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Spoilage Temperature Inventory Location Chips
[STIL Chips]
TEAM 5
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Casey McGuire Nick Sajovic Dom Caputo Jordan Shill Ben Thomas
The STIL (Spoilage Temperature Inventory Location) Chip is an economical, yet innovative way for grocery companies to measure the state of their perishable meats from supplier to their retail store. This product will be a 4x4 inch chip, and will be fixed onto a specially designed plastic crate. The purpose of the chip will be to monitor temperature levels from the fish/meat supplier to the distribution center and then finally to the retail store. The STIL Chip will communicate with companies in the grocery industry such as Wal-Mart, Shamrock Foods, and Trader Joe’s that are striving to become as lean as possible. Although they seek to limit inventory, these companies face spoilage in their meat, dairy, and produce sectors. In fact, it is estimated that 31% of the food available for consumption at the retail level, goes uneaten. Spoilage occurs at every level of the supply chain creating massive monetary losses for these companies. Recently, Shamrock Foods came to Arizona State University to share with students key supply chain concerns they had in their company. These concerns included warehouse automation, logistical failures, and what specifically interested our group, spoilage from supplier to customer.
Introduction
In the current day and age, the world has seen a revolution unprecedented in its growth potential. This incredible revolution has been called by a few names, with some people coining this time period the “Digital Age”, or the “Information Age”. These names come from the vast amounts of data that are becoming readily available, and Intel has made several very good decisions to utilize this opportunity to their advantage, making a large investment into the research and utilization of the “Internet of Things”, or IoT.
Intel has seen the future of this IoT revolution, and has already been finding solutions to problems before we realized that they existed. From the creation of an intelligent traffic system to ASU’s Sun Devil Stadium being fitted with IoT in each seat, Intel is at the forefront of the Information Age. Looking forward to the future, the possibilities are endless.
Our team has been privileged with the task of producing a device that could eventually be sold to consumers. We were asked to find a problem that could be solved by introducing IoT technology, and demonstrate the advantages within the logistics industry specifically. With this research project, our group’s goal is to show that IoT technology offers a solution in the logistics industry, and is cost effective for businesses today.
Problem
“If I had only one hour to save the world, I would spend fifty-five minutes defining the problem, and only five minutes finding the solution.”
-Albert Einstein
The best way to find a solution is to start with a problem. Though our group has a lot of experience in logistics through our studies, we understood that it takes experience in the workplace to find the best issues that need fixing. We met with several professionals in the logistics industry, and when we sat down with Monica McCombs, Chief Supply Chain Officer at Shamrock Foods, she drove us into the right direction for our proposal. She was able to connect us with Matt Lewis, one of Shamrock Foods' most tenured managers, and an incredible resource of information.
In a day where the food industry is held to extremely high standards of compliance, one mistake can cost millions or billions of dollars, and have effects that extend for years to come. In the last year, companies like Blue Bell, Chipotle, and others have been heavily hit by issues in food handling compliance. A deeply held belief within the family-owned company of Shamrock Foods has always been rooted in bringing the highest quality products to their consumers.
We were able to tour the warehouse with Mr. Lewis, and while talking with him we found a solution that needed IoT a long time ago. We saw a place where IoT could be cost-effective for any food distributor in the country, and that is the maintaining of the cold chain.
The cold chain is a very simple concept; trace the temperature of a given product from beginning to end. Maintaining traceability is key to having an eye on the cold chain, and it allows a company to identify concerns before they become problems. In our project, we wanted to select one of Shamrock Foods’ weakest points, and that is in their fish market.
Shamrock Foods has tens of thousands of SKU’s, and fish is one of their products that spoil the most. Fish is generally ordered in smaller quantities than beef or chicken, it has a short shelf life, and it’s also very sensitive to temperature. Shamrock Foods’ meats are also part of what they refer to as the “center of the plate”. This is among the products that have the highest cost, and also the highest profitability in the food industry. This is a big hitter for Shamrock Foods’ bottom line, and an efficient use of resources is key to keeping spoils low and sales high.
In the end, everyone at Shamrock has asked us two things— First, to create a product that can monitor temperature continuously. Second, using this same device, find a way to tell what inventory is on their trucks. These are two opportunities that are specifically geared towards Intel’s IoT, and we believe that a company like Shamrock Foods would be very interested in this technology.
