Horizon 2020

The Next Generation Supply Chain Management Software in the European Food Industry – NexGenFSCM

Acronym: NexGenFSCM
Type of the action: SME Instrument Phase 2
Start date of the project: 1.7.2016
Duration of the project: 24 months
Read more on SME Instrument Phase 1

Background

Increasing food wastage is a global problem that has made the headlines more frequently recently as many organizations have started to pay attention to the magnitude of the problem – even third of all produced food is thrown away. The focus is often on the wastage created by households, but in fact a significant amount of food wastage is created in the supply chain – from manufacturers to distribution centers to regional warehouses to stores. Food retailers and wholesalers are constantly fighting against spoilage and high inventory levels. Spoilage is high in food supply chain because of the short shelf-lives of products. Without accurate forecasts the risk is high for either excess ordering which leads to spoilage, or deficit ordering which leads to out-of-stock situation and lost sales. An average grocery retailer writes off goods worth 2-5% of its turnover, meaning that billions of euros are thrown away every year, just by retailers. In addition to the financial impacts, the environmental effects are massive.

Based on the feasibility study conducted in the SME Instrument Phase 1 project (Spoilage Down), RELEX has revised its strategy and has decided to focus on food retail and wholesale sector. RELEX’s disruptive in-memory technology has the biggest competitive advantage in food retail and wholesale sector due to the large size and complex nature of the businesses. Furthermore, RELEX has estimated that the business potential for supply chain management solutions in this sector is substantial – the annual market potential is estimated to be 420 million euros in Europe and approximately 1,2 billion euros globally.

Objectives and expected results

The overall objective of the innovation project is to increase the efficiency and reduce the spoilage of the food value chain companies (food retailers and wholesalers) by further developing RELEX in-memory solution that from a scalability perspective is possible to quickly and cost efficiently implement to the customers. The goal is to have a set of solutions that are fast to deploy across the entire industry. In addition to the performance leap that the solutions enable, with the new and improved forecasting methods food retailers and wholesalers will be able to produce better and more accurate forecasts that result in reduced inventory levels, increased sales and decreased spoilage.

As a financial result of the project, RELEX aims at generating additional annual turnover of 85 million euros from the food retail and wholesale sectors the by the end of 2020. This represents 20 % of the sector’s estimated market potential in Europe.

The specific objectives of the project are:

  • Implement a set of forecasting improvements that are extremely valuable for large food retailers, since forecast accuracy is the key indicator due to products having short shelf lives and high risk of spoilage
    • Key success criteria: Forecasting features for the solution enhanced with weather forecasting, regression forecasting with external data and cannibalization/halo effects forecasting.
  • Develop RELEX’s software architecture to support clustering for improved scalability (i.e. one RELEX instance utilizing multiple servers or cloud environment).
    • Key success criteria: Support of larger customer environments enabled via the use of multiple servers and cloud infrastructure to allow more efficient use of computing resources.
  • Develop sales model for commercialization of the innovation first in Europe and the US, and later globally
    • Key success criteria: New sales model verified to be easily adoptable and cost efficient in RELEX’s operations globally
  • Implement, demonstrate and validate the business case of the new product functionalities with pilot customers and update RELEX’s business plan
    • Key success criteria: Pilot customers ready to acquire the commercialized version of the solution and interested in continuing the development in collaboration with RELEX
  • Create and implement a new IPR strategy that supports RELEX’s growth and protects RELEX’s key intellectual property rights
    • Key success criteria: New IPR strategy and related processes adopted across RELEX organization during the project

Work package descriptions

The project has been divided into six tasks.

The objective of work package 1 is to implement a set of forecasting improvements that are considered vital for serving large food retailers well. Due to short shelf-lives and high risk of spoilage, forecast accuracy is a key metric in this sector, meaning that the forecast must take into account factors such as weather or cannibalization.

While wp 1 is underway work package 2 is meant to kick off nine months after wp 1 and has the objective of developing the RELEX software architecture to support clustering for improved scalability (i.e. one RELEX instance utilising multiple servers or cloud environment).

Work package 3 should lead to the creation of a solid foundation for commercialization of the innovation and fast growth first in Europe and later globally. The current markets include Finland, Sweden, Norway, Germany, Denmark and the UK. The new markets are the US, Italy, the Netherlands, Poland, Spain and France.

The next work package (4) focuses on RELEX’s IPR strategy development and implementation. Currently RELEX has one pending patent application. In addition to patents, the current state analysis covers trademarks, domain names, other copyrighted materials as well as potential inventions that are not currently protected. Based on the analysis the objective is to create and implement a strategy that supports RELEX’s growth and protects RELEX’s key intellectual property rights.

Throughout the project RELEX will coordinate and manage the different work packages in an efficient way. The objective of work package 5 is to track the financial progress and prepare financial reports, as well as preparing interim and final reports of key results.

The last work package (6) consists of disseminating and communicating information and results of the project to stakeholders, industry players and general public throughout the project.