Last Friday November 1st was the date on which Sam’s Club and Wal-Mart’s case labeling mandate for produce went into effect. Here are some excerpts from the “Greetings supplier partners” letter that Wal-Mart sent to their suppliers on May 29th of this year:
“• Effective November 1, 2013, all fresh commodity produce delivered to a Wal-Mart Distribution Center will be required to have standardized case labels, consistent with the PTI standards. Wal-Mart and Sam’s receiving specifications will be updated with a requirement for standard case label including GTIN, Lot/Batch#, Voice Pick code and Pack or Sell-By Date…
• Initially, product that is not label compliant will be received as A- out of spec unless an active exception has been issued by the buyer prior to delivery.
• On January 1, 2014, product out of compliance will be rejected as out of spec unless an active exception has been issued by the buyer prior to delivery…”
The terms “GTIN” and “voice pick codes” may need some clarification.
A GTIN (Global Trade Identification Number) is an identifier for trade items developed by the GS1 standards organization. These identifiers can be used to look up product information in a database. As goods, including produce, moves through the end to end supply chain, that product commonly experiences name changes. A GTIN number allows for a supply chain entity, for example, a retailer, to see how what they call the product in their database corresponds to what upstream partners call the product in their databases. This becomes very important in situations where food needs to be recalled. In produce, the end to end recall supply chain spans from “farm to fork.”
The voice pick code is a way of condensing the GTIN, batch/lot number, and pack/harvest date into a 4 digit code. It is created through the use of an algorithm. By condensing it to four digits, it can be used by pickers in big warehouses, like Wal-Mart, that are using voice picking systems.
Produce, of course, is an area where some very bad food poisoning incidents have occurred. The US Congress passed the Food Safety Modernization Act (FSMA) in 2011. The scope of this act goes beyond just produce, but produce is called out for special attention in the act. The act calls for the Food and Drug Administration (FDA) to come up with specific rules and methodologies that make the act enforceable. The Produce Traceability Initiative (PTI) is the produce/grocery industry’s attempt to get out in front of the FDA regulations and show that the goals of the act can be met in a manner that is not too onerous to the industry.
But the Wal-Mart initiative is not being driven just “to ensure customer confidence in produce industry-wide… Along with that, we are… placing a heightened focus on freshness, quality and satisfaction of the produce we sell to our customers. In the past months we’ve invested significant resources to improve our freshness, flow, and store level execution.”
This is where Wal-Mart’s initiative goes beyond an effort to comply with coming regulations in a cost effective manner, to actually being an initiative that can save the company money and allow them to better differentiate their offerings.
How could this help Wal-Mart save money? Produce is a perishable product. The closer it is to the end of its life, the lower the value. Lettuce for example, in perfect conditions, has an 18 day shelf life. Every hour it is outside the proper storage temperature, it loses a day of life. To the extent that produce can be accurately tracked through a farm to a retail warehouse, produce that arrives with limited shelf life can be purchased at a lower price.
Similarly, insuring that produce has a good shelf life associated with it helps retailers compete on freshness. Many consumers shop at higher priced groceries because they think the produce is better. If Wal-Mart can compete on both price and freshness, their competitors lose market share.
This case level mandate won’t get Wal-Mart all the way to the kind of end to end tracking that allows them to compete on freshness. Other solutions are needed. For example, Foodlink has developed a “warehouse management system for the field.” As pickers finish picking a case, they generate a label, put it on the case they just picked, and scan that label. This provides a record of the time the case was picked. When a truck comes to pick up the cases, cases are scanned into the truck. And then when trucks arrive at a refrigerated warehouse, they are scanned into the warehouse. This kind of tracking, rare today, is where the industry really needs to go to compete on freshness.
Getting there won’t be easy. Unlike many product categories where Wal-Mart has just a few big suppliers, big retailers must deal with a very large number of small, unsophisticated growers and distributors. But growers and distributors that begin to use these kinds of systems can differentiate themselves on quality.
In conclusion, Wal-Mart has shown real leadership in working to achieve “comprehensive produce supply chain visibility… so our customers can be confident in the freshness of the produce they are bringing home to their families.”
Sam's Club exterior (Photo credit: Walmart Corporate)
