Supply Chain Management

Thesis

Innovations in Global Supply Chains of Fruit and Vegetables

Professor:

Dr. Stefan Wolff

Date: 28.04.2014
Darima Pivovarova
Georgiana Ciobotaru
Mahlet Sahle
Mengting He

Table of Contents
Table of Contents
1
Introduction
1.1
Problem description
1.2
Research aims
1.3
Structure
2
Main challenges in food supply chain

Innovations in fruit & vegetables supply chain

3.1
Innovations in distribution
3.2
Innovations in storage
3.3
Innovations in packaging
5
Conclusion
Table of references

1 Introduction
1.1 Problem Description
Globalization has brought about substantial opportunities as well as intensive competitiveness
to markets, which simultaneously leads to ever-increasing customer demands in terms of
quantity as well as quality. This is especially true in the supply chain of fruit & vegetables,
where consumption rate increases tremendously due to rising of income and growing
awareness of healthy diet (Pollack 2001, p. 49). Fruit and vegetable goods and related
services are increasing being globally outsourced due to reduced tariffs, improvement of
transport efficiency, developed IT systems and cold chain techniques (Bogataj, Bogataj &
Vodopivec 2005, p. 346). Therefore, it is necessary not only to deliver fruit and vegetables
freshly and safely with decreased quantities and shorter delivery time, but also to develop
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cost-effective and mass-customized logistics services in the supply chain.

1.2 Research Aims
The main aim of the paper is to identify structural, process, as well as technological
innovations in areas of distribution, storage and packaging within the global supply chains of
fruit and vegetables. Furthermore, the paper aims to generate insights into potentially existing
challenges of the fresh cut supply chain. The study mainly consists of desk research,
attempting to consolidate literature and data from academia and industry. The findings will be
presented with contemporary examples.
1.3 Structure
The remainder of this paper is structured as follows. The next chapter presents the concept of
food supply chain and main challenges. In the third chapter, innovations in areas of
distribution, storage and packaging in fruit and vegetables cold chain will be analyzed in
detail. The paper finalized with a conclusion.

2 Main Challenges in Fruit and Vegetables Supply Chain

A typical fruit and vegetables supply chain includes basically all activities in fresh produce
production and post-production processes, until goods reach final customers (Likar & Jevnik
2006). It is embedded with several characteristics such as perishability, shelf life constraints,
seasonality in production, necessity of conditioned transportation and storage, safety
concerns, and etc. (Aramyan et al. 2007).
Figure 1: A typical food supply chain

Source: (Own representation, adapted from CAPESPAN 2014)

Globalization generates considerable opportunities for companies; while in the meantime,

challenges have become more salient with regard so supply chain management. Firstly,
producers, distributors and retailers need to keep their costs low and performance high to
remain competitive in the global marketplace. Secondly, consumer awareness and
government regulations on food safety have increasingly captured more attention in supply
chain management (Kuo & Chen 2010, p. 560). According to the report by WHO (2010),
foodborne and waterborne diarrheal diseases approximately kill 2.2 million people annually.
Thirdly, considerable amount of foods, about one third of global production according to the
Food and Agriculture Organization of the United Nations (FAO), are being lost or wasted
during processing, transport and kitchens (Lundqvist et al. 2008).
These challenges require changes and innovations in ways of producing, processing,
transporting, storing and accessing. Some innovative methods in the distribution, storage and
packaging areas will be described below.

