The United Kingdom Market Potential for Fresh Fruit and Vegetables Assignment

Assignment Task

Background

FruityFresh are a UK supplier of fresh fruit. They import fruit from Spain and supply and deliver it to the major UK supermarkets. Their product range consists mainly of soft fruits such as peaches, plums and apricots in the summer months and oranges, persimmon and pineapples in the winter months. Individual product lines include mass market “value” products and higher quality “ripe and ready” and “single orchard” products which have more niche demand. They aim to provide excellent customer service to their customers focussing on the quality and freshness of their products.

Currently, FruityFresh import fruit from a range of trusted suppliers in Spain to the FruityFresh warehouse in Kings Lynn. In the warehouse the product is checked, processed, and sorted into orders for shipping to retailer warehouses. For many years, the majority of fruit handled at the Kings Lynn facility was processed. This included various operations focused on repacking and labelling fruit products to meet specific consumer packaging requirements as specified by, FruityFresh’s customers, the individual supermarkets. In more recent times, the amount of repackaging required has reduced significantly, with many products now packed and labelled at source in Spain. This means that for many products the Kings Lynn factory has become a transhipping location only. FruityFresh acknowledges that this now constitutes significant, probably unnecessary, double handling, which is reducing available shelf life for the end consumer and increasing the cost of the operation. FruityFresh and would like to investigate the possibility of shipping at least some product direct from Spain to their customers.

The Transportation Process

FruityFresh’s ordering and transport process is driven by customer orders but constrained by the harvesting programme in Spain. Customer orders are received from retailers 24 hours before delivery. However, the harvest programme has to be planned one week prior to delivery, introducing a very obvious lead time gap and reliance on the quality of FruityFresh’s forecasting. The accuracy of the forecast is fundamental to the business, but on a day-to-day basis, the forecast can never be 100?curate. This means that the actual order placed by the customer may be more or less than the forecast for the same day. To meet actual sales, the forecasted order may be supplemented by buffer stock held in the Kings Lynn warehouse, alternatively excess forecast product not required to meet the sales order will need to go into stock at Kings Lynn. The commercial relationship that FruityFresh has with its customers requires that no over or under deliveries are made. These operational constraints mean that it will be impossible to meet 100% of customer orders direct from Spain. If direct delivery is to be incorporated into the FruityFresh operation it will have to be balanced with some indirect transport.

The Problem

FruityFresh needs to determine what proportion of deliveries should be shipped direct to the customer and how much should be shipped using the indirect route via their warehouse. This is likely to be dependent on product demand characteristics and therefore may be individual for each product. In addition, a buffer stock at the warehouse will need to be maintained to ensure that all orders can be met, FruityFresh needs to understand how big this should be.

FruityFresh are aware that the demand for their products is extremely variable on a day-to-day basis and the forecasts and demand data bear this out. This is typical of demand for fresh products across the sector and is an industry wide challenge. Hence, FruityFresh would like to carry out a pilot study to assess the feasibility of carrying out a combined direct and indirect transportation operation going forward. Monte Carlo simulation provides an ideal tool for assessing the impact of this variability on FruityFresh’s transportation plans. To do this, they have identified one key customer and three products with varied demand characteristics on which to carry out a feasibility study. It is your task to carry out this simulation study. 

Your task is to carry out this simulation study to inform FruityFresh’s transport strategy going forward. To do this you need to:

• Use the information provided to adapt the deterministic model to incorporate Direct to the customer as well as Indirect (via Kings Lynn warehouse) delivery for the three pilot products.
• Convert the deterministic model to a Monte Carlo simulation using
• Run the model using Risk and RiskOptimizer as required, for an appropriate number of iterations – remember to consider the accuracy and validity of your results.
• Collect a set of relevant model outputs and carry out a comparative analysis of your results.

Your overall aim is to make the following recommendations:

• What proportion of each product should be delivered direct to the customer and what should be delivered via the Kings Lynn warehouse?
• How should buffer stock for each product be managed to ensure that all customer demand is met but no more?
• What savings can be made compared to the current operation?
• Based on your analysis what will FruityFresh need to consider in order to implement mixed Direct and Indirect delivery to their customers?

You are also required to submit one Excel workbook containing your working model/s and tabulated results. Marks will be awarded based on the model efficiency and ease of use of your simulation (i.e. the model must be user-friendly, easy to understand and simple to run – you should consider that the model you are building is a decision support tool that could be used by FruityFresh staff to plan and manage customer delivery going forward).

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