IBM Global Business Services White Paper

An appetite for changeHow an interconnected approach to food supply management can help food growers, producers, sellers and consumers—and planet Earth

Guy Blissett, IBM Institute for Business Value, Consumer Products Lead

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Executive summaryIn many ways today’s food supply chain is a marvel—a highly fragmented and com-

plex, and ever-evolving ecosystem that delivers an astounding volume and quality of

product—sufficient food in all its various forms to feed roughly 6 billion of the Earth’s

6.8 billion inhabitants. However, in this same value chain where fresh produce is

shipped around the globe hours after being picked, globally linked financial mar-

kets dynamically set prices for agricultural commodities, and crops are increasingly

re-engineered at the genetic level, major stresses are appearing. At a planetary level

concerns are rising about food security and sustainability; How can we feed the ad-

ditional 2 billion people that will inhabit the planet by 2050, while at a participant level

concerns linger and grow about recalls contaminations, waste, spoilage and distribu-

tion inefficiencies that create shortages and embed incremental costs?

Planetary concerns center on the increased demands that 2 billion new inhabitants

will place on the food supply, and changes in consumption that accompany increas-

es in income. Based on existing trends we will likely need to increase the food supply

70-100 percent by 2050. Exacerbating these concerns are newer issues such as

climate change and drought; high and volatile energy prices; plateauing crop yields;

arable land limitations; and diversion of crops for biofuels. As a consequence, we are

seeing significant price volatility, shortages, government interventions and a growing

realization that the current model is not sustainable. Indeed, agriculture is already the

largest human use of water, comprising an estimated 69 percent of total.

At a participant level many of the issues are not new, just persistent. Consumers

continue to crave additional information about product source and contents, while

harboring lingering safety concerns. Retailers continue to wrestle with stubborn lev-

els of out of stocks and razor-thin low margins. Consumer products (CP) companies

continue to struggle with accurately sensing end demand, and synchronizing their

plans and forecasts with retailers. Farmers and growers struggle with increasingly

pernicious weather, rising input costs, uncertain demand and volatile market prices.

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Other persistent problems—such as

food spoilage and waste, product

contaminations and recalls; and often

convoluted farm subsidies and trade

policies—further complicate an already

challenging landscape.

Clearly, a smarter approach to manag-

ing our food value chain is needed. And

while technology alone cannot solve the

crisis, its application to create a value

chain that is increasingly instrumented,

interconnected and intelligent is essential.

In this whitepaper, we will summarize

the current structure of the food value

chain, assess its current state, and

identify the capabilities and attributes

necessary for a smarter food value chain.

Structure of the current food value chainThe food value chain—comprising liter-

ally tens of thousands of participants of

varying size and sophistication spread

across the globe—is a daunting enter-

prise to summarize. For our purposes, we

have grouped and summarized partici-

pants into the following value chain (see

Figure A). While this figure represents a

gross simplification of the web of partici-

pants and their interactions it does enable

a structured assessment of the existing

and emerging stresses, and provides a

framework for considering solutions.

Figure A. The Food Value Chain...a highly simplified representation

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In addition to its complexity, the food

value chain can also be viewed as a

study in contrasts. At each step the

participants and their activities vary

across the spectrum in terms of dimen-

sions such as scale, breadth, scope,

sophistication and integration (see

figure B).

It is notable that some organizations act

as highly focused specialists developing

unique capabilities and expertise in a

specific competency (e.g., raising broiler

chickens in their thousands), while

others operate across multiple com-

petencies reaping benefits of vertical

integration (e.g., global beverage and

snack company integrated all the way

upstream to potato farmers and sup-

pliers of sugar alternatives). Assorted

cooperatives, trade associations, and

market organizations also play a role

aggregating product, collecting informa-

tion, representing industry interests and

sharing knowledge.

