Elevated consumer expectations drive changes in produce supply system

By: | at 02:45 PM | Channel(s): Logistics  

Retailers increasingly sourcing direct from growers

Pallets of clementines being stored in a warehouse at the Port of Wilmington, DE.
Pallets of clementines being stored in a warehouse at the Port of Wilmington, DE.

The insistence by consumers that the fresh produce they buy be of the highest quality and freshness has met a response by retailers that has wrought changes in how perishables are sourced and transported. So said Richard Owen, vice president of global development at the Produce Marketing Association (PMA), an industry group, in an exclusive interview with the AJOT. Retailers are sourcing a greater proportion of the produce they sell direct from growers, are vetting growers to make sure they have the appropriate cold-chain infrastructure in place, and are speeding perishable products to store refrigerators like never before. This phenomenon has forced retailers to develop technical expertise on cold-chain logistics and supply-chain management and has also spawned a crop of third-party providers that can manage this direct sourcing on behalf of the retailers.

“The biggest overall trend in the international transportation of produce has been brought about by consumer expectations and demands that the produce they buy is of the highest possible quality and that it will have as long a shelf life as possible,” said Owen. “That means getting the product to the port and the store quicker and fresher.”

All this means that retailers must make sure that produce leaves the field as fresh as possible and that it is protected every step of the way to make sure that it arrives at warehouses and in stores in good shape. “It has to be fresh when it is put into the container,” said Owen. “If it is not in great shape to start with, they can’t do much to protect the produce later.”

Making sure that produce leaves the domain of the grower as fresh as possible requires verification that the growers have the right measures in place to start the cold chain supply system. “The cold chain has to be as complete as possible,” said Owen, “from the time the produce leaves the farm for the warehouse.”

The infrastructure for keeping the produce fresh starts right in the field as the product is being picked and prepared for storage. “It has to be placed in a controlled atmosphere almost immediately and remain there all the way to the end user,” said Owen. “Research has determined the ideal temperature for storing and transporting particular fruits and vegetables. There are also protocols in place for the cold chain supply system that are designed to mitigate disease and insects in the produce and to prevent those from entering the United States.”

Growers in some lesser developed areas of the growth are still struggling to put these infrastructures and measures in place, according to Owen, and the cold chain supply system from the farm to the port tend to be broken in those areas. The Food Safety and Modernization Act, signed into law in 2011, initiated a number of requirements for domestic and foreign food facilities that handle exporting to the United States. Proposed regulations for foreign supplier verification programs were issued by the Food and Drug Administration last July, and would require importers to assure that foreign food supplies are in compliance with preventative processes and procedures. The comment period on the proposed rule expired on January 27, 2014. Under a recent settlement of a law suit brought by the Center for Food Safety, the FDA agreed to issue final FSVP rules by October 31, 2015.

Demand for high-quality fresh produce is growing worldwide, according to Owen. “As incomes in the developing world increase,” he said, “we are seeing imports of branded fruit and vegetables at higher volumes in those areas. People with rising incomes have an appetite for the best products and are willing to pay for them. In some areas, this higher level of demand has meant higher prices for imported produce.”

All of these developments have led retailers to take steps to satisfy the expectations and the demands of their customers. Chief among these measures has been the trend for retailers to source produce directly from growers.

“Large retailers especially are actively involved in making sure that product is picked properly, put through stringent safety processes, and then put into cold chain delivery systems as quickly as possible,” said Owen. “They have a vested interest in making sure the produce remains in the best of shape.”

This, in turn, has transformed and streamlined the traditional perishable supply chain. “In the traditional system, farmers are a few steps removed from importers, retailers, and consumers,” Owens explained. “Farmers typically sold to aggregators who sold to wholesalers who sold to retailers. Farmers didn’t know what was happening three or four steps along the way. Now that they sell to retailers they get immediate feedback. This represents a tightening of the supply chain.”

The logistics of produce distribution has also changed as a result of these new practices. “Produce is more likely to be delivered from the field directly to a retailer distribution center,” said Owen. “This takes a distribution point or two out of the system and gets the product delivered faster.”

Sourcing directly from growers has meant that retailers must develop greater technical expertise in the cold-chain supply system. “We are seeing retailers developing deeper technical expertise in field work,” said Owen. “Many work directly with growers on food safety to make sure the produce meets food safety requirements.”

Some retailers hire third-party service providers to manage the process for them. “Even then,” said Owen, “the third party is usually located on or near the retailer facility. They are still taking a lot of steps and a number of players out of the process.”

The direct-to-retailer trend is happening in many areas of the globe, although with some notable exceptions. “In countries like China this is nowhere close to being the norm,” said Owen. “In China they have many small farmers so they must go through several steps up the aggregation chain to make their shipments large enough to be handled by wholesalers and retailers. But in places like North America, South America, Europe, Australia, and New Zealand, direct sourcing is becoming prevalent.”

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American Journal of Transportation

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.