Essay on supply chain management
Essay by Connor Wilkins
Topic: The pandemic has caused many supply chain and operational disruptions over the last two years. Pick a company affected by the pandemic and evaluate their pre-pandemic strategies and how they have adjusted to the supply chain issues experienced during the pandemic. While their original strategies may have been valuable at the time, show how strategic mismatches occurred and explain possible solutions.
Twenty years ago, New Zealand apple growers who wished to export their fruit only had one option as it was controlled by just one regulatory body (Golden Bay Fruit, 2022). When this changed Golden Bay Fruit (GBF) seized the opportunity to market its own fruit around the world. This was a risky choice but it allowed them to deal directly with their customers and have more control over their supply chain. GBF grew by collaborating with a number of other established family owned apple growers in the Tasman region who each wanted to take their apples to the world market (Jones, 2022). This allowed them to each bring their own resources and capabilities into one structure.
GBF now is home to over 750 hectares of apple orchards (MSC, 2021). The fundamental driver of GBF is based around creating value for customers through quality. Quality is an order winner for GBF that gives them a competitive advantage over competitors (Zighan et al., 2018) Their customers know them for “growing some of the juiciest fruit in the world” but quality for them is not just the apples, it is everything such as getting the container to the customer when they want it (Golden Bay Fruit, 2018). GBF had successful strategies in place prior to the pandemic. GBF has experienced numerous operational and supply chain problems as a result of Covid-19 restrictions. They have had to adjust to the new environment and develop solutions, because the way they operated prior to the pandemic no longer allowed them to be successful.
There are many integrated activities and processes that go into transforming a flower on the tree into a quality apple for customers to enjoy. Each season consists of different operational activities that are all part of the process of creating the quality end product. Seasonal activities include pruning, thinning, picking, watering, tractor work etc (Golden Bay Fruit, 2022). Another activity that emerges from long-range forecasting is the planting of new orchards to increase capacity in response to increased demand. The growing process starts in the spring where the trees are pruned. Once summer hits the trees begin to develop flowers which are naturally pollinated by bees. It is crucial that the irrigation is managed well so that the trees get the right amount of water needed to grow quality fruit (Golden Bay Fruit, 2018).
Once the fruit begins to grow into small apples, tractor drivers place a chemical thinner on the trees. This is a crucial activity as if there isn’t enough applied, the trees will need more hand thinning, which increases costs and reduces efficiency. If too much chemical is applied, too many fruit will fall to the ground, lowering the overall output. Thinning apples is critical in determining the quality of the crop. It is important to forecast upcoming demand so managers can determine how much fruit to take off the trees to ensure they leave enough to meet demand at the quality expected from customers.
Harvesting is the next step in the process. GBF has put pickers on a contract so they get paid for what they pick, which encourages them to pick more efficiently. It is important to get the fruit off the tree at the right time to ensure premium quality, which is why it is critical to have enough staff to complete this job. Chemicals and fertilisers are an important part of the growing process. Managers need to plan and order enough chemicals and fertilisers for what is needed. If too much is ordered then this can result in waste and increased costs. However, if there is not enough ordered this can lead to operational activities falling behind due times and can affect the quality of the fruit. It is also important to have reliable suppliers so that GBF can feel confident that the orders placed will arrive on time for when they are needed. GBF has made significant investments in capital in order to increase the efficiency of its operational processes. An example of this is upgrading to 3 row sprayers which allows a single tractor driver to complete 3 times the amount of rows as it would with a single-row sprayer.
Once GBF receives an order, that particular variety is moved from the coolstore into the packhouse where the apples are cleaned, graded, packed and then automatically stacked into pallets ready for shipping. Apple boxes are also weighed throughout this process to ensure that the weight variance between boxes is minimal. Golden Bay Fruit invested in a state-of-the-art packhouse as part of a long-term capacity management strategy as they anticipated continued growth and needed additional capacity to meet rising customer demands. The facility has the capacity to pack 40 tonnes per hour (Golden Bay Fruit, 2020).
GBF is continuously looking into the future and planning for the upcoming season. Before the fruit is even harvested growers meet with customers to discuss their volumes, pack types and delivery times (Personal communication, April 6, 2022). Gaining this information helps them forecast demands and creates more value for their customers. GBF has offices around the world which makes it easier for them to ensure the orders get to the right destination at the right time.
GBF partnered with MSC containers who go into specific markets which hit all their customers in the required timeframes. GBF exports fruit to the UK, European, China, South-East Asia, India and Middle East markets. MSC is servicing the majority of these markets which allows GBF to work with one shipping partner to deliver their apples around the world. MSC has a weekly schedule that comes into Nelson which is incredibly important as GBF has to ship weekly in order to keep up with their customers’ demands. MSC also has high-quality equipment. GBF is a long way from their markets, and the fruit can be on the water for up to 8 weeks, so having high-quality equipment that ensures the fruit’s quality along the supply chain is vital (MSC Cargo, 2021).