Figure B. Food Value Chain particpants and their activities...a study in contrasts

Commodity and specialty products provid-ers / primary producers

This complex and fragmented group

and can be clustered around the follow-

ing competencies:

• Agriculture: Growers of legumes,

pulses, wheat, rice, fruits, vegetables,

corn, and other crops. They range

in size from the small family farms to

titans such as Archer Daniels Midland

(ADM), Bunge, and Cargill.

• Beef, chicken and pork farmers: in-

cluding cow/calf operations, stocker

and backgrounding operations,

feedlots, ranchers, and Concentrated

Animal Feeding Operations (CAFO).

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• Dairy farms and cooperatives: pro-

ducing cheese, milk and milk protein

and other derivative products.

• Fisherman and fish farms: that catch

and/or farm fish, shrimp and shellfish

Component converters, processors, abat-toirs, packers and repackers

While operations at this step are

sometimes highly automated and tightly

integrated with those of the farmers

and growers, they are just as likely to

be performed manually and dispersed

across a web of small players.

a) Converters of raw / bulk crops,

livestock and other foods into com-

ponents—slaughtering, deboning,

peeling, cleaning, sorting, slicing,

freezing, and otherwise storing,

b) Processors that change the com-

position of the product through

cooking, mixing, grinding, and/

or other chemical, mechanical,

thermal operations

Secondary and tertiary suppliers

Chemical, pharmaceutical, industrial

and specialty companies that manu-

facture and market the antibiotics, pes-

ticides, fertilizers, seeds, and genetic

material increasingly a component of to-

day’s food value chain. Examples include

Monsanto, BASF, DSM, Potash Corp.

Brokers, distributors, exporters, importers, traders

This portion of the supply chain en-

compasses a massively diverse group

of large and small players that typically

add little to no value to the physical

product itself, in fact in many cases they

never even “touch” the physical prod-

uct. Their role is to facilitate movement,

aggregation and trade. In Japan, mega-

players such as Itochu, Mitsubishi and

Mitsui are active in each of these areas.

Consumer products companies

Ranging from global players that own

and manage portfolios of familiar prod-

ucts and brands (e.g., Danone, Unilever,

Nestlé, Arla, Heinz, and Kraft), to local

and regional players focused on a single

brand or category (e.g., Kikkoman,

Weetabix, Utz, and Bush Brothers) to

the increasingly important private label

manufacturers who make products

for retailers under their own labels. As

competition increases, critical inputs

become scarce and/or expensive, and

the geographic scope of operations

expands, CP companies are playing an

increasingly active role upstream assist-

ing and integrating with suppliers and

connecting with end consumers to un-

derstand their needs and preferences.

Food and Foodservice Wholesale distributors

These entities bridge the gap between

CP companies and retailers, enabling

CP companies to efficiently sell and

distribute products to diverse and

numerous retail outlets, and delivering

incremental services to the customers .

In many markets multiple tiers of whole-

saler and distributor may exist between

the primary manufacturer (i.e., the CP

companies) and the retailer or restaurant.

Food retailers and restaurants

Food retailers used to consist almost

exclusively of traditional grocery stores,

kiosks, and restaurants but now food

is sold through every type of outlet

imaginable, including online. Examples

range from global powerhouses such

as Carrefour, Trust-Mart, Tesco, Panta-

loon and Walmart to individually owned,

single store locations. Restaurants also

range from global fast food chains such

as McDonalds, Jollibee, Taco Bell and

KFC to single unit, individually owned

restaurants. These organizations run

the gamut in sales volume and degree

of technological sophistication.

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Food consumers

At the end of 2008 there were ap-

proximately 6.8 billion food consumers

on the planet, and by 2050, two billion

more will join them. Although consum-

ers the world over crave safe, healthy,

abundant food choices at relatively

low cost, they are extremely difficult

to please and characterize. They want

more information about the source and

contents of products and are connect-

ed, concerned and empowered to get

that information and share it.