With the ever-increasing requirements in food handling compliance, maintaining the cold chain is nothing new. While touring the semi-automated warehouse, Matt showed us the devices that they are using currently to monitor the cold chain. They had several versions of these products, each of them with different pieces of technology. The companies used by Shamrock were Sensitech, Logtag Recorders Cargo Data Corp, and Locus Traxx. In the image above are these listed devices, varying greatly in utility & price.
All devices had limited capabilities, and anything that continuously reported data was very expensive. Locus Traxx talks about their use of the Internet of Things, but these devices were limited to GPS location and temperature. They had no way to monitor inventory, and they were a one-use device, making them even more difficult to rationally implement on a large scale.
It became clear to us that there remained a lot to be improved in maintaining the cold chain by monitoring temperature, and keeping it cost-effective. In response to the issues in maintaining the cold chain, we have created a cost-effective product that will be able to reduce spoilage, maximize inventory usage, and will be entirely reusable. This is the key purpose of the STIL Chip.
The STIL Chip is a device with a completely reusable life cycle. One problem with the products that are in circulation today is that they are, generally speaking, a single-use product. This STIL chip will have a battery life of 15-20 days but will utilize a rechargeable battery to offset the investment, allowing each device to be used multiple times.
An issue with these currently used devices was also the placement of them on the pallet or box. Most were used on a pallet-scale, and therefore were out of reach when shipping products from the Shamrock warehouse to the retailer. When placed on the pallet, they were adhered to the top or side, and were very easily misplaced or broken. To address this issue, we have also proposed the development of a crate that houses the chips. As illustrated in the image above, these chips will be streamlined to fit within the crate and continuously monitor temperature.
These crates, in addition to protecting the chips by integrating them into the crate, will also reduce the footprint of waste and eliminate the use of cardboard for any product utilizing this device. Assuming the costs would be four dollars per crate and one dollar per box, after four uses of the crate, it will begin to pay for itself, facilitating a faster return on investment in the implementation of the STIL Chips.
STIL Chip Capabilities
The cold chain is the center of our problem we are trying to amend for companies like Shamrock Foods. An unbroken cold chain is an uninterrupted series of storage and distribution activities which maintain a given temperature range. It is used to help extend and ensure the shelf life of products, such as meats and seafood. The STIL chips are designed to control all aspects of the delivery of perishable goods and control the location, temperature and management throughout the distribution.
Fluctuating temperature levels is the leading reason why perishable goods become contaminated and are therefore deemed unacceptable to retailers. This leads to a major loss of revenue for both the distributer and the wholesaler. With the STIL chip installed in plastic containers, it can notify the driver of the truck to adjust the temperature, keeping the levels at an acceptable range causing the food not to spoil. The chip will send information to a network synched with the truck that can alert the driver of the unacceptable level. The truck driver can then turn the refrigerated truck to the right level and continue driving.
When opening up the back of the refrigerated truck, it spikes the temperature to a level that damages the seafood, causing a more rapid spoilage rate. The STIL chips can help maintain the levels of the meats and seafood so they aren't constantly going up and down which leads to a longer shelf life and ultimately more profit from non-contaminated foods.
The information that is transmitted through the network can be stored and brought back up if needed in the future. This can be especially useful if you want to show the buyer what temperatures their perishables have been through to show them that it is still fresh. By using these chips, it can form a relationship with your buyer because they trust you knowing that the perishables have been in a safe environment throughout the delivery process.
A GPS function is another feature the STIL chip has. This allows each container to be completely tracked at all times. This can be beneficial for a couple of reasons, one being that each individual container can we tracked at all times. Throughout the delivery process the chips allow for a pinpoint location that for help speed up and project more accurate delivery times.
Reducing the delivery time is the ultimate goal, especially when it comes to meat and seafood. While trucks keep food refrigerated, it is not the same as having it in an industrial warehouse where the product is safe and secure. By knowing where the product is at all times we can find ways to cut down on delivery time and deliver the product faster, keeping it out of unstable trucks. As technology advances, we can constantly track the roads and see the fastest route to the destination while taking into consideration things such as crashes, weather, and other travel delays. Seeing where the product is in the truck shows the supplier the best route to go, the most efficient way possible.
The GPS can also gauge a better-projected delivery time. It is a huge advantage for the buyer to know exactly when their product, especially perishable foods such as meat and seafood, will be arriving to the retail stores so they can know when to be prepared. Building a relationship by showing the temperature reports to the buyer creates reliability because they are much more likely to go with a supplier that can give them this data compared to a company that doesn’t.
