Produce Business ‘Distribution Software’

Feature Writing

Distribution Software

Specialized Programs Help Move Product from Field to Produce Department

Few places on earth are any more hectic than a produce warehouse. In the daily mad rush to move their highly perishable product quickly, produce distributors must also cope with ongoing quality and availability issues, ever-shifting costs and complex pricing structures tailored to individual customers.

“With produce, you have to move everything, not within weeks or days, but within hours,” says Charles Shafae, president and co-founder of dProduce Man Software, based in Half Moon Bay, CA. “It’s sell it or smell it.”

“In the produce distribution industry, the greatest challenges center on product quality and perishability,” notes John Carpenter, president of Boise, ID-based Silver Creek Software, maker of Visual Produce. “Produce has such a limited lifetime, your product can become unsellable within days—even hours.”

“The key to produce distribution is speed,” observes Leroy Moyer, director of business development for Dimensional Insight based in Burlington, MA. “The highest value comes from the fastest delivery of the right amount of produce.”

“You’re not dealing with a product like shampoo,” observes President and COO Connie Taft of Integrated Knowledge Group, Inc., in San Jose, CA. Taft’s company makes ProPack software. “With produce, the market can change significantly within an hour.”

“The quality and availability of produce vary with the seasons,” notes Steve Reilly, sales manager for Produce Pro, Inc., in Oak Brook, IL. “Costs and prices vary from day to day and from customer to customer based on very elaborate pricing structures and purchasing agreements that have to be maintained.”

“Produce is a free-flowing industry where pricing is very dynamic,” says Ray Connelly, sales manager for Famous Software, LLC, of Fresno, CA. Connelly says more than 2,000 clients in North, Central and South America—most in the United States—use Famous Software, making it the industry leader. “Often, prices change over and over and over again, so it’s critical for information to be available in real time.”

“We’re dealing with items that are not manufactured for inventory but being harvested to fill orders you have in place that day,” says Steve Dean, director of business development for Franwell Corporation in Plant City, FL. Franwell’s Agware program is especially useful for growers, packers and shippers. “Most of what you’re doing is as close to real time as you can get.”

Technology to the Rescue

To tame the beast that is produce distribution, these and other software vendors have created powerful, highly specialized computer programs for growers, packers, wholesalers, brokers and processors of every size and at every level of the distribution chain.

System prices range from about $20,000 to $200,000 or much more, depending on such factors as the number of users, the type of license, the level of support or, most often, a combination of these and other factors.

Most produce distribution packages offer basic accounting functions such as general ledger, accounts payable and accounts receivable. Most of the industry-specific specialization is built into the inventory management, warehouse operations, costing and pricing functions. Among the many current applications:

• Technologically-advanced growers generate barcodes in the field to identify their products.

• Wholesalers print labels for boxes and pallet tags as they arrive at the receiving dock and use wireless handheld scanners to count inventory, designate put-away locations, alert fork lift operators on let-down requirements and scan the product into work orders for processing.

• As orders are entered into the system, warehousers create picking tickets to guide workers to the proper product lots and generate a last-in, first-out load sheet for each truck, based on the day’s orders and customer locations on the route.

• Distributors instantly access detailed, real-time information about inventory on-hand, allocated and available for sale.

• Retailers enter orders directly into vendor systems through electronic data interchange and other linking technologies. Completed deliveries prompt linked customer-supplier systems to input invoices directly into the customer’s accounts receivable.

• Several programs permit processors to track individual components in mixed products, such as fresh-cut fruit salads and bagged salad mix. Processors also generate reports on such critical factors as yield per item, variances from standard by lot, by customer and by quantity on hand, and labor productivity statistics, such as average pounds per hour per worker.

• Managers generate specialized cost and profitability reports by customer, by product, by truck route and by sales rep within minutes of data entry into the system.

“Ideally, the system facilitates the company’s entire workflow,” notes Connelly, “with certain transactions automatically triggering other events. For example, entering a customer order into the system might initiate a notification by email or fax to the trucking company that will ship the merchandise. Or ordering inventory—particularly if it’s something out-of-the-ordinary, might prompt messages to be sent to the sales force or directly to customers.”

“A good computer system can also help promote and enforce best practices in produce distribution,” adds Reilly. “We’ve identified the best practices in the industry, and that drives how we design Produce Pro to interact with users.”

Management Information

In addition to streamlining operating efficiencies throughout the distribution chain, software vendors are placing increasing emphasis on providing meaningful management information based on system data.

“The more forward-thinking distributors use our software, not just as a tool to get through the day, but to generate management information that will give them an advantage over the competition,” says Reilly. “When the data are presented in an intelligent, understandable fashion, many previously invisible aspects of the business can come to light and be acted upon.”

“Most systems have always offered various types of transaction processing, accounting and sales functions,” says Marketing Vice-President David Hatch of Dimensional Insight. “Our system has the analytical tools needed to interpret the transactional data to help you manage your business.

“We provide users with an interface that allows them to ask questions in any order along any data dimensions. The user navigates through the data intuitively.”

“A lot of the focus has been on how to collect data and store it,” adds Moyer. “Where the rubber meets the road is how you use the data.”

