Food waste is a critical global issue that affects our environment and exacerbates hunger and food insecurity. It is alarming how much edible food is lost or disposed of each year. This waste squanders valuable resources, contributes to climate change, and has far-reaching consequences.
What Is Food Waste and How Does It Differ From Food Loss?
It is crucial to differentiate between food loss and food waste, as they occur at different stages of the supply chain and pose distinct challenges.
Food loss refers to the reduction in edible food mass during production, post-harvest, and processing stages, and it is more common in developing countries. Food waste refers to the disposal of edible food at the retail and consumer levels, and it is more prevalent in industrialized nations.
While many people are aware of the food loss & waste problems, few people realize the scale of the issue. Approximately 1.6 billion tons of food was lost or wasted in 2021, which accounts for one-third of global food production and represents $1.2 trillion in squandered value.
Taking into account the average density of food, you could build one thousand Pyramids of Giza, which would be enough to cover the entire island of Manhattan!
Meanwhile, more than 840 million people are undernourished today –10% of the global population– and 1.6 billion tons of food could, in theory, feed them 5 times over.
On top of the substantial amount of energy spent on discarded food at every level of the supply chain, waste often ends up in landfills, where it releases large amounts of methane which is 25 times more potent than carbon dioxide at trapping heat in the atmosphere, making it one of the worst greenhouse gasses.
If food loss & waste was a country, it would be the 3rd largest greenhouse gas emitter in the world behind China and the United States!
That makes food loss & food waste not only a financial disaster but a humanitarian and ecological one. There is no upside to the current situation, and any improvement regarding food loss & waste would result in positive ripple effects on both world hunger and the environment.
A Breakdown of Where and How Loss & Waste Occurs
The complexity of supply chains contributes to food waste and loss occurring at its various stages. According to a BCG study from 2020:
- The greatest share of food loss occurs at the first stage –the production level– pre and post-harvest, where 13% of the produce will be lost. High-income countries tend to experience overproduction, while low to middle-income nations face premature harvests as a common cause.
- Then, 6% of the produce will be lost in storage, handling, and transportation. Technology is especially important at this stage, given the need to keep perishable foods fresh and animals alive in transit. Loss at this stage is more common in developing countries because of the lack of technological infrastructure.
- The processing and packaging stages contribute to a 1% loss. Discriminatory sorting for fresh produce (mostly vegetables and fruits, wasted just because they do not match a certain shape or color standard while being perfectly edible), as well as substandard industrial processes (processing and packaging), are responsible for this loss.
- An additional 6% will be wasted at the distribution and retail level. Stringent health regulations, aesthetic concerns, and purposeful overstock are the primary causes in higher-income countries, while lack of temperature control in certain markets is the most common factor in lower-income countries.
- Finally, 8% will be wasted at the consumer level. That is often the result of over-purchasing and discarding leftovers. Promotional activities from retailers can be a factor in this, encouraging shoppers to buy more than they will likely consume, but a myriad of other factors also come into play.
The Key Drivers of the Problem
The very same BCG study identifies the following key drivers of the issue of food waste and loss:
- Supply Chain Infrastructure – Significant amounts of food are lost because they spoil before reaching the markets and consumers due to insufficient infrastructure.
- Supply Chain Efficiency – To address food waste, it is crucial to create incentives, processes, and structures that prevent it from occurring in the first place.
- Collaboration – A lack of coordination among stakeholders along the value chain, especially between raw material producers and processors, leads to inefficiency, loss, and waste.
- Policy Environment – The disposal of food is currently inexpensive and convenient. Generally, existing regulatory and tax policies do not impose penalties on companies and consumers for the waste they generate.
- Awareness – There is a lack of understanding regarding the extent of food loss and waste, as well as the underlying factors contributing to the problem.
An Intelligent Supply Chain Planning Platform for Reducing Food Loss & Waste
At Solvoyo, we are proud to enable companies to tackle 3 of these 5 drivers: Supply Chain Infrastructure, Supply Chain Efficiency, and Collaboration. We also hope that this blog contributes to Awareness as well.
We offer an array of off-the-shelf solutions that enable fresh retailers and grocers to have a direct positive impact on the issue:
- Forecast Automation for Perishables: Fresh Produce and Seasonal Items
- Advanced forecasting methods, automatic classification, and lifecycle modeling to address demand patterns unique to perishable products.
- Waste Management in Inventory Planning and Pricing
- Inventory planning takes into account expiration dates by batch and waste simulation. Solvoyo’s stockout and waste tradeoff analysis allows our clients to make informed data-driven inventory investment, purchasing, and markdown decisions.
- Smart Replenishment and Allocation with Optimization
- Optimal replenishment plans and allocations based on real-time data are subject to operational constraints and shelf-life considerations.
- Transportation Planning with Special Requirements
- Working with constraints of refrigerated transportation assets, for both trucks with temperature-controlled compartments, and LTL with maximum transport duration, using multiple objectives that include minimization of waste, cost, and carbon footprint.
- Network Design and Flow Optimization for Changing Sourcing Options
- Digital Twin with optimization working around changing parameters and scenario comparison to optimize multiple objectives with constraints
You may notice a trend with these solutions; they all address the problem of food waste and empower your business to take immediate action. This in turn helps the environment and allows your company to measure its ROI explicitly, as outlined in Deloitte’s latest Fresh Analytics report.
Without appropriate measures and technologies, curbing the food loss & waste issue is an insurmountable task. The progress made in the last decades when it comes to big data and predictive analytics should be regarded as indispensable tools to tackle food loss and waste.