Covid-19 forced governments to impose substantial limitations on export shipping and labour mobility (Aday & Aday, 2020). These restrictions posed many challenges for GBF that impacted their typical operating practices including a lack of shipping capacity and seasonal labour shortages (Chapman, 2020).
Labour shortages were caused due to foreign seasonal workers being stuck at the border (Tougeron & Hance, 2021). GBF is heavily reliant on foreign seasonal workers especially the Recognised Seasonal Employer (RSE) scheme in order to get the fruit off the trees and packed for overseas shipping. GBF’s operational activities need to follow a fine-tuned schedule so that immediate actions can be performed when needed. Since all processes are strongly connected to each other, a slight delay by not having the labour to complete the job can result in negative impacts to quality (Aday & Aday, 2020). For example, if GBF aren’t able to pick their crops in time it can lead to apples maturing resulting in substantial fruit loss. Staff shortages lowered their capacity and capabilities to serve their customers’ demands. As a result, the apple industry lost around 100 million in export earnings (Fyfe, 2021). Exports were also around 14% lower than 2020 levels (Knowles, 2021).
Up until the pandemic, exports and demand for apples globally has been increasing. The apple industry has seen 53% growth in the last decade (New Zealand Horticulture, 2020). However, companies such as GBF face the challenge of not having enough staff to maintain this growth. In 2010 apple growers in the Tasman region employed 1883 full time employees. 10 years later this has dropped to only 1635 employees (Berl, 2021). There is no doubt that the volume of apples produced is increasing. However, staff levels are lower than a decade ago which suggests this is a bottleneck that is restricting further growth.
In response to the immense labour shortages, GBF had to change their tactics in order to survive the season. They collaborated with other entities in order to share staff. This worked well and was a win-win situation for all sectors involved (Chapman, 2020). Apples are harvested between February and May which is different to other horticulture sectors. Having close relationships with other sectors has allowed GBF to share staff in the times they each needed them. GBF also offered RSE staff further incentives to encourage them to stay and help with harvesting and packing (Personal Communication, April 6, 2022). This would have increased costs, but if these employees had not stayed, the majority of the fruit would have been left on the trees. GBF should also consider investing in a domestic marketing campaign in order to make them less reliant on foreign seasonal workers. They have been using social media and creating videos but could also look into advertising through other sources such as the national radio. GBF could also consider investments in more automated solutions that will allow them to be more flexible and less reliant on labour (Rae, 2021).
Chinese customers have strict requirements for GBF to follow, due to Covid-19 (Kitchin, 2022). These expectations meant GBF had to adapt their operations. Chinese customers require GBF to identify staff with symptoms of Covid-19 and restrict these people from working. This starts with carrying out health checks for symptoms of all staff at the beginning of each day. This has resulted in more staff having days off, thus decreasing capacity and adding to the shortage of staff. Decreased capacity due to staff absence has flow on effects such as falling behind on packing customers orders.
Border closures have also caused GBF to face unprecedented challenges with shipping to export markets. Container shortages and reduced or disrupted services from shipping lines is leading to uneven supply to export markets (Hey, 2021). There is now ongoing pressure on port and freight congestion as demand for NZ apples is still elevated (New Zealand Foreign Affairs & Trade, 2021). The unpredictability of shipping availability made it challenging for GBF to meet demand and deliver the order on time, which causes frustration for customers. These shipping disruptions significantly increased the transit times it took for orders to arrive and increased the price of containers for all exports, which ramped up costs considerably (F&B Technology, 2021). Increased transit times and therefore, increased variability is an issue for GBF in terms of ensuring the apples remain the same quality that is expected by its customers on arrival. Shipping delays and longer transit time may have negative effects on the quality and freshness of the apples (Aday & Aday, 2020).
The lack of international shipping capacity forced GBF to explore new strategies in order to get their produce to their offshore markets, as the domestic market was too small. GBF wasted no time and decided to deal with new shipping companies in order to lock containers in early. They agreed to pay double the normal price for a container in order to secure enough containers to meet customer demands (Personal communication, April 6, 2022). GBF also collaborated with other large exporters such as Zespri and T&G to charter reefer vessels to ensure they could get their product to international markets (Rae, 2021). The cost of getting a chartered reefer vessel is more than containers. However, due to the container shortages, it was the only option to get their fruit to market on time (Hey, 2021). If GBF were experiencing too many delays in shipping their fruit out of the country, their cool stores would have clogged up and reached capacity. Chartering reefer vessels played a key role in reducing the pressure on cool store inventories.
Shipping supplies such as fertilisers and chemicals to NZ was also impacted by the pandemic. GBF participated in large amounts of pre-buying to give them the confidence they will have the required supplies on hand to grow and protect the crop.
Overall, it is evident that the pandemic posed many challenges for GBF that forced them to adapt. With the implementation of new strategies they have still been able to deliver their quality fruit to their customers around the world.
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