3 Innovations in fruit and vegetables supply chain

3.1 Innovations in distribution
Food retailing underwent some profound changes from 1920s to 1970s in the US. Due to the
increasing urbanization and food packaging evolution, the new type of food retailersupermarket- gained the considerable share and later displaced the traditional small, clerkservice stores (Hagen 2002) . The innovation in previous decades transformed the food
retailing in developed and developing countries, making the supermarket concept a standard
scheme for reaching the customer (Hagen 2002). In more recent years perishable goods have
been distributed and sold in number of convenience stores and through online sales to
customers (Kuo & Chen 2010).
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The modern innovation in perishable goods distribution that has a potential for growth lies
within the e-commerce business, aiming at changing the shopping experience and adding the
last mile delivery service (KLRP 2014). E-commerce and online retail sales are booming in
the recent years due to the growing online population and changing consumer behavior
(Jones Lang LaSaale 2013). According to the research by JLL, global online retail sales has
reached US$ 579.9 billion in 2012 with an annual growth of 14.8% from 2007 to 2012 (Jones
Lang LaSaale 2013).
Amazon Fresh is a subsidiary of Amazon.com based in Seattle that performs home delivery
of fresh products (Bensinger 2013). Online grocery shopping was pioneered by the
unsuccessful initiative of Webvan Group Inc. (Bensinger 2013). Currently, AmazonFresh is
facing the competition from US companies like FreshDirect LLC and Peapod LLC that
already operate grocery delivery in major cities including New York, Chicago and
Philadelphia (Bensinger 2013). The expansion of the grocery business performed by Amazon
is witnessed from adding the other metropolitan areas outside of Seattle and the plans of
launching Amazon Fresh in Germany by September 2014 (IGD Retail Analysis 2014).
German online grocery sector makes up a very small share of the market and entry of
Amazon Fresh will intensify the competition (IGD Retail Analysis 2014). In contrast to
France and UK, Germany has experienced a limited online services by Metros Real, Rewe
and Edeka, underlying the shoppers reluctance to shop for groceries online (IGD Retail
Analysis 2014). Amazon takes the challenge of entering the German market of online grocery
shopping relying on the trend of changing the customers shopping behavior.
An innovative idea was developed and launched by TESCO in South Korea bringing the
virtual stores in a public place (Strother 2011). TESCO under the name of Homeplus in Korea
has become a number one store in the online market pursuing the goal of increasing the
market share without increasing the number of physical stores (Strother 2011). The idea was
to create the virtual stores and bring the stores to the people. The displays of the food were
placed in the subways allowing the customers to scan the QR code and make a purchase onto
your online cart. After the online purchase is done, the goods will be delivered to your home
(Strother 2011). The increase of 76% of registered members in 15 months could be observed
making a promising outlook to spreading the concept to outside of Korea, since more and
more people around the world are adopting smartphone technology (Strother 2011).
Online grocery business requires a structural changes of the supply chain, on the one hand,
eliminating the medium parties like retail or wholesale stores and on the other hand,
encountering the costs related with the added service of distribution.
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Another approach to online shopping is the click-and-collect scheme introduced by the eretailer giant Ebay that could be seen as the challenge to the similar Amazons locker delivery
concept (BBC News Technology 2013). Both companies cooperate with the local stores to
provide customer with a convenient pick-up location combining the online and physical
stores. (BBC News Technology 2013). This new concept of click and collect can be also
applied to food retailing.
In the Walmarts click and collect experiment, the customer can pick up the food items
from the temperature-controlled lockers around the corner after making the purchase online
beforehand (Felsted 2014). Click and collect is a bright idea opening the new opportunities in
fast growing e-commerce business for food retail (Felsted 2014). According to Financial
Times, click and collect scheme is expected to become more significant in developed market
with the expansion of the online retailing and increasing importance of convenient location
for the customers (Felsted 2014).
VeGeFruit initiative is an original idea from Belgium of having vending machines with fruits
(FreshPlaza 2014). The founder describes that the idea to have the fruits available for 24
hours in the vending machine came from the observation that all vending machines have
bread, chocolate or some other products but fruits (Fresh Plaza 2014).
With regard to the recent innovative solutions for perishable goods distribution, new apps
aimed to reduce the food waste are of a high relevance. Food waste is a challenging problem
caused by the short life cycles of the goods. With the development of the concept of sharing
economy, new initiatives like Leftover Swap app and foodsharing.de aim at the better use of
resources and reduction of waste. Using the leftover Swap app the users can share the picture
of the leftover food that would go to waste otherwise and hope for someone to pick it up (Oi
2013). A similar approach but on the wider scale is introduced by the foodsahring.de
platform, where individuals, retailers and manufacturers are given the opportunity to offer or
collect the surplus food for free (Foodsharing 2012). This innovative idea rapidly gained
popularity having 12,000 users across the country in just two months of its existence and now
more than 220 cities are taking part in food sharing using this platform (Foodsharing 2012).
Innovations in the perishable goods distribution are related to the development of a new
approaches to the last mile of food distribution. The new initiatives are either concerned with
the home deliveries or the new click and collect scheme. Companies offering the home
delivery of groceries allow consumers to make a purchase online and then get the delivery to
home, where the click and collect scheme offer consumers the opportunity to make the
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purchase online and collect it at any time at their place of convenience. The shift to online
grocery shopping comes with the challenges of on-time distribution and maintaining the good
quality of the products. The innovation in packaging and storage are important in facing the
challenge of increasing growth of online food retailing.

