I started my professional career (many years ago) as a quality controller of fruits and vegetables (specifically, in citrus for exports). It is interesting to see how the circle of life and the profession closes taking into consideration how much of my job is related lately to talk and manage “Quality”.
But, rest assured, this is not going to be an article about the definition of quality. Of this, we could make a treaty (but this is not the day of this blog’s so called “Produce Academy”); or better, read some of the many that are already written.
One of the mantras that are repeated in the business is: “I want perfect quality“. And as soon as I hear it, I make a pout of disgust.
Instinctively, my answer follows: “there is no perfect quality in fruits and vegetables” – While trying to control the pout.
And the conversation with the imaginary interlocutor starts… (take no offense, any resemblance to reality, it is pure coincidence)
– Yeah, man. I know there is no perfect quality, but you understand me. Right?
– No, I think it’s better to set it up. – I would say.
– I want a superior quality to the competition and I want it at every moment during the season. – would respond a good interlocutor who knows what he is talking about.
Focusing the conversation at times of production (“at any moment”) and using other customers as a reference that compete in the same market (“benchmarking”) is an appropriate way to approach with an “strategic and commercial criteria” the issue of the definition of the technical parameters to be applied in product specifications.
If you allow me to rewrite the famous phrase of Voltaire (Perfect is Enemy of Good), the perfect quality is enemy of the good quality that contributes to build a healthy and stable business.
As a criterion for managing clients and programs at supplier/grower level: “If a client proposes a program with quality specs that imply picking / selecting / sorting at the production line more than 20% of the product of a fair quality standard lot, the program it is definitely not interesting.”
In fact, it ceases to be interesting in much smaller percentages because the costs of processing / selection are exponential (follow an exponential curve) and buyers and sellers usually assume that these costs follow a geometric increase and therefore, they will not be willing to pay the premium price needed to cover this cost increase.
And in this case, there are only two possibilities: either the customer demand is unreasonable or the farm production is not good enough. In any case, it is not worth incurring in further selection / packaging costs that you will not be able to cover. Same situation may apply to suppliers/service companies (service providers, traders with warehouses and etc.).
A very common example of how the requirement of perfect deliveries (in shape and time) by the supermarkets has generated exorbitant costs that today are difficult to keep assuming is the British market.
Following years of application of the theory of the Category Management by the Big Four (Tesco, Sainburys, Asda, Morrisons) in the United Kingdom, the effects could easily be spotted. Increasingly demanding specifications that produced efficiencies in shops and distribution centers of the retailer were developed while the fulfillment of these requirements was outsourced to the so called “Service Providers” (former Importers or Agents that were invited to fit as this new stakeholder figure).
These Service Providers, for example, assumed that they should serve the products to the retailers’ distribution center in record time to avoid unnecessary stock at the customer’s premises and serve whatever the stores demanded almost just in time. This strict requirement made it “mandatory” to keep a larger stock than necessary at the Service Provider’s premises, since a lack of service (since they were not able to anticipate actual demand) would trigger a huge penalty followed by the loss of the volume contracted to serve the distribution center. The consequences fall by its own weight, exorbitant losses of perishable products stocked and not served due to a poor demand forecasting.
Furthermore, penalties for bad quality and/or poor labeling were (are) draconian. To such an extent, that almost no product packed at the origin was able to meet the tight specs upon arrival and so the majority of packing processes were transferred to the UK loading only loose packs of fresh produce at the source. Again, the implications are clear: packaging costs rose to UK levels, extra losses due to sorting at destination, transported and delivered product that is discarded but still generates transport and destruction costs, unused loose packaging materials for final customer and a long etc.
The combination of super demanding requirements and this well-oiled organizational machinery achieve amazing product perfection but generate a huge cost.
All these negative incentives have created a new reality. While the Big Four shared a system, they all sustained similar operational costs and therefore were on the same competitive threshold, but the value chain of fruits and vegetables generated in the UK was extremely expensive.
New players arrived and have wrecked the old business model. German discounters Aldi and Lidl, disembarked using a more traditional fresh produce supply model. The stock was measured in transit and not at the distribution center. The quality specifications were set to meet a great standard adjusted to real demands of the market (consumers) but not aiming for perfection. And also the negative incentives (economic penalties) are not part of either the value chain monitoring or the supply agreement.
All processes set to achieve perfection are effective but not efficient. The challenge is to achieve high levels of perfection with simple processes, especially in industries so tight with margins.