Stresses on the current systemThe current food value chain does many

things very well, from producing pro-

digious volumes of food at a relatively

low direct-end price to the consumer, to

innovating around processes, products,

pricing and packaging. However numer-

ous factors are stressing the chain at

both the participant and planetary level.

Participant Stresses

Participant stresses—typically business

related—impact or occur at the partici-

pant level, rather than a planetary level.

Some business stresses—such as

contaminations and recalls—cut across

the entire chain and even overlap with

planetary concerns. Others—such

as high failure rates for new product

introductions—are more localized in

their impact.

Given the complexity of the food value

chain effective collaboration on issues

and stresses is essential. Progress has

been made toward developing and

adopting standards that facilitate collab-

oration, however significant challenges

remain especially in the upstream end

of the chain. Globalization, specializa-

tion and fragmentation of the food value

chain are exacerbating longstanding

issues as products get handled by more

entities spread across a wider geography.

A sample of cross chain and individual

participant level stresses follows:

Contaminations and recalls

This issue took center stage in 2008

and 2009 with a series of highly

publicized recalls around the globe of

products as diverse as spinach, milk,

peanuts, ground beef, and jalapenos

sickened thousands. Awareness of

the food safety issue and its cross

channel impact has been growing and

consumers the world over are increas-

ingly concerned about the safety of the

food they eat and farmers feeling the

financial impact of recalls. A sample of

contaminations and recalls since 2005

is shown in figure C.

The global trade in food, myriad regula-

tions and inspection standards, and

the complexity of the processed food

we eat are all complicating efforts to

improve food safety. In the U.S. for

example imports account for nearly 60

percent of the fruits and vegetables

consumed, and 75 percent of the

seafood. However, only one percent of

those foods are inspected before they

enter the country.

Food safety issues present problems for

more than just consumers. Food grow-

ers and consumer product manufac-

turers are facing a crisis of confidence

from their customers while they struggle

to institute appropriate safety measures

in the face of rising costs. Government

agencies that regulate food safety are

also increasingly under fire as they

try to answer the public’s demand

for greater accountability with limited

staff and resources.

Agricultural entities

Agricultural entities face an onslaught

of unique stresses. Competing in the

increasingly competitive global market,

these organizations must often con-

tend with extreme price volatility, due in

part to biofuel production fluctuations;

widespread tariffs and import quotas;

and sometimes perverse production

incentives such as those currently in

place for European milk and sugar, and

U.S. corn.

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Figure C. Product contaminations and recalls...a major stress on the Value Chain

Additionally, costs are on the rise in

many areas of the industry. High energy

costs are forcing production costs

up because oil, natural gas and their

derivatives are essential components

to modern agriculture, both to fuel

machinery and as ingredients in fertil-

izers and pesticides. Additionally, many

agricultural entities are under increas-

ing pressure to pay a premium for the

water they use to grow crops or raise

livestock. Europe already has such

a water pricing system in place and

other agricultural producers are bracing

themselves for this potentially devastat-

ing cost increase.

The future will likely bring more, not

fewer pressures for these organizations,

including:

• Rising demand for sustainable practices

• Growing concern about water usage,

waste and runoff

• Increased need for agility due to

climate changes

Consumer Products companies

The primary business of CP companies

is to delight customers and consumers.

Today they struggle with an increas-

ingly concentrated and demanding

customer base who are just as likely to

be competitors. Another stress comes

in the form of a rapidly growing number

of increasingly affluent consumers, who

are themselves concerned, connected

and empowered to gather and share in-

formation. IBM calls this dynamic group

Omni Consumers.

Many CP companies are already

responding to these changes but rec-

ognize they have yet to find workable,

comprehensive solutions. Connec-

tions with consumers are tenuous and

distrust of companies, products and

brands remains high. At the same time

acceptance of private label products is

growing.

Additionally, pressure is mounting for

CP companies to reliably measure the

impact of their operations and those

of their suppliers. Walmart recently

announced creation of a sustainability

index that may soon set a benchmark

for the industry. Walmart leaders say

they are creating the index due to the

planet’s increasing global population,

decreasing natural resources and in

response to consumer demand.

