A Question Of Leadership
Everyone knows the industry is facing unprecedented growth in fruit volume.
We are also seeing huge revenue being generated by the sale of SunGold plant variety licences and while those ‘close to the action’ are seeing dollar signs and rubbing their hands with glee, little thought is being given to how ‘we’ as an industry are going to cope with this growth. Where is this leadership?
We are already experiencing the stress of this growth right throughout the supply chain. This stress is being manifested in labour shortages, insufficient postharvest confidence to invest to the level required and a marketing effort that is taking longer to achieve sales than expected. This is all happening now and we are only at the beginning of the expected growth curve.
What planning is taking place to ensure we can handle this growth? Northern Hemisphere fruit supplies (in addition to the Chilean competition) are increasingly putting pressure on both ends of our marketing effort. Zespri tells us they have more markets coming on stream and current promotion, given the current ‘blow torch’ on sales is impressive. However, we are rapidly entering the time when the ‘more of the same’ approach along the supply chain will not foot it! More of the same will certainly not ‘foot it’ in our postharvest operations which are faced with labour and capacity issues now. Many operators are frantically looking to invest in automation and to provide more capacity.
The individual responses are varied; the investment environment is uncertain – what type of systems? Are they energy-efficient and environmentally sustainable throughout the chain? Individual operators can’t afford to make these decisions in isolation. Many are sending teams overseas to see what they can learn about automation and how modern supply chains work, whilst these same suppliers and others, are looking to invest in more capacity in their current packhouses and coolstores.
Zespri have signaled that the medium-to-longer-term Grower Returns will reduce as this explosive growth takes place and needless to say these returns will be lower than they currently are (including Shareholder Dividends). This factor alone will affect postharvest willingness to invest in future capacity. The “marginal cost” of a coolstore at $6-7 per tray is going to be an unwelcome, if not unsustainable, charge against the grower fruit return (unless those returns are exceptionally high and that is unlikely!)
Are there better options for packing and coolstoring fruit that result in improved supply chain efficiency? Our current packaging doesn’t allow us to cool fruit in an energy-efficient way and there is significant waste, both in repacking and in the market.
My point here is that the structure of our Industry is such that the “leadership” for constructive change and development rests with Zespri. We have elected our Directors to provide this leadership. Innovation can, and does, take place throughout the supply chain. Growers and Postharvest have played their part but to be efficient, to meet the needs of a changing world and to advance at a pace to meet our current needs, it must be well-led and coordinated. We need inspired leadership. The corollary here is Fonterra!
Postharvest, by virtue of our industry structure is a highly competitive part of the supply chain. Individual operators can develop new systems and capture IP for themselves but the risk is that uncoordinated development could well be wasted effort (and of course a cost to Growers should the Industry eventually move in a different direction).
Successful Supply chains (eg Amazon etc) are a massive undertaking. They are what top companies and corporates are developing. They are using tools like “Watchtower” and “Blockchain”. ISG (Industry Supply Group), for example, has issues with its data-sharing platforms but there is no hint where it is currently wanting to go. Our Directors have a duty to provide the leadership we require to meet the looming challenges (put aside their vested interests) and unless this is provided we are doomed to follow a path down which incompetent directors have led Fonterra. Perhaps this is not a good time to have a CEO living offshore.
Some examples: Overseas many fruit packers pre-size into crates, coolstore and then repack to order. Such a system has a number of advantages: 1) packing is quicker at the critical harvest time, 2) bins or crates can be coolstored more cost-efficiently 3) packing to order can be easily automated and is a good quality check. If we were to adopt such a system, a number of areas of traceability, grower payments and possibly crate type need to be sorted out. Some crates may also be suitable to export the fruit in—some of us know, we have even been there before, but now is the time for leaders to step in and rethink everything.
Advanced movement is something else that needs more thought and planning.
I have previously written about the massive impact containers are having on our supply chain—this is costing growers!
Over the last 30 years, the one innovation that has benefited postharvest the most is the development of the Compac Sizer. Despite being nominated for the Industry’s Hayward Medal, the developer of this technology has been bypassed. Is it vested interest, or simply that they don’t understand?
Allan Dawson, Managing Director