Food waste is a plague, for both the planet and distributors costs. How can distributors reduce food waste through supply chain optimisation? Find out now.
In 2024, the UN published its latest Food Waste report that painted an alarming picture of the scale of food losses and waste across the world, with 1.05 billion tons of food products squandered in 2022, generating 8% to 10% of global greenhouse gas emissions. These hard-hitting figures shed light on the critical need to change our consumption behaviour and how we manage resources.
At a time when environmental issues have never been higher on the priority list, urgent action must be taken to shrink our carbon footprint. Adopting practices that respect our ecosystems not only mitigates our impact on the environment, but also align with international sustainable development goals.
How can the supply chain, the backbone of our world's economic activities, drive a change in practices and turn the tide in the fight against food waste?
Ever since the Paris Agreement was signed during the COP 21 summit in 2015, the world has seen a rise in the number of pledges to build a greener and more sustainable planet. As growing geopolitical issues continue ratcheting up tensions in the social and economic climate, and technological boundaries are pushed with increasing speed, while inflation lingers and profit margins erode, sustainability and optimisation have become top priorities. These challenges are no longer restricted to companies, but are now influencing individual behaviour within society.
Uncontrolled consumption practices among individuals and businesses alike are causing food waste to spiral to unprecedented levels. In an all-out effort to prevent empty shelves (and irritated consumers), the agri-food and retail industries have focused on a policy of excessive purchasing and overproduction. When it comes to perishable food products, this policy naturally leads to surpluses that end up in the bin. In fact, the UN Food Waste Index Report shows that the retail sector is responsible for about 12% of global food waste.
By 2030, food loss and waste could reach an alarming cost of $1.5 trillion worldwide, according to estimates by BCG. In addition to the environmental impact, this equates to a massive loss of earnings for both industry professionals and retailers. Approximately 40% of food products are lost before they even hit store shelves, and poor inventory management practices are the main culprit.
Fortunately, technological and strategic resources are available to address this situation by improving companies' supply chains and drastically reducing food waste.
This optimisation strategy to reduce food waste harbours a wealth of opportunities for logistics.
Action can be taken inbound of the supply chain by optimising the ERP (Enterprise Resource Planning) solutions used, which play a key role in providing accurate forecasts about where demand is heading. Forecasting capabilities can achieve a considerable fall in food waste by helping avoid the overstocking issues that happen when retailers order too many products that are likely to go unsold.
There can be no denying that forecasts play an important role, but they fall short when it comes to clearing products before their use-by date. However, inventory management offers a tremendous opportunity for reducing food waste. Order management systems (OMS) can have a major effect by providing visibility into the organisation's stock levels in real time, including its "virtual" inventory. OMSs dynamically adjust the range of products shown to consumers to accurately reflect the company's actual inventory levels, which avoids lost sales and maximises the chances of selling the products in stock. For example, if customers require a delivery within three days, these systems can display products that could potentially be out of stock when customers place their order, but which will be replenished before the expected delivery date.
Some OMSs are capable of taking inventory management performance even higher by automatically replenishing stores, which cuts down on their safety stock and promotes smaller, but more frequent orders by better adapting to actual demand. When picking orders in the store and in case of a missing product, guiding workers with substituting products is another effective way of curbing waste. Guiding them towards the best possible product alternative ensures that customers are offered quality products that meet their expectations, and therefore don't end up in the garbage can.
In addition, consumers are mindful of sustainable development issues and are increasingly willing to accept stockouts. Retailers need to embrace this change in behaviour. One example that deserves a mention is the Intermarché French supermarket chain, which deliberately put fewer products on store shelves in the summer of 2024 in certain areas where demand typically falls during this period.
Whereas an OMS provides real-time insights into the available stock, Warehouse Management Systems (WMS) are key for keeping better track of the physical inventory levels in warehouses (or stores, where necessary) and thereby reinforcing product traceability. These systems minimise losses where, for instance, products are forgotten in a corner of the warehouse and then found after their use-by date has elapsed.
By improving global traceability across the entire value chain, companies can also fine-tune their recall policies to eliminate the risk of having to throw away perfectly safe products alongside contaminated products in the interests of safety, because of poor traceability practices.