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Lastly, CP companies are caught be-

tween a financial rock and a hard place

with consumers unwilling to pay more

for their food and rising input costs.

Indeed cocoa, tea and other commodi-

ties have hit record highs within the

past 12-18 months.

Wholesalers/distributors

Wholesalers and distributors are under

pressure from both upstream and

downstream value chain partners to

evolve their role and offer enhanced ser-

vices. As grocers and restaurant chains

handle more of their own distribution

and turn to increasingly capable mega-

distributors and third-party logistics

providers, food distributors are under

attack like never before. They’re also

being squeezed by unprecedented cost

pressures, product proliferation and dis-

tribution complexity. In many emerging

markets the multiple tiers of distributor

further complicate the coordination

and collaboration so necessary for

efficient operations.

Retailers and restaurants

As the number of channels through

which food is sold has proliferated so

have the challenges. Retailers now

prepare foods, own brands and sell

meals. Prepared food is sold through

gas stations, hardware stores, coffee

shops and kiosks. The proliferation

of quick service restaurants (QSR)

globally has exploded requirements

for food service and food is delivered

to your home, office or other location.

At the same time traditional channels

remain, such as the Dabbawallas

in India, who hand deliver 170,000

homemade meals to office workers

each day. As previously mentioned,

retailers are under increased pressure

to be more responsive to notoriously

fickle customer demands. In a dif-

ficult economy and an oversaturated

marketplace, attempting to increase

customer responsiveness and remain

profitable in the face of intense com-

petition can be a daunting task.

Consumers

A recent, steady, stream of food

recalls and safety warnings have

left many consumers fearful of the

food they consume and distrustful

of companies, products and brands.

Consumers are increasingly vocal

in their demands for safer food and

increased transparency about the

origin and contents of food. Con-

sumer demands are also growing for

functional foods that deliver added

health and/or nutritional benefits.

To that end, many consumer prod-

ucts manufacturers are focusing on

successfully launching new items to

satisfy the increased preference of

consumers for health and wellness.

In the last five years, there has been

38 percent increase in marketing food

and beverages as “better for you.”

Satisfying this concerned, connected

and empowered consumer is an ever

evolving stress on the value chain.

Planetary concerns

At the heart of planetary concerns are

the additional two billion people ex-

pected to inhabit the planet by 2050,

up from 6.8 Billion at the end of 2008.

These consumers are increasingly

likely to live in a city, and as their in-

come rises their consumption of meat

and dairy products will also likely rise.

These factors will place tremendous

pressures on a food value chain al-

ready straining to feed the world.

The global food value chain is a study

in contradictions. Large segments

of the population are subjected to

hunger and scarcity alongside popu-

lations enjoying enormous excess.

Tragically, at the same time, vast

amounts of food is spoiled or wasted

at every stage of the production

process; some experts estimate up to

50 percent may be lost between farm

and dinner table. At the same time

geographic regions are increasingly

subjected to alternating periods of

excessive rainfall, and then drought.

While the local food movement is

gaining increased traction, the major-

ity of food is produced far from where

it is ultimately consumed, being

shipped thousands of miles before ar-

riving in your local store or restaurant.

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Although for many consumers it may

still be hard to appreciate the planetary

implications of the food they eat. In-

creasingly the impact of the global food

value chain is being measured, com-

municated and appreciated. From the

land and water required to raise cattle

or grow grain to the energy required to

create, transport and distribute food

products and the amount of food that

is wasted or spoiled along the way vis-

ibility to these costs is increasing.

From a planetary perspective, the prob-

lems are many and serious. How can

food growers and producers continue

to meet consumers’ demands efficiently

amidst price volatility, shortages, climate

changes and government interventions?

