarmPress highlighted the rapid rise in trucking costs for the supply chain. The article states that, in early January, a truckload of refrigerated foods moving from Washington State to New York cost $8,450. A mere two weeks later, that same truckload cost close to $10,000 – an 18% increase in only a fortnight. Ouch! Similarly, according to USDA, truck rates for fresh food from California heading eastward jumped nearly 25% over the same period the previous year.
Why? First, there’s shortage of drivers and trucks. The average age of a truck driver is now 50 years old, and many are retiring, making it hard to find someone to get behind the wheel of that strawberry-carrying truck, assuming you can find a truck for them to drive. Another factor is also emerging: a new law regarding Electronic Logging Devices (ELDs) that is being mandated by Congress as a part of the federal Moving Ahead for Progress (MAP-21) initiative. The goal of this law is to create a safer work environment for drivers, and improve safety for motorists nationwide. The law requires the installation of a device on a truck that automatically logs the hours the truck (and the driver) is in operation, and limits that time to 60-70 hours per week.
Before ELDs came along, truckers were required to log their hours in paper-based books. The problem with that method is that many truckers would, shall we say, take liberties with the logs so they could drive more hours and thereby make more money. And with this new legislation, the trucking industry fears that ELDs will lead to more truckers leaving the workforce due to decreased wages and increased regulation, further hiking transportation prices.
Don’t Waste Your Money
Getting back to the retailers—in the current highly competitive environment, retailers are hesitant to increase prices. If your local regional grocery store boosts the cost of strawberries by 14 or 25% to cover increased transportation costs, what’s to stop you from heading to Walmart. So instead, they try to eat that cost. It’s not a recipe for long-term success. But, what makes it worse is if 33% of the produce they receive is going to be wasted because of insufficient shelf life.
Here’s what I mean. One-third of produce goes to waste. Why? Because it’s shipped with insufficient shelf life to allow for distribution to the store, two or three days of sell through and four to five days with the consumer. Half of that waste occurs before it is even purchased by consumers. So, let’s call it 16% of food is being wasted at the retail level. The result is that this hits the margins, hard. But, making it worse, grocers just paid to have that food that’s going to be tossed shipped across the country. And they’re paying that rapidly increasing price for transportation.
The solution? Know the dynamic shelf life of the produce BEFORE it’s shipped. It makes no sense to ship strawberries with only five or six days of shelf life on a five-day trip across the country, only to toss it into the garbage the day it goes on the store shelf. Yet, that’s what happens today.
Condition monitoring solutions using data from IoT sensors and AI-based prediction analytics solve this problem by providing the ability to dynamically calculate the remaining shelf life (or freshness) of the product before it goes on the truck. This enables intelligent pallet routing so that each pallet has sufficient shelf life for distribution, sale and consumption. In other words, it allows growers and producers to identify and ship a pallet with six days of shelf life to a nearer location, and the one with twelve days across the country. The result? Less waste and improved margins for the retailer, and fresher product for their customers. And that truck full of strawberries? All those berries will be sold (with sufficient freshness) to happy and satisfied customers.
Our Zest Fresh solution tracks the condition of produce from harvest to shelf, uses cloud-based analytics to calculate the dynamic remaining shelf life and provides a code to automatically enable intelligent routing. We call it the ZIPR Code (Zest Intelligent Pallet Routing). Not only is it a time saver for the supply chain, it’s a money saver for retail grocers because it reduces waste, both of the product and of precious – and increasingly expensive – transportation.