Another advantage of GPS is that in the event that the containers become missing they can be easily tracked and returned. This can become very useful for when we have to reuse them and what to know which retailer has what containers.
Finally, the STIL chips can be utilized to manage the inventory within the warehouse. Currently Shamrock is using cardboard boxes to ship their goods to retailers. This is not necessarily the most efficient, manageable, nor cost effective system. The STIL chips will be inside the plastic containers in order to manage how much inventory is not just in the warehouse, but how much is being delivered. With the STIL chips, we can see what and how much perishable food is in each container.
Potential Engagements
According to the United States Department of Agriculture, meat consumption has increased an average of 57 pounds per person. Companies such as Wal-Mart, Shamrock Farms, Target, and Bashas are constantly supplying meats to these consumers. With an increase in population and consumption of meat per person, this decreases the margin of error for these companies. This perishable inventory has a limited life and any exposure to warmer temperatures can quickly create spoilage. Although our research was directly related to Shamrock Farms, STIL chips can be implemented in all grocery logistic settings. Food and Market Institute estimates that throughout all supermarkets, 13.5% of revenue comes from meat, poultry and fish sales. Supermarkets average about 640 billion in sales yearly so 13.5% can generate a large sum of money.
Intel’s IOT program has the resources and capability to be able to tap into this market. There are many companies that have created an idea similar to STIL chips, but have not created a product that is reusable. The capability of being constantly tracked throughout the supply chain, and the ability to be manufactured at such a low cost is our selling point. This is an advantage that Intel has above potential competitors. For decades Intel has lead the microchip industry and STIL Chip’s provides a strong segment to their portfolio.
Truck drivers can be quickly notified if the back is left open
As businesses are looking to become more data focused, the grocery industry will look to maintain and preserve their inventory through data. Shamrock Foods explained their greatest concern is inventory spoilage from supplier to retail store. The spoilage occurs when truck drivers move from one location to another and open their reefer container. In an industry with lean supply chains and low profit margins, spoilage in meats can be dangerous. Imagine a truck arriving to the end destination and full of spoiled meats. Grocery companies will now have to be forced to choose between stock out costs or expedited shipments. This valid concern provides Intel a place in the grocery industry. A chip that can gather data and prevent current inventory from spoiling will be a high valued asset to these companies. If a company can gather data on a certain truck driver and find if this particular driver is leaving the reefer open too long, they can quickly correct and mentor the driver so that these problems do not occur in the future (see picture above). In addition, the company can quickly identify if a reefer is not cooling to the correct temperature or if there are certain spots in the reefer that are not being cooled as well.
The food consumption among Americans continues to rise yearly. STIL chips will become a necessity among supermarkets as they seek to protect their moving inventory.
IoT Capability
The proposed Spoilage Temperature Inventory Location Chip has the potential to revolutionize the food industry by not only adding to the ever-growing Internet of Things, but by saving companies time and money. Minor shipping process changes will have to be implemented in order to make this idea possible. The best part is that these early minor changes will have immediate positive effects on the entire supply chain. Data can be collected at each and every step, and shared on Internet of Things. The capabilities are endless for Intel with this product.
Temperature Control
Let’s start with our main idea, temperature control. In transit, temperature is arguable the most crucial variable affecting spoilage of food. On average, companies experience a 12% loss in produce, along with 6.25% loss in meats and seafood. These losses are due to the lack of control over the product in the back of the truck. This part of the food journey is the least visible part of the supply chain. Now what if we took back control of the product while in transit? That is exactly what our STIL chip can provide companies through the collective mind of Internet of Things. Adding these chips to independently controlled boxes will save these food items from spoilage. For example, a chip is reading that a box has a slightly elevated temperature and is detecting early fermentation within that box. The company can simply lower the temperature within the truck, allowing more time to reach the final destination before spoilage occurs. Each box is reusable and a 15 day rechargeable battery. By allowing these chips to monitor each and every box of perishables, it will be easy to the company will gain control and more importantly valuable information that will prevent food from perishing too soon.