3.2 Innovations in storage

The right temperature for production, storage and distribution is an essential aspect of
perishable goods handling due to the nature of fresh products. As proven by many researches,
temperature is the key determinant of chemical reaction rates and, therefore, facilitates
metabolic rates. The right temperature can help extend the storage life for most fresh produce
and the wrong temperature can lead to 100% damage, leading to loss of money and energy
(Fischer 2009).
Different types of fresh product have different abilities to survive and maintain their quality.
Some have short storage lives due to their high metabolic and fast water loss rates and should
be kept in cool hydrated places while others can be stored for long period of time without the
need of cool storage (Villalba, Boyer, & Bazemore 2009). Just by knowing the character of
the fresh produce, decision can be made about the storage and reduction of high deterioration
before consumption.
Fruits are the reproductive organs of the plant and continue to ripe when detached from the
plant. The application of excess heat or cold may inactivate important enzymes required for
ripening to progress or cause temperature injury, resulting in permanent loss of eating quality
(Fong, Rice, & Paust 2009). Vegetables, on the other hand, are the leaves, stems and roots of
plants. They do not go under dramatic change after being detached from the plant. Under the
right temperature, they can be kept in good condition for a long time.
Some key variables that affect fresh produce in the supply chain are: (1) temperature, (2)
relative humidity, (3) atmosphere composition, (4) ethylene, (5) pest and disease, (6) pre and
post-harvest handling.
In order to reduce the problems mentioned above, there have been many innovative
inventions in the past few years. One thing that should be kept in mind when considering an
innovative solution should be the cost of the technology. Even though fresh products have
high demand, their market price cannot get higher than a fixed price.
Some of the 21st century inventions are listed below.
a) Special refrigerators
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When fruits and vegetables are detached from their plants, they tend to transpire and lose
water. This can lead to high humidity in the storage area. So, in order to decrease the
humidity rate in the storing area, special refrigerators, which have rapid drying effect, are
used. This mechanism controls the ventilation of the storage area so that the humidity can
decrease within the container. This reduces the deterioration of fresh products. For instance,
b) Controlled atmosphere
In order to have fresh produce, it has been identified that the atmosphere in the storage area
should be controlled. Modified atmospheres are strategic designs that control metabolic rates
of fruits and vegetables by adjusting the atmospheric gas contents. Creating high carbon
dioxide and low oxygen can lead to slow respiration rate, which will reduce the water loss of
fresh products. For instance, MAERSK shipping line uses controlled atmosphere, which
enables them to keep fruit and vegetables in good condition for more than 25days. This can
lead to a new market within reach, allowing local producers to sell their products in an
international market.
c) Watering fresh products
In most Asian countries, supermarkets have introduced a good technique to avoid high loss of
water during storage or display. They have invented a watering mechanism where the fruits
and vegetables get enough water each day. This keeps the fresh produce healthy and
hydrated.
In general, storage of perishable goods is an essential part of fresh produce supply chain due
to the ability to maintain the products in customer desired way. By looking further into the
innovative part of storage materials, the quality and quantity of fresh products can be
improved.
3.3 Innovations in packaging
Packaging technology is an important factor in the global supply chains of fruit and
vegetables. Due to improvements in this area, produce can be shipped for long distances from
their point of origin, over long periods of time and still preserving the quality until their point
of consumption (Pollack 2001, p. 52). In addition, the fruit and vegetables market is much
more varied and products are available even during seasons when they cant be locally
supplied (Pollack 2001, p. 49).
The main functions of packaging are the protection and maintenance of quality (Robertson
2012, p. 2). Among the secondary functions the most important are: traceability, convenience
and communication (Marsh & Bugusu 2007, p. 39). Although traditional packaging methods
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have been essential for the development of supply chains of fruit and vegetables, they are not