Solutions are also available for automating processes within the supply chain. Reducing errors can ramp up overall operational efficiency, while supporting the company's sustainability goals. In the case of picking food orders, automation can affect the amount of household waste. For example, if consumers receive an item that they did not order, they might eat it if they happen to like that product, but there is every likelihood that it will end up in the bin.
Automation does not necessarily mean replacing humans with machines, but primarily involves providing tools to help supply chain stakeholders. In-store picking solutions are a prime example, since they are particularly effective at assisting order pickers. As we have seen, they can support a company's product substitution policy, but also prevent breaches in the cold chain by improving picking paths and guiding employees in placing products in the right areas or containers - and much more.
Effectively streamlining the supply chain could potentially reduce food waste by several tens of millions of tons a year on a global scale. However, improvements must be backed through concerted efforts at every level of the food supply chain to turn this ambitious objective into a reality. Sustainable development goal 12.3, which aims to halve food waste by 2030, requires stakeholders to work closely together and adopt innovative and sustainable practices for managing supply chains.
Retailers can take action beyond their own boundaries if they work alongside their suppliers, such as by improving their global replenishment or transport processes. Similarly, they can guide consumers (who are responsible for 60% of all food waste according to UNEP) in adopting the right behaviour by setting up anti-waste initiatives that actually meet consumers' expectations. According to research, 65% of consumers look for products that can help them live a more sustainable and socially responsible life.
In addition to optimising supply chain and order preparation, it is also possible to act on the products offering to maximise sales of products whose use-by date (UBD) is approaching. This proactive approach not only helps prevent waste by offering products to interested consumers, but also significantly reduces the food waste generated in stores.
As with any e-commerce site, grocery distributors’ websites make a point of recommending certain products to their customers when they create their shopping baskets. This lever can be used to prioritise the promotion of products that are approaching their use-by date, to maximise their chances of being sold on time. This approach can be adopted if the underlying OMS is able to manage the products' use-by dates, by feeding them into the website's recommendation engine.
Of course, these recommendations must remain in line with the brand's sales promise: a customer who only receives products with a relatively short use-by date may be unhappy. Precaution is key, which requires a high degree of granularity in the rules of the OMS and recommendation engines.
We're all familiar with “short-date” aisles in stores: a bin or part of an aisle containing products whose use-by date is very close, offered on special price to facilitate stock clearance and limit waste. Why not transpose this principle to the e-commerce site, by creating a “virtual aisle” dedicated to short-dated products?
This involves creating a “sub-stock” within the stock associated with a product reference, and therefore with the same barcode. Concretely, of the 10 family-size white chocolate Magnum products in stock, if 2 are short-dated, the OMS must be able to show the availability of the 10 products in the “ice cream” category on the one hand, and the 2 short-dated products in the dedicated “short-date” category on the other. If the latter are sold, the overall stock must be adapted to show only 8 products available. An advanced OMS with a high level of granularity is therefore required.
A third approach consists in bringing together several products with short use-by dates in a pre-packaged basket, offered at a discounted price. This is the principle behind the Too Good To Go app, but distributors can also implement this initiative within their own strategy: this is what the French Casino Group has done.
The group adapted its OMS to identify products approaching their use-by date in real time and then sell them as "anti-waste" baskets that customers can reserve online.
Ever since the Casino Group put its idea into action, its stores have managed to save tens of thousands of kilograms of edible food from winding up in the skip. This initiative has enabled the group's stores to go further in embracing sustainable and ethical practices, making an active contribution to cutting down on food waste, and stepping up their commitment to sustainability and social responsibility. Find out more by reading the Casino case study.
Ultimately, all stakeholders would like to see a reduction in food waste, and they all have a role to play. If retailers take tangible action across their supply chain and also throughout the rest of their ecosystem, they can drastically shrink their impact in this area while saving money... and improving their brand image through effective communication about their efforts.
Kbrw is actively committed to promoting sustainability. Our customers can harness our Order Management System and Warehouse Management System solutions to optimise their supply chain and raise the bar on their operational efficiency, while reducing their food loss and waste.
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