Tracking
These chips will provide much more than simple temperature control. Since each box will be tracked with the chip, its location can accurately be recorded at any point. This allows for increased inventory tracking as well. The chips send a signal to a truck mounted router, which keeps the truck and the company in constant communication. In the event that some boxes are starting to spoil, the company will have an accurate inventory total when the truck arrives at the retailer. This can help the company/retailer make more accurate inventory/order decisions. In collecting this data, alternative uses for near spoiled food can be made while the truck is still on the road. Rather than having a truck arrive with spoiled food to a distant location, near spoiled food could be rerouted to a closer store before it is too late, or be disposed of in a different way. This prevents the spoiled food from becoming an issue upon arrival. Using these chips provides valuable supply chain vision because decisions can be made preemptively, instead of reacting to a problem after it has become too late.
Data Collection and Supply Chain Planning
As stated above, data can be collected at every stage of our STIL Chip’s intended use. This data will be uploaded to Internet of Things and can be an accurate tool when it comes to supply chain planning. With the chip/box combination and the combined use of IoT, this idea can be a valuable weapon in the fight against spoilage. Major decisions based on the feedback from the chips can be made preemptively now, instead of reactionary. Shipping routes and destinations can more accurately be planned along with the inventory that goes to each location. This inventory can be better planned because of past historical data that can be collected on the average amount of spoilage. Even though we are implementing these chips to prevent spoilage, we recognize that 100% of spoilage cannot be eliminated. This way, if necessary extra inventory can be added to an order placed in order to accurately fill that order upon arrival. Data collection can help regulate different products at different quantities due to the remotely controlled temperature boxes. Data will be collected on time and efficiency of loading and unloading the trucks, as well as how much that affects the temperature of each box. All the data will be accessible to both the company and industry wide in order to reduce waste and increase useable inventory rates. IoT will be able to use this information along with information from various other industries to make the food industry more efficient, and most importantly reduce waste.
Cost Analysis
The implementation of a new product into the field leads to large start-up costs causing the implementation to look bleak, but looking into the future, the benefits outweigh the costs. This segment estimates the costs for manufacturing and using the STIL chips on reusable crates for Shamrock Foods for the fish department. Although this was segmented for their fish department, the STIL chips can have a positive monetary impact in any industry. The first step we took was to run a S.W.O.T. analysis on the product to evaluate our STIL chip if we were to implement this today. S.W.O.T. stands for Strengths, weaknesses, opportunities and threats. The strengths of the STIL chip are efficiency, connectivity, cost saving, and it is a new technology. Connectivity is a strength for us because the chip will be physically attached to each crate of fish and can ensure each crate is kept at a reasonable temperature to create less waste. Efficiency is also a key strength because it saves time ultimately by sending alerts to the driver that the crates are getting too warm or too cold and they can adjust the temperature of the trucks. Going into the weaknesses, these would be costly initially, very similar to other products, and broken products or network. Other chips and RFID tags on products gauge different measurements, but none gauge just temperature, however companies may be drawn towards other products due to the versatility. Our biggest opportunity is to expand to other meat products and dairy to save those from spoiling too. The overall biggest threat to us is our new technology because it is fairly innovative and many companies do not risk jumping into new products very quickly.
Initially, we looked at the current system and how much money is going into the current system that could be going towards other resources. The cardboard boxes are not reusable that Shamrock Foods uses, and they are broken apart and thrown out by the recipient stores, therefore causing a need for more cardboard and more packing material. This is very costly for Shamrock as they need more boxes. Along with the boxes, Shamrock designates someone’s job to make and set up the boxes. These boxes then need to be stored somewhere, leaving less room for inventory. This is an aspect that our chips will greatly reduce and help not only minimize costs, but minimize wasted space. When trucks go out with their full truck loads, they will be going out with our crates, then coming back with the empty crates that the stores have been holding onto. These crates can be rinsed and reused again, saving the need to store crates and also create more. The biggest problem with the current state is that Shamrock ultimately throws out a portion of each delivery due to spoilage, and this is where the new product from Intel will benefit Shamrock. Instead of having wasted goods, all products will be delivered under the right temperatures, therefore having less waste, and also creating more revenue for your company, and in our case, Shamrock Foods. We estimated that for 25% of all product will be wasted due to spoilage. There are less fixed costs and costs in general with the already in use method, but also less profit due to no sales of our readers and crates. Without the STIL chips, a huge loss from spoilage causes the company to lose money rather than gain. The majority of this cost comes from the lost product, and our goal is to minimize this.