“We’ve designed our system to capture and present information in meaningful ways,” says Taft. “From the moment information is recorded in the system, it’s available so that, as you’re trying to make management decisions, all information is in real time, putting the decision point much closer to the current activity level.”

Up and Coming Technologies

In addition to traditional sales and software licensing arrangements, a growing number of software vendors are hosting the software systems used by their clients on in-house servers accessible via the Internet.

“Our newest business model is based on delivering our software through the Internet,” says Shafae. “We introduced it about a year ago, and almost anyone who calls us takes this option whether they’re going to buy the whole system later or not.”

“We believe that’s the way most applications will be offered in the future,” says Hatch. “As more companies are looking at the expense of purchasing and maintaining an in-house network of application servers, versus a hosted model, we’re seeing that sector of the business growing.”

Current systems are already making good use of wireless technology, handheld scanning devices, tablet PCs and electronic data interchange. Most vendors agree the next “big thing” will be radio frequency identification, or RFID.

“These little RFID chips can not only show you where in the field a box of produce came from, but things like cool-down and storage temperatures all along the way to the customer,” says Shafae. “But right now, the chips cost 50 to 80 cents apiece. Considering you typically make only about 35 to 60 cents’ profit on each box, RFID is not there yet.”

In addition to prohibitive costs, another obstacle to industry-wide adoption of RFID technology is the lack of a standard product identification system.

“Every company uses its own numbering system,” says Dean. “The industry as a whole needs a champion to push through some type of uniform coding system before you’ll ever see the widespread use of RFID.”

‘Time to Start Looking at Technology’

With such powerful packages readily available to support operations and management, businesses at every link in the produce distribution chain can benefit significantly from computer technology. Yet so far, surprisingly few are fully automated.

“About ten percent of the industry is on the cutting edge of computer technology,” estimates Connelly, adding, “Most every company has some type of computer system, but most are far from using technology to the fullest.”

Carpenter notes, “About 20 percent of the industry is at or near state-of-the-art, about 20 percent is in the Stone Age and the remaining 60 percent somewhere in-between.”

Taft agrees. “We would say about ten to 20 percent are on the leading edge, 50 to 60 percent are late adapters and 20 to 30 percent are still not using computer technology to any meaningful degree. The reluctance to use technology could be because of costs, or for some people, a feeling the technology will somehow take the business out of their hands. For some, the objection is simply, ‘We’ve always done it this way.’”

“Many are doing business the way they’ve always done it because it has worked well for them,” observes Dean. “You’re asking them to spend money now to save money later, and they know there’s going to be a set-up process and a learning curve associated with a new system, too. Of course, they can keep doing it all on paper, but now is the time for them to start looking at technology.”

As more information and record-keeping are required of distributors, not only by the government but by retailers, software vendors predict it will be harder for low-tech companies to maintain their viability.

“Many produce distribution companies use computers and technology for some part of their operation, usually beginning with bookkeeping and invoicing,” notes Reilly. “But as companies grow and competition becomes more intense, the value of having accurate, intelligible management information becomes much more significant.”

“In the old days, five years ago, when everything was written with pen on paper, it would take forever to gather all the information and input it into an accounting system,” says Shafae. “You don’t have that luxury anymore.”

Sidebar:

Country of Origin Labeling

With the passing of the 2002 Farm Bill, Congress made country of origin labeling (COOL) mandatory for beef, lamb, pork and fish, fresh and frozen fruits and vegetables and peanuts. The U.S. Department of Agriculture was to oversee implementation by September 2004.

Congress voted in January 2004 to delay mandatory COOL until September 2006 for all products except seafood. While food processors, wholesalers and retailers lobby for COOL’s repeal, vendors of distribution software say their current programs can easily accommodate country of origin labeling requirements.

Virtually all programs support tracing produce lots back to the field—even the individual tree—from which the product was harvested.

Tech-savvy growers have for years used computer technology to generate barcode labels at field level.

Further up the distribution chain, barcode technology is increasingly common at packing plants and on wholesalers’ receiving docks to generate pallet tags and labels for individual boxes.

As consumer demand for processed produce grows, more and more processors are using computer technology capable of tracing individual ingredients contained in prepared products back to their points of origin.

Sidebar:

Why Suppliers’ Software Matters to Retailers

Distribution software is designed for use by produce growers, brokers, wholesalers and distributors. While the programs are not intended for use by retailers, the software packages can add considerable value to the suppliers’ services to their retail customers.

Efficiency. Distributors and processors whose computer systems most effectively promote more efficient handling and faster turnaround can offer retailers an unbeatable combination of more competitive pricing and a fresher product.

Tracking. Whether retailers want to add value now by providing country-of-origin-labeling at retail, or they want to be prepared in advance for mandatory labeling, scheduled to begin in September 2006, purchasing from distributors whose software permits detailed product tracking can be advantageous.

Responsiveness. If a retailer has a question or concern about a particular product or delivery, the distributors who have the best computer systems are most likely to provide a fast, accurate response. Should a retailer need to recall a product, a technologically advanced distributor can support an immediate response with accurate tracing to the lot level while minimizing waste.