Thanksgiving 2018 And The Digital Supply Chain

Richard Howells

On the last Thursday in November, families throughout the U.S. will be sitting down to a traditional feast of turkey with all the trimmings. Yes, it’s Thanksgiving Day again – and while the holiday focuses on family, food, and giving thanks, a tremendous amount of commercial activity goes on behind the scene to make it happen.

According to one survey, the average consumer spent $165.14 on Thanksgiving tidings last year. You might think the biggest expense is food, but in fact, travel tops the list. More than 46.3 million Americans travel 50 miles or more to join their families, most by car. With Americans spending an average of $67.59 on Thanksgiving Day travel, this category grabs 41% of the spending pie.

Much of the remaining $97.55 goes to actual pies – or more broadly, food and drink. You might think turkey comes in first on this score, but it takes second place, with alcohol (perhaps not surprisingly) earning the top spot.

Turkeys and the digital supply chain

Of course, for most folks, turkey takes top billing when it comes to Thanksgiving. According to the survey, 52 million turkeys are consumed on Thanksgiving Day, at an average cost of $1.20 per pound.

This is big business. On a yearly basis, US producers raise 254 million turkeys, for a total value of $4.85 billion. But getting turkeys to tables on Thanksgiving Day posses more supply chain challenges than you may think. Unlike alcohol – which keeps quite well over time – turkeys are perishable, and suppliers find them difficult to stockpile.

Raising millions of turkeys in time for delivery on Thanksgiving Day is simply not feasible. The solution? Freeze them: Estimates show that 90% of the turkeys sold for Thanksgiving Day are frozen.

Surprisingly, though, these frozen turkeys often cost more to produce, warehouse, and deliver than their price at the grocery store reflects – which means many producers are actually losing money to accommodate their customers. With integrated business planning and digital supply chain technology, however, producers just might be able drive down costs enough to achieve profitability.

Inventory optimization

Suppose you’re a large producer serving customers on a regional or even national scale. One way to optimize your supply chain – for turkeys or anything else – is with multi-echelon inventory optimization (MEIO).

“The idea behind MEIO,” writes Martin Barkman in a recent blog, “is that inventory optimization at the individual warehouse level returns only limited advantage. With supply networks that include warehouses at the central, regional, and local levels,” you need a broader approach.

MEIO takes the entire supply network into account, allowing organizations to optimize inventory levels across all distribution centers with the help of IT. “Insights generated by advanced analytics such as machine learning,” Martin explains, “can help planners set target levels for individual warehouses while also gaining insights into the drivers of demand.”

Advanced logistics is key as well. To ensure that you have the right number of turkeys in the right place at the right time – at a cost that makes sense – you need to optimize delivery routes. With vehicle sensors and real-time analytics that take in vehicle location data and evaluate traffic patterns, you can optimize routes and get the most out of your logistics operations.

Another concern is to protect inventory in transit. In the case of frozen turkeys, one major challenge is to maintain the proper temperature in refrigerated trucks. With Internet of Things (IoT) technology, logistics teams can track temperature in real time and take action when issues are detected. Better yet, they can use predictive maintenance to avoid machine breakdowns in the first place.

Fresh is best

This same technology can be used to further maximize profits in one sector of the Thanksgiving Day turkey market that is highly profitable: fresh turkeys.

With food safety of paramount importance, the logistics of “fresh” are somewhat unforgiving. But with advanced data analytics that can optimize the farm-to-table route, companies can deliver more fresh turkeys at scale. IoT sensors can track safe temperatures, and blockchain technology can be used to track the chain of custody throughout the supply chain. This boosts consumers’ confidence that the food they’re serving on Thanksgiving Day is fresh and top-quality.

Happy holidays

Thanksgiving, of course, kicks off the Christmas season, when consumer spending dwarfs all other holidays. Stay tuned for more thoughts on how the digital supply chain can drive success for companies during this critical sales season. But for now, Happy Thanksgiving. Enjoy the day with family and friends.

Join an interactive session featuring Jeff Hojlo, Program Director, Product Innovation Strategies at IDC and Hans Thalbauer, Senior Vice President, Digital Supply Chain & Industry 4.0 at SAP to get inspired about how best-in-class companies are reinventing their supply chain – Register here.

About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.