When Shamrock Foods initiates our product into their delivery system, it will be very costly at first. The product will take time to manufacture and we look to get it in the market by 2020. However, the long term benefits of less spoilage and less material cost will create a profit for Shamrock. Our readers cost $40 to make and need a $200 network in the trucks and a one-time installation network in the warehouse for $500. Depending on how many trucks the company has and how many crates they want to make will determine their initial costs. These costs will be a one-time cost however. That $4 a crate (how much it costs to make a crate) times 1,000 crates, for example, will only be a one-time fee. The hardware costs, installation costs, and the manufacturing costs are all a one time cost for Intel, while labor, sales and revenue all fluctuate based on the crates. We based our analysis on 1,000 crates, 20 trucks and one warehouse using one battery station. Given the sales prices of our products for the companies to purchase, a profit will come to Intel contingent on the number of crates and or trucks. After that, the crates and networks will generate profit for the company in gauging temperatures and alerting drivers to prevent spoilage of fish. The transportation costs would be the exact same because they are going the same routes. The positive of our STIL chip is that the trucks will be going home with the old crates the stores have held aside. They will not be going home empty. Another benefit of these crates is that they will not take up as much space in the warehouse as the cardboard boxes because they will not have to have a surplus of already made boxes. This will free up space in the warehouse for more inventory or other needs the company has. Instead of having an extra 2000 boxes ready to go, the company may have only 1000 crates as each truck that comes back to the warehouse will have more crates.
We ran this simulated product to see when the company would generate revenue. After factoring in everything, Intel will have an a large profit margin if more than these sales are made. After comparing side by side how the company would prosper with the STIL chips versus without, the company saves 50% of its money using our STIL chips, mainly from the amount of product that does not go to waste and from the inventory space in the warehouse. We looked at jumps in the number of trucks because the number of readers, crates, networks is all determined by the number of trucks Shamrock Foods has implemented. If they use 10 trucks or 100 trucks, the amount of money spent without the STIL chips is twice as much as it would be if they used this new Intel product. The chart to the left shows if all else stays the same, the profit from a change in demand of simply crates, showing by the 2550th crate, Intel makes a profit. This profit is given that labor, material, transportation and sales stay the same, but just the crate number changes. While factoring in the profits to Intel and the costs to manufacture, Intel will not see a profit at first, but will see a happy future based upon what is ordered by the companies.
Ultimately, by using reusable crates, our STIL chips and a network, any company will save money in regards to temperature-gauged foods. The investment in STIL chips sounds pricey with the networks and new materials in the crates and production of the chips, but for a company that loses a good amount of their product to spoilage, they can bounce back and worry less on the amount of money they’ll lose but on new ventures and other concerns for the business.
Branching Out
A STIL chip is a universal product that is not limited to fish at Shamrock Foods. STIL chips can branch out for Intel to any food company that worries about perishable goods, such as chocolates, dairy, and even flowers. The STIL chip is not limited to meats and will provide the same monetary gain for any company that faces spoilage. Our product focuses completely on the transportation aspect of moving goods. However, STIL chips can come in handy for companies looking to store as well. Once the products are delivered to the store, the STIL chips are no longer transmitting temperature data because they are not connected to the network of the truck. Companies may invest in using the STIL chips in their back rooms to gauge temperature within their own store to save money in that sense as well. Intel logistics for STIL chips would benefit from finding ways to create long-term bonds with their customers. This will be established through these additions in the STIL chip capabilities. Financially, these chips may be costly for 80% of a company’s products, but for that 20%, the company saves thousands of dollars in spoilage. The biggest areas to focus on are the delivery of the goods to the customers, and potentially long term, on the pallets in the stores themselves. When fish are on display, being able to gauge the temperature while on display will also save shoppers from purchasing bad products. For now with the capabilities and technology in IoT, the transport of the goods is of the biggest concern and has the best case to provide functional and financial comfort for not only the companies, but also Intel.
Conclusion
The marketplace is searching for how to minimize spoilage and how to pinpoint its cause, and STIL chips does exactly this. While hidden within Intel’s newly reusable crates, this product will provide stability to the fish market for Shamrock Foods, and any other perishable goods. This will minimize cost, but STIL chips will also help in the next step to solving world hunger by utilizing the goods already in circulation. The innovative and essential IoT technology will drive the food industry in due time with the implementation of a temperature tracking system that can not only judge temperature to ensure quality, but also location to ensure security. STIL chips are the evolution the food industry has been searching for. While they will not be in place for a few years, the industry has something to look forward to from Intel and its ever changing technological advances.