How can consumers ensure the food

they eat is safe, ethically produced,

healthy and affordable? And how can

the players in the historically-siloed food

value chain integrate their thinking and

their processes with each other to cre-

ate a smart, sustainable system that will

benefit the Earth and its inhabitants for

many generations to come?

In the next few paragraphs we will focus

in on a couple of the major planetary

stressors on the global food value chain:

Population

Although many experts believe that we

currently produce enough food to feed

the planet’s inhabitants, the world’s

population is growing. At the end of

2008, the world’s population reached

6.8 billion. By 2020, that number is ex-

pected to rise to nearly 8 billion and by

2050 the world’s population may well

exceed 9 billion. This unprecedented

population growth will likely drive deep

changes for every member of the global

food value chain who will be forced to

do continually more with less.

Estimates are that the incremental

population, coupled with changing

consumption (see next section) will

require a 70 percent increase in global

food production. The acreage needed

for such an increase in production is

estimated at approximately 300 million

acres, an area roughly three times the

size of California.

For a growing number of countries the

issue of food security is taking on a

whole new level of relevance and driv-

ing some major shifts in ownership of

agricultural resources.

Consumption

Exacerbating the impacts of population

growth are changing consumption pat-

terns. In 2008 for the first time humans

ate more farmed fish than wild fish, from

tilapia, to salmon, to cod. Other pat-

terns are also changing. It is well docu-

mented that as incomes rise, so does

consumption of meat, fish and dairy.

Between 1990 and 2005 China’s popu-

lation increased by approximately 161

million (14 percent) and over the same

time period per capita pork consump-

tion nearly doubled, going from 19.7

Kg to 37.9 Kg. The resulting increase

in Chinese annual pork consumption of

27.1 M tonnes represents roughly 360

million additional pigs, which require

155,000 km2 of farmland, an area

roughly the size of England and Wales.

With global demand for meat and

poultry expected to rise 25 percent by

2015, many difficult questions loom.

How can food producers meet the ris-

ing demand? Are existing methods for

fattening livestock sustainable, safe and

ethical? How can consumers balance

their need for affordable food against

their desire for responsible products?

Where will we find the necessary land?

Finding answers for these and related

questions is crucial for developing food

production processes that are optimal

for all members of the global food value

chain, and for planet Earth. Especially

since these foods require large land

areas, massive quantities of water,

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prodigious amounts of energy and

generate significant volumes of waste.

An additional concern is that overcon-

sumption of these foods and changes

in lifestyle are a contributor to the global

obesity and health crisis.

H20

Until quite recently water—arguably the

single most important input to the food

value chain—was a frequently under-

addressed issue in many food chain

discussions, its continued availability

at little to no cost considered a given.

However there is a growing apprecia-

tion that agriculture is the single largest

human use of water and that current

policies and practices are very likely

unsustainable. The underlying issues

are myriad but include degradation of

aquifers, rivers and lakes to support

crop irrigation, risk of runoff from the

lagoons of animal waste created by

concentrated animal feeding operations

(CAFO), continued high levels of food

waste and spoilage in the supply chain,

deforestation that degrades water

retention as developing world farmers

seek new, productive acreage, and

consumer thirst for bottled water, soft

drinks and beer.

Water-related issues will likely increase

in number and complexity as popula-

tions rise, urban areas expand, and

climate change, drought and farming

practices affect crop yields and avail-

able arable land. In 1950 there was

1.2 acres of arable land per person, by

2010 it is forecast to be just 0.52 acres.

One manifestation is a burgeoning

global trade in virtual water, as countries

with limited water acquire overseas

farmland to bolster domestic food

security (e.g., Saudi Arabia, Abu Dhabi

and Qatar acquiring farmland in Sudan,

Egypt, Ukraine, and Pakistan).

Governments will likely play an increas-

ingly active role in finding a balance

across industrial, agricultural, environ-

mental and municipal water uses.

