Supply Chain Integration, Fruit Manufacturer

Supply Chain Integration, Fruit Manufacturer - Introduction...

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Introduction Brief company profile Delicious Fruity Company is a market leader of fruit drinks which manufactures fresh juice, long life fruit juice and juice concentrates using mostly locally grown fruit ingredients such as oranges, apples, lemons and more. Flowchart of Delicious Fruity Company’s supply chain system Fruit picking Delivery of fruits to factory Storage of fruits in wooden crates Storage of fruits in refrigerated cool rooms Manual sorting of fruits for squeezing Washing of fruits with sterilized water Fruit squeezing Checking of juice at in-house laboratory Storage of juice in refrigerated tanks Filling of juice in bottles or cartons Labeling and capping on rotary fillers Automated product palletization Chilled storage of products Delivery in refrigerated vehicles
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As the company’s supply chain manager, I plan to buy raw materials in bulk for sufficient safety inventory. This approach could increase product availability and reduce ordering costs, but it would cause overstocking and it might not work for perishable commodities like fruits. Therefore, I need to adopt supply chain integration strategy to overcome these problems. The problem of perishable commodities For perishable products, especially fruits, the value decays over time. The cause for the deterioration is sucrose depletion due to respiration. Conventional design of supply chain which assumes the values of products to be stable cannot be applied on perishable products. The supply chain of these perishable products, which have shorter product lifespan, can be divided into two segments: the first segment where decaying is exponential at the early stage (after harvesting to the beginning of cold time), and the second segments where decaying rate is lower rate. Hence, the supply chain management should be responsive at the early stage, which means to maximize the values of the perishable products before they go for decay, and then cost efficient at the stages later. In order to maximize the freshness of our fruits, cold storage will be necessary after delivery by fruits suppliers. Once the fruits are sent for cold storage, we can proceed to the second segment which is the cost efficiency segment. The decaying rate of fruits will be lower compared to the previous segment. In this segment, the issues we need to consider include the cost of transportations, manpower and other cost of storage. Below is a diagram that shows the declining value of perishable product over time. Source: Blackburn & Scudder 2009
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The problem of bullwhip effect Due to the lack of supply chain integration in a company, there will be high chances of the occurrence of the bullwhip effect in a company which has significantly cut or added inventories. The bullwhip effect means that the small increases in demand can cause a sudden need for parts and materials in the supply chain 1 . It is the fluctuation in orders as they move up the supply chain from retailers to wholesalers and suppliers, and it occurs when different stages of a supply chain have conflicting objectives. Therefore, supply chain integration is
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