Planning, information and ordering processes in supply chain structuring

The planning process for each fruit follows a similar process. In the following paragraphs this process is first described and then analysed. This includes the process of planning and ordering between the Supermarket and suppliers10. The ordering process described in the following discussions covers the process to the Supermarkets’ DCs. The processes of how the Supermarket accumulates all the store demand and also how it distributes the fruits from DCs to the stores are not described in this thesis. These are the Supermarket’s internal issues and are outside contractual agreements between Supermarket and suppliers.

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Planning and order negotiations happen between the Supermarket and the suppliers. The indirect growers are not directly involved in planning. They receive the information from the marketers and pass the required information to the marketers.

The planning process starts when the last season finishes. The first step is to receive the forecasts for next season from the forecasting team. Forecasting occurs internally to the Supermarket and produce by produce. Then the category managers determine commitments for each supplier based on their individual performance and reputation in terms of quality and volume of fruit.

The suppliers rely on the commitment by 90% accuracy and work through the year to make sure they will be able to supply the volume with the required quality during the season. Six to eight weeks before the season starts the suppliers update the Supermarkets in terms of volume and possibly quality. The growers11 are able to estimate more precise volume as it gets closer to the season based on flower counting, fruit counting, number of plants and yield. In addition, the Supermarket is able to update the consumers’ demand when it becomes closer to the season. The updated information guides the grower to compare the forecasting demand and predicted fruit volume. Although fruit production is outside the farmers’ control, the growers can decrease the amount of potential volume by pruning the orchards. The grower cannot manipulate the trees to fruit more, but they are able to decrease fruiting. The planning and information sharing are started in the review meeting. This meeting is usually appointed four weeks after the last season finishes. The review meeting includes analysis of the numbers in terms of volumes, prices and default performance of the last finished season. Furthermore, the ability of production for the next season is discussed in this meeting. However, due to the lack of clear information regarding the production volume, the discussion about the accurate plan is postponed to the later meetings.

M1: At the end of every season we do our review meetings. We analyse the numbers in terms of the sales volume, average pricing, our default performance and how we met our agreed targets

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the previous year, we review how the products performed in the stores, the level of waste and that review will become the starting point for the planning for the current season.

G1:‎In‎terms‎of‎volume,‎….‎We‎do‎that‎probably‎once‎a‎year.‎We‎have‎a‎formal‎conversation‎ around that but certainly more regularly than that we would provide them with updates for the following season. So we are already starting to give them indications of what the crop looks like for next year as well as the current trading season.

Six to eight weeks before the season starts, the parties have another meeting referred to as the pre-season meeting. In this meeting which is closer to the starting day of the selling season, they refine the previous plan and decide about the number of trays and volumes in more precise detail. They try to plan the coming season in SKUs (Stock-Keeping Units) by DC destinations by week. Promotions are also discussed in this meeting. They agree on what volume they are going to promote in what weeks of the season.

In this meeting both the Supermarket and the supplier can provide clear information regarding the forecast of production volume and consumer demand, respectively. The farmers count the flowers on the trees to estimate the volumes in the season.

M1: As we get closer to the season we refine that plan. We break it down by SKU by state distribution facility by week.

Other interviewees confirmed the M1 statement.

M3: We have a preseason meeting where we talk about what they want for the season as far as some volume, some varieties. Then we just take the season on go. Generally probably about 6 weeks before the season starts we have the preseason meeting.

M2: As we get closer to the season we start to talk about what volumes we have. We know flower‎to‎fruit‎takes‎x‎amount‎of‎period….‎We‎do‎a‎flower‎count.‎And we say we should have that amount of trays by that time.

P4: For peaches we do it about six month out, because it depends on how the tree flowers, how it‎responds,‎etc.‎We‎don’t‎do‎it‎as‎far‎in‎advance‎not‎because‎they‎are‎not‎committed‎to‎what‎ they supply‎because‎they‎don’t‎have‎good‎understanding‎how‎the‎crops‎going‎to‎look‎like.‎ ‎

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The planning for strawberries is slightly different. This is because strawberries are annual plants. The growers must plant the crops each year. They need to have a precise plan and decide about the number of plants they are going to grow for the next season.