Kilocalorie /BTU

Energy – and more specifically oil and

natural gas – is perhaps the second

most important input to today’s food

value chain. Sixty years ago, food

producers could create a calorie of food

with less than half a calorie of fossil

fuel. Today, a single calorie of modern

supermarket food may require up to 10

calories of fossil fuel to produce. One

study conducted in 2000 estimated that

ten percent of the energy used annu-

ally in the U.S. was consumed by the

food industry.

Figure D. Water...an essential component in food production and distribution

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Increased demand for biofuels such

as ethanol has generated a unique

set of problems with the world’s food

supply. Biofuels gained popularity as a

way to potentially wean countries from

their reliance on oil and combat rising

fuel costs. But today, an estimated 25

percent of U.S. corn is now converted

to ethanol and goes to fuel vehicles

rather than people or animals. In the

meantime, high oil prices contribute to

higher food prices by raising the cost of

food-production-related items such as

fertilizer and transportation.

CO2/ °Fahrenheit / °Celsius

A growing chorus of reasoned and

informed voices are raising the alarm

about the global impacts of climate

change on agriculture. At a time when

the energy conversion ratio for many of

our foods continues to trend towards

inefficiency and the environmental im-

pact of the food value chain is increas-

ingly documented and understood,

climate change represents perhaps the

most important stress on the global

food value chain. However the impact

of climate change likely extends beyond

the immediate and visible. A recent

report from the United Nations Food

and Agriculture Organization anticipates

climate change will also increase food

safety risks (increasing incidence of

contamination by Salmonella, Campylo-

bacter, E. coli and Salmonella).

Let’s build a smarter food supplyWhile technology alone cannot deliver a

solution to the myriad stresses impact-

ing the food value chain, its application

to create a smarter food value chain—

one that is increasingly instrumented, in-

terconnected and intelligent—is essential.

Why will a smarter food value chain be

instrumented? Because it will use sens-

ing and tracing technologies, such as

satellites, radio frequency identification

(RFID) and barcodes, heat and moisture

monitors, and global positioning sys-

tems (GPS) to enhance overall supply

chain visibility as meat, fish, dairy and

produce moves from the farm or field to

the fork, lowering waste and spoilage

and reducing costs. Sensors can also

enable more efficient production meth-

ods by reducing irrigation, pesticide

and fertilizer requirements, boosting

yields and monitoring moisture, tem-

perature and airflow during storage to

reduce spoilage.

A smarter global food value chain will

also be interconnected—with the dispa-

rate ranches, farms, packers, feedlots,

storage bins, manufacturing and pro-

cessing plants, warehouses, distribution

centers, and retail stores sharing infor-

mation and insights. This connectivity

is increasingly important as food today

is rarely consumed where it is grown or

raised, frequently exported to low cost

markets for processing or packaging,

then re-exported as a finished product

for consumption. For example, cod

caught off the coasts of Norway may

be shipped to China for processing

into filets, only to be shipped back to

Norway as a finished product for sale to

consumers. This inflates logistics costs

and increases waste due to spoilage,

damage or contamination.

Finally, a smarter food value chain will

be intelligent—capturing, leveraging and

sharing standardized data and inte-

grated information to generate insights

on optimizing the value chain. Smart

technology can improve the complex

process that is the production, distri-

bution, storage, selling, consumption

and disposal of food. Elements include

improved planning and coordination,

efficient storage and dynamic routing,

optimization for cost, carbon and other

attributes and improved traceability. The

result can be more, safer, higher quality

food delivered when and where it is

needed, and with reduced waste and

an extended shelf life.

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Elements of a smarter food supply can

be found and imagined for application

at every step in the global value food

chain:

Commodity and specialty products provid-ers / primary producers

Given the fragmentation and historic

lack of technological sophistication

among many participants in this area

of the supply chain there are many

opportunities for greater instrumenta-

tion, intelligence and interconnectivity,

including:

• Farmers can use GPS and ad-

vanced sensor technology to monitor

weather patterns, assess soil and

crop conditions, and adjust their

water, fertilizer and pesticide usage

for optimal efficiency.

