Written by Garret Weigel
November 6, 2019
Written by Garret Weigel
As Thanksgiving Day approaches and grocery stores gear up to provide shoppers with all their holiday favorites – turkey, potatoes, green beans, pumpkins, and cranberries – most consumers don’t think about the immensely complex supply chain that delivers all these goodies to their tables. Come to think of it, many store employees probably aren’t fully aware of just how much is involved: from production on the farm and processing at manufacturing plants to transportation over long highways and final sale at the supermarket.
This year, more than 250 million Americans will celebrate Thanksgiving. That adds up to $2.375 billion spent on food for a traditional dinner – an almost incomprehensible amount of stock to plan for in advance. The very idea of a 21st century Thanksgiving meal is not possible without the tireless efforts of the logistics industry and its supply chain partners to ensure grocers have what they need to provide consumers with a positive shopping experience throughout the entire holiday season – without either running out of food or wasting it because of excess inventory.
The numbers behind the Thanksgiving Feast. Source: https://www.statista.com/chart/11967/the-numbers-behind-the-thansgiving-feast/
For example, let’s take a quick look at the two most popular foods for Thanksgiving dinner: turkey and potatoes. As far as Tom goes, frozen turkeys comprise 90% of Thanksgiving sales. That makes a lot of sense, since the sheer number of birds needed makes it far too impractical to raise and process them all within a month of Thanksgiving. For this reason, most turkeys are bred, slaughtered, frozen, and stored at the appropriate temperature in warehouses throughout the year until the holiday arrives. The remaining 10% of turkeys are sold fresh, requiring much more fast-paced logistics to keep them from spoiling while in transit from the processing plant.
Along with turkey, 64% of U.S. consumers plan to serve Thanksgiving dinner with mashed potatoes. The fourth most common food crop in the world after corn, rice and wheat, these beloved tubers grow best in a cool growing season that is frost-free. The best yields are obtained when the average daily temperature is in the range of 18 – 20°C. At temperatures above 30°C or below 10°C, their growth slows considerably. For this reason, the potato is cultivated during spring in temperate climate zones, during late winter in warmer regions, and only during the coolest months of the year in hot tropical climates. Like turkeys, potatoes must be stored for long periods in most locations to ensure they will be plentiful over the holidays. Also like turkeys, maintaining their optimum temperature zone is essential to maintain quality.
U.S. Farms Providing Majority of Most Popular Thanksgiving Foods. Source: https://www.transparency-one.com/supply-chain-impact-thanksgiving/
Imagine all this planning for only two types of food – not counting the 650 million tons of green beans, 80 million pounds of cranberries, and 50 million pumpkins typically consumed on Thanksgiving. Getting all of these products to the grocery in time for the holiday rush is quite stressful for retailers. It all starts on the farms, of course, which are scattered all over the country. For Thanksgiving, the average American will travel 550 miles roundtrip, whereas each ingredient will travel between 1,500 and 2,500 miles from farm to fork.
Unless consumers buy products directly from the farm, it’s only the beginning of a long journey. The next stops involve food processors and manufacturers, packing companies, warehouses, trucks for transport, storage facilities, and finally the grocery store before finally arriving at homes on the table. Although every player along the supply chain performs a crucial role, equally important is transparent and efficient communication between them. That means sharing product information to ensure that the correct product gets to its proper destination on time and safely.
After peaking at the beginning of the new year, after the holidays, demand drops back to normal (or even to a lower than usual level for a while). To sustain inventories precisely requires meticulous planning several months ahead of the season. Mistakes in capacity planning can result in empty shelves and refrigerator bins as well as excess product likely to go to waste. Even seasoned managers will admit that estimates can sometimes feel like a guessing game, where errors can quickly amount to millions of dollars for the losers who guessed wrong.
The best practice to ensure greater accuracy is to implement high-quality supply chain monitoring to foresee bottlenecks in all parts of the supply chain. Managers at each link in the chain can gather and share data about their organizations so that they better understand capacity needs, both for product and of the workforce supplying it. This cross-functional effort among all representatives from the supply chain is more likely to create solutions that benefit all parties involved.
The Multi-echelon Approach, as outlined by ToolsGroup. Source: https://toolsgroup.com/blog/multi-echelon-inventory-optimization/
Capacity planning for the holiday season typically begins six months before Thanksgiving. The first step is to analyze hypothetical constraints on sales and delivery plans, such as changes in supplier lead times, delivery schedules, or warehouse capacity. Potential bottlenecks can materialize in any part of the supply chain. For example, too many deliveries of frozen turkeys on a single day might exceed the available space to store them in warehouses and freezer bins. Real-time inventory tracking lets store managers keep a better handle on the flow of stock, so that they can be sure to have enough of it (and not too much of it) in the right place at the right time.
Multi-echelon inventory optimization (MEIO) is a particularly effective method for streamlining the supply chain during the holidays. MEIO takes the entire supply network into account as a complex of smaller chains at the more local levels. With the help of computer analytics, retailers can set accurate target levels for individual warehouses and consumer populations at specific geographic areas. MEIO can also optimize delivery routes by using real-time sensors that account for traffic patterns and transport vehicle locations. Finally, MEIO protects inventory in transit.
As we will see in our next Thanksgiving post about turkeys in the supply chain, one major challenge is to maintain the proper temperature in refrigerated trucks. With continuous, remote, digital monitoring systems as part of MEIO, logistics teams can track temperature in real time and take action when issues are detected.
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