Company tames flower loss by shortening supply chain

 

Flower customers loose upto $100million due to poor temperature control along supply chains, with Kenyan flowers being among the worst hit by long supply chain aftermaths. However one company is reversing this sorry state of affairs.

The value of Africa’s cut flower sales to Europe amounts to some $500m – but about 20 percent of the value is wasted through poor temperature control along supply chains.

“One quarter of the shipments from Kenya may arrive at 25? – and the difference between arriving at 6? and 25? can equate to about 25% of the value of a flower,” said Jeroen van der Hulst, managing director of FlowerWatch, an organisation dedicated to ensuring quality through the supply chain. “The grower or the retailer loses that money.”

Where African growers used to buy transport to send their products for sale in Europe at markets such as FloraHolland’s Aalsmeer Flower Auction, it is now the retailers who order the flowers directly and pay for transport costs. And they are active at all points in the chain.
“Where we traditionally have dealt with the forwarder, we are now dealing with the retailer,” said Pieter Fopma, director fresh logistics for Martinair. “They say they expect us to work with the forwarder and handler to improve standards.”

Bama Gruupen, Norway’s largest private distributor of fruit and vegetables, is trying to increase supply chain efficiency by working with the grower and all parties in the supply chain to ensure a longer shelf life and lower logistics costs. “The retailers are pushing more and more for better flowers,” said Harry van der Plas, CEO, Total Touch Cargo, a specialist flower and vegetable freight forwarder. “They want the savings on it. It’s now the retailers buying flowers direct from the grower, and they are buying air freight. It’s gone from a push to a pull model,” he added.

The demand for cut flowers has risen dramatically in recent years, with major retailers such as Tesco seeing 10-fold growth in sales in the last seven years, added Mr van der Hulst. Retailers in the UK, Switzerland and Scandinavia are already pushing this model, and other countries are likely to follow suit, he thought.
Mr van der Plas noted that the shift could see fewer flowers sold at auction, where extra handling and repacking could further jeopardise the quality of the flowers; only 40% of Kenyan flowers now go to auction instead of directly to the retailer. “If auctions were adding value, they would still be used, but they are not,” he said.

However, there are still large parts of the supply chain where flowers are at risk – particularly in Kenya. The palletisation process is the most critical link in the chain – if flowers are not kept cool at that point, as living things, their temperature can naturally increase inside the hold. They then need to be rehydrated, adding an extra 20 cents per kilo in cost – an additional charge retailers are keen to lose. “Now only about 10% of the product is lost, but that can only function when airlines and forwarders protect the supply chain,” explained Mr van der Hulst.

Karel Swings, managing director of Total Touch in Nairobi, said that there had been little investment by exporters. “One of the largest exporters of flowers has one of the poorest cold chain facilities.” Mr van der Hulst added that there are currently no standards, and that few participants had accurate information relating to the treatment of flowers. “You hear of airlines talking about their temperature control – but 60% don’t have it at the right setting. No one has set any standards, which is what we are trying to do.”

However, with typically poor yields for the transport of perishables goods, airlines are unlikely to want to invest significant amounts into the business, and would prefer to pass on the bill to the driver of the change, the retailer. But despite the high costs of air freight, there has been little modal shift.

In Ecuador, an increasingly large perishables exporter, just 2 to 3% of flowers are moved by sea freight, although this is expected to change. Retailers tried first with carnations, a hardy flower which copes well with lengthy journeys, and have begun to try with roses, one of the most vulnerable flowers. Mr van der Hulst noted that so far about 100 shipments have taken the three-week journey by sea. “It can be as good as air freight,” he said. “The problem is that the growers are not quite ready for it.”

He added that Kenyan flowers were less likely to travel by sea. “The shipping lines are there, but there are too many connections and it takes too long. There are few other exports from Kenya by sea, so there is not enough demand. It will be years before it happens – unless someone buys a ship to set up a direct connection.”