S1: you look X amounts of trays have to be sold this year. Generally one plant grows about three punnets for a season. So we look at that. Different varieties of strawberries grow at different times. So what we do before start the season, we plant every year strawberries. S2: The reason for that is for strawberries we need to purchase the plant. So you need to start basically from nursery. We hope to get 1.2 million trays of that produce. That means that we have to buy 800000 strawberry plants from nursery.‎That’s‎how‎we‎go‎with‎strawberries.‎ The communication and information sharing between the suppliers and the Supermarket continues through the season more frequently in terms of the ordering process. The Supermarket during the peak season talks to the suppliers daily and asks for information about the available volume and quality of the produce. The intense and frequent information sharing between the parties remains crucial for the whole season.

M4: [W]e speak to the growers in the season every day, is the crop coming along, is it harvested,‎ is‎it‎ raining,‎ is‎ there‎ disease,‎ how’s‎the‎ transport,‎ specially‎ out‎ of‎ NT,‎ because‎ transports are nightmare. How does the fruit ripening? Is it ripening quickly slowly, because it really changes day to day?

S3: So pretty much what we do for strawberries, we flower counts four weeks in advance, so the flowers determine how many strawberries will come up in four weeks. So we do four week forecast, three week forecast and then two weeks out from the actual time they have to clean it, we send the order

The ordering process is weekly. More specifically, the Supermarket makes the orders on each Thursday to receive the produce on the following Wednesday at the DCs. The delivered fruits can be distributed to the stores and effectively on sale for the Thursday. The short ordering timeframe highlights two issues- first the very short life cycle of produce and second the variability in supply availability.

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Furthermore, even if the Supermarket and supplier consider this issue, uncontrolled weather events change the plan. In other words, the fresh produce season is very dynamic regarding the volume. It is essential for the parties to negotiate with each other. They talk to each other sometimes two or three times per day. They need to refine the plans promptly and decide about the changes.

The above description shows how the Supermarket and suppliers act and decide regarding the planning and ordering issues. They have close relationships which enable them to trust each other. The suppliers are not concerned whether the Supermarket purchases the committed volume. Similarly, the Supermarket believes in suppliers’ loyalty. However, both parties are aware of changes in the planning due to supply uncertainties. Weather can change the plan and available volume by days or even weeks.

Their kind of relationship allows both of the Supermarket and supplier to have flexibility in ordering. During peak seasons, if the suppliers or direct growers have more fruit than what the Supermarket requested, then they communicate with the Supermarket and negotiate to increase the ordering quantity. When a supplier cannot supply the requested order due to natural events, the Supermarket negotiates with other suppliers to increase their order quantity.

Despite the flexibility sometimes the suppliers cannot manage to respond to the increased request. This is because the suppliers do not exclusively supply to the Supermarket and they are committed to supply to other supermarkets.

The marketers and indirect growers have similar relationships in terms of ordering. Marketers select which growers they tend to trade with according to the growers’ history of supply. Their decision is approved by the Supermarket since the indirect growers’ fruit quality has to be confirmed by the Supermarket. The marketers meet and talk with the indirect growers during the off-season. This is, first, to indicate the required fruit volume and planning schedules to them, and second, to inspect the farms in term of the quality standards and growing process.

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M3: We work with 4 growers. It is enough because you have to have a specific grower to pack for [the Supermarket]; you cannot just have a grower. These guys grow good products, they have been with [our business] for 15 years.

The marketers are in constant touch with the indirect growers during the season. They receive updated information about the available volumes and quality of crop from the indirect growers. The marketers collect information from all growers and notify the Supermarket of the available volumes. The final order quantity from the Supermarket is passed on to the indirect growers. The indirect growers pack the fruit and deliver it to either the marketer’s warehouse or to the DCs- the delicate fruits with high rate of deterioration (such as stone fruits) are delivered directly to the DCs, and mangoes are delivered to the marketer’s warehouse at such a time as to allow for ripening.