sufficient any more. Because of factors such as market globalization, concern for food safety,
increasing demand for minimally processed food and bioterrorism, new techniques of
packaging are required. Active and intelligent packaging methods seem to be the solutions
(Yam et al. 2005, p. 1). In the case of active packaging systems, a substance is deliberately
included in order to expand the product life (Robertson 2012, p. 400). Regarding the
intelligent packaging systems, the definition is based on the function of communication.
While active techniques are focused on the protection and extension of shelf life of the
products, intelligent techniques are able to detect, record, sense and trace data that will help
in making decision about the safety and quality of the goods (Yam et al. 2005, p. 2).
The paper will proceed now with more specific methods, exemplified by examples from the
contemporary food and vegetables industry.
a) Active pads and labels
Sirane, the leading packaging development-to-manufacture company in Europe, had
developed absorbent pads that are combining two complementary technologies. They contain
natural substances that are both inhibiting mold and absorbing ethylene released by the fruit
and vegetables in their ageing process (Sirane 2011). Furthermore, Sirane absorbent bubble
pads, designed specifically for soft fruit such as berries, draw huge interest in 2013 (Fresh
Plaza 2013). In addition, Sirane has implemented a new technology of small labels, that can
be even hidden if necessary, and that attracts and absorbs ethylene. They are mostly suitable
for fruit like apricots, avocados, bananas, kiwi fruits or mangos that are transported for long
distances (Edelbrock 2013).
b) Active modified atmosphere packaging
In the fruit and vegetables industry one common packaging method is the modified
atmosphere packaging (MAP). In a MPA process, products are packaged in an atmosphere
that is different than the air (Cooperhouse 2003, p. 16). Active MAP deals with finding the
right gases inside a packaging or the right packaging materials in order to allow fresh
products to have a longer shelf life. For instance, engineers at Anacail, which is a company
specialized in creating and handling Ozone in revolutionary ways, have developed a new
system that turns some of the oxygen inside a package into ozone. This system was used for
grapes and tomatoes, managing to extend their shelf life up to 300%, from 5 days to 20 days
(Fresh Plaza 2014). StePac, a leading developer and manufacturer of modified atmosphere
packaging for fresh produce, has developed multiple solutions for the transport and storage of
fruit and vegetables (DS Smith 2014). StePac offer includes a variety of products customized
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for each fruit/vegetables and weight: bin liners for long term storage, bulk liners, flow pack
applications, retail packaging and pallets shrouds (StePac 2014).
c) Intelligent packaging methods
Smart packaging devices split basically into two categories: data carriers (barcodes or RFIDs)
and package indicators (time-temperature indicators, gas indicators and biosensors). Data
carriers are used to transmit and store data, while package indicators have as main function
the monitoring of the external environment (Yam et al. 2005, p. 4). For example, Blue Skies,
a UK-based company, that supplies mango, pineapple, papaya or passion fruit from Africa,
has implemented a time/temperature monitor system to insure the quality of the fresh produce
while being transported by plane. The system includes an RFID smart card, an RFID reader
that records the temperature every 15 minutes and the Internet. After arriving at the
destination, the stored data is uploaded on the internet where pre-defined actors of the supply
chain (shipper, customer, freight forwarder) can see what happened during the transport
(Butschli 2012). In addition, Blue Skies, have included a traceability system called Caretrace:
an online tool that allows people to find out where there fruit came from and to meet the
people involved in the first stages of the supply chain (Blue Skies 2014). One of the latest
developments is a smart package that incorporates nanotechnology. Researchers in SouthAsia were investigating the possibility of using a plastic film impregnated with nano
materials in order to expend the shelf life of vegetables and fruit with up to 21 days (Padma
2012).
To conclude, innovations in the fruit and vegetables packaging are mainly related to active
and intelligent systems. Researchers are trying to implement new ideas to the already existing
methods in order to face challenges such as market globalization, concern for food safety or
food wastage.

4 Conclusion

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