• Farmers, growers and even fishermen

in less developed regions are using

mobile phones to access market,

scientific, and environmental data and

knowledge through services such as

Farmers Friend in Uganda, 12582.

com in China, mKrishi in India. In this

way they can boost yields as well as

their own returns by boosting price

realized and reducing production costs.

• Sensors technology and actuators

can be used to identify and respond

to threats across the supply chain

(e.g., excessive humidity or heat,

or contamination). Companies like

Total Grain Management offer such

technologies that monitor conditions

in grain silos and adjust humidity and

heat to reduce spoilage and forma-

tion of potentially harmful mycotoxins.

• Sensors can automatically adjust

water usage based on local and re-

gional dynamics (e.g., fluctuations in

seasonal/daily industrial or residential

water requirements

• Systems and tools can be used to

drive standardization of food related

processes to mitigate risk and reduce

both spoilage and waste. A powerful

example of this dynamic can be seen

in the increasing adoption of pro-

grams such as the Consumer Goods

Forum’s Global Food Safety Initiative.

• Serialization and tagging technol-

ogy, coupled with the application

of standardized nomenclature for

participants, locations and products,

enables true end to end traceability

across the supply chain.

• Integrated communication systems

enable those at the top of the food

value chain to seamlessly share in-

formation about anticipated growth

and demand with downstream, cre-

ating a stronger link between supply

and demand

• Application of genetic manipulation

and nano-technology to animals

and crops to deliver drought and

pest resistance, nutrition and other

functional benefits. Already 64% of

the world’ soybeans and 24% of corn

is genetically modified

Consumer products companies

Smart CP companies can

• Leverage the widespread adoption

of data standards such as GS1, the

power middleware and other com-

munications platforms to continu-

ously coordinate inventories, produc-

tion plans and sales forecasts with

customers and suppliers to create a

consistent, seamless, link between

groups.

• Embrace and enable the concepts

and principles of Open Innovation

by connecting with a diverse set of

internal and external stakeholders

and other interested parties to ac-

cess ideas, technologies, ingredients,

and other assets. In the process

accelerating the new product creation

process, lowering costs and boosting

success rates.

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• Reduce water usage in production,

packaging and products themselves

by marketing concentrated versions

of liquid based products (e.g., laundry

and dish detergent), reusing water in

production processes,

• Deploy advanced monitoring tools to

listen and understand the concerns

of customers and consumers about

products, brands and companies

in areas such as traceability, social

responsibility, sustainability, and apply

advanced analytics to convert those

observations into actionable insights

such as new products, promotions

and distribution strategies.

• Deploy sensors (e.g., RFID tags,

thermometers and psychrometers) to

track location and monitor heat and

humidity throughout their production,

packaging and storage operations

and connected intelligent actuators

to automatically effect changes to

processes, conditions and operations

to boost efficiency, service and safety.

• Dynamically optimize their supply

chain operations against both tradi-

tional metrics (e.g., $ cost, customer

service, asset utilization) and new

metrics (e.g., fuel, H20, and C02).

Wholesalers and distributors

Smart wholesales and distributions

are deploying RFID, 2D barcodes, and

other identification technologies to

track products as they move through

the chain. Such technologies enable

companies to continuously coordinate

inventories, production plans and

sales forecasts with retail or restau-

rant customers and CP company

suppliers for uninterrupted planning

and communication.

Additionally, smart wholesalers and

distributors can optimize supply chain

software to minimize distribution costs

(e.g., storage, transportation) for

multiple positive outcomes, includ-

ing increased profit and a decreased

carbon footprint.

Retailers and restaurants

In this frequently oversaturated mar-

ketplace, many retailers and restau-

rateurs are finding they must take a

multi-pronged approach to retaining

customers and attracting new ones.

