When Silos Connect: Tackling Food Waste Throughout the Supply Chain
Lost food equals lost revenue. U.S. grocery retailers alone waste an estimated $18 billion of food every year — which is double the industry's profits. And in the nation's $10 trillion market, one-third of food is wasted before it ever reaches the consumer.
"Most companies in the food supply chain do not have big bottom lines, they have razor thin margins," says Are Traasdahl, CEO of Crisp. "So they see a huge business potential in lowering waste."
While the economic impact of wasted food is bad, the environmental impact may be even worse: it translates to wasted energy, depleted soil and the rotting food that makes up 20% of U.S. landfills.
The following article is based on a discussion between Traasdahl and Philip Behn, CEO of Imperfect Foods, a service that reduces waste by delivering unwanted food (both "ugly" and normal-looking surplus) to consumers at attractive prices. Their focus is understanding how businesses can reduce food waste throughout the supply chain.
Where's the Waste? Knowing where food waste hides can help us tackle the issue more effectively. We all know that consumers toss a lot of perfectly edible food into the trash, but what other points along the food supply chain are contributing to the problem?
On the Farm: Overproduction and "Ugly" Food. When farmers don't know how much food they'll need to supply producers and retailers, they often overproduce just to be sure they're covered. Not to mention, retailers turn down produce that's an odd shape or size, leaving the farmer with unsellable food.
Imperfect Foods helps with the latter problem by saving good food that's destined for the trash just because it isn't pretty. "It's not uncommon for farms to call us before tilling a field of imperfect produce after their grocery partners turned down their supply due to unusual shapes and sizes," says Behn. "We work with farmers to purchase their supply at a fair rate so that they can avoid writing it off as a loss."
During Storage & Transport: Lack of Visibility. About a third of produce world-wide is thrown away because its quality has declined below an acceptable limit, according to a study in the journal Philosophical Transactions of the Royal Society.
A first-expired-first-out (FEFO) solution would ensure that stock that's closer to the end of its shelf life is handled first. But, say the report's authors, "Owing to the lack of automated data capture and shelf life calculation systems to perform this task, FEFO has found very little practical application so far."
Between Producer and Retailer: Too Much Product. Like farms, manufacturers often overproduce when they don't know what the demand will be. Better to create too much than to not create enough and risk short shipping, losing out on shelf space, and disappointing loyal customers.
At Consumer-Facing Businesses: Unpredictable Needs. Consumer demand can be unpredictable in the best of times. The COVID-19 situation has made it even worse, saddling many businesses with food they can never use. "Over the past two months, we’ve rescued cheese trays from major airlines, popcorn kernels meant for movie theaters, and even meat meant for the Houston Livestock Show and Rodeo," says Behn. This area of the food supply chain accounts for more than 80 percent of total food waste.
Not to mention, retailers and other consumer-facing businesses reject foods that are unfamiliar to consumers. For example, Imperfect Foods points out that nutritious broccoli leaves are left in the field because people don't know how to use them.
Complexity Leads to Waste. We're a part of what might be the world's most complex industry. "There are over 200,000 companies trading with each other, plus 3.7 million farms and 45,000 grocery stores," says Traasdahl. "It's not an easy structure."
Add on factors like unpredictable weather, shifts in the industry like the move to home delivery, and store promotions that impact consumer behavior, and we have the perfect recipe for confusion — and wasted food by the ton.
Here’s how we can make it happen:
Education: Stopping Food Waste at Home. Thanks to confusing "best by," "sell by," and "use by" labels, Americans throw away around $29 billion of safe food every year. To help fix this problem, producers and retailers could create a campaign to educate consumers on what the labels mean, when a food is still safe to eat, and when it really needs to be thrown away.
"We use our platforms, especially our blog and social media, to educate our community on how to make the most of their Imperfect boxes," says Behn. "For many, it's as simple as explaining how far your food and 'scraps' can really go."
Communication: Sharing Data for Better Predictions. Communicating and sharing between trading partners enables better decision making — which in turn leads to less food wasted. "At Imperfect Foods, we're in constant communication with our suppliers and food purveyors, who provide us with insight into pending shifts in inventory," says Behn. "The insight from our partners, and our direct and nimble supply chain, allows us to capture potential waste quickly."
First we need to enable collaboration between direct partners in the food chain, says Traasdahl, and then expand to sharing data with the industry as a whole. "We can aggregate and share with others the macro trends that are influencing the entire industry," he says. "For instance, we all know people are making a lot more food at home. What does that mean? What products are in increasing demand at the grocery store?"
So, what data can businesses share to help fight food waste? Here are just a few types:
- Pricing information and shifts that affect buyer behavior, like advertising and marketing campaigns, sales, and buy-one-get-one offers.
- How much safety stock vendors want to keep.
- Historical data alongside real-time data to develop more accurate predictions.
The problem: Communication systems in the food supply chain are old, and most data is being shared using slow, error-prone peer-to-peer methods like emails, phone calls, and paper purchase orders.
Technology: Fighting Food Waste Through Clarity. The amount of data needed to make accurate predictions is way too much for humans to collect and process efficiently. The good news is that cloud technology, combined with machine learning and AI, can now do the job for us.
Our industry has been slow to adopt digital tools like these, but the current COVID-19 crisis — which is highlighting areas for improvement in the food supply chain — may be the catalyst that finally gets food businesses on board with these solutions.
Even better news is that the food waste problem is solvable. For example, Imperfect Foods is already working with supply chain producers to better manage inventory so that items closest to their “best-by” date can be offloaded first. Says Behn, “Tools and technology like Crisp, which more effectively log and forecast this type of data, would benefit the fight against food waste in an impactful way."