Strategies include:

• Maintaining a seamless connection

with consumers that transcends their

location, allowing them to dynami-

cally and continuously search, review,

purchase and take acceptance of

products and services leveraging

devices such as mobile phones, in

store kiosks, and hand held devices,

identification and preference informa-

tion garnered from web searches,

loyalty cards and purchase history,

supporting technologies such as

video surveillance, GPS and web

monitoring, and advanced text, data

and video analytics.

• Improving the in-store experience.

This can be accomplished by provid-

ing more value added services to

consumers through in-store offerings

such kiosks, shopping cart PCs, or

self checkout features as well as out-

of-store offerings such as Website

interactions or services.

Page 14

• Adjusting forecasts, orders and

inventories based on weather, sea-

sonal, calendar, competitive, price,

availability and other conditions

• Ensuring in-stock positions to

reduce lost sales, experimenting

with new formats and channels (See

the IBM report on multi-channel)

http://www-935.ibm.com/ser-

vices/us/index.wss/ibvstudy/imc/

a1016279?cntxt=a1000063

• Continued challenges coordinat-

ing promotions, new product

introductions and day-to-day

business with CP suppliers - See

the press release on data sharing:

http://www-935.ibm.com/ser-

vices/us/index.wss/summary/imc/

a1031441?cntxt=a1000063

• Developing the capabilities needed to

support rapidly growing private label

business (e.g., retailers increasingly

need brand management, shopper

insights, marketing capabilities)

Consumers

Usually, considered the end of the

global food value chain, consum-

ers are still driving many changes

upstream. “Smart” consumers use

technology in myriad ways to become

even smarter, including:

• Using online and mobile coupons

• Selectively shopping online based on

availability, price and convenience

• Researching products and compa-

nies online—both through structured

and controlled content such as com-

pany Websites and through unstruc-

tured and uncontrolled content such

as social networking sites, online

communities and blogs

• Sharing information, insights and

opinions in real time with other con-

sumers and directly with manufacturers

and other stakeholders such as NGO

• Investigating products and their impacts

Sequencing the cocoa genome

IBM Research, the U.S. Department of Agri-

culture and Mars, Incorporated are teaming

up and through their collaboration, they

hope to sequence the genome that makes

cocoa, the key ingredient of chocolate.

Researchers plan to use IBM’s computa-

tional biology technology and expertise to

develop a detailed genetic map, identifying

the specific genetic traits that produce

higher cocoa plant yields and resist

drought or pests.

But like any sweet treat, the results of

this research will be better when shared.

Mars will make the genome information

available for free through the Public Intel-

lectual Property Resource for Agriculture

(PIPRA), which supports agricultural

innovation for both humanitarian and

small-scale commercial purposes.

Page 15

ConclusionThe stresses on the food value chain are

pervasive, profound and persistent and

while solutions are not easy, technology is

no longer the barrier it once was. A smart-

er food value chain is not just possible,

but imperative. By leveraging the collective

and synergistic power of intelligence,

instrumentation and interconnectivity we

can make that imperative a reality.

Why IBM?

Technology is shaping how food grows,

how it tastes and how it gets to your

plate. A smarter global food system would

help eliminate waste, improve quality and

ensure safety. IBM has the technology

solutions and expertise to make it happen.

To find out how we can help your organi-

zation build a smarter food supply chain,

contact your IBM representative or visit:

http://www.ibm.com/ibm/ideasfromibm/

us/smartplanet/topics/food/20081208/

index.shtml

For further information

Getting Real About the High Price of

Cheap Food (Time Magazine, August 21,

2009) http://www.time.com/time/health/

article/0,8599,1917458-1,00.html

Cargill’s Inside View Helps It Buck Down-

turn (The Wall Street Journal, January

14, 2009) http://online.wsj.com/article/

SB123189501407679581.html

Health Ills Abound as Farm Runoff

Fouls Wells (The New York Times,

September 17, 2009) http://www.

nytimes.com/2009/09/18/us/18dairy.

html?scp=2&sq=runoff&st=cse

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