Retailers Need To Take A Holistic Approach To Address The Underlying Causes Of Food Waste
Following the recent release of WRAP’s food waste reduction roadmap, Guy Cuthbert, CEO at Atheon Analytics, discusses why it’s important for retailers to take a holistic approach to address the underlying causes of waste – including poor forecasting, oversupply and ineffective markdown practices:
The food waste reduction road-map presented by WRAP provides a robust framework for retailers and suppliers to measure, report and focus attention on reducing unsold food waste. This is a welcome and positive step, but retailers need to take a more holistic approach to addressing the underlying causes of waste – namely poor forecasting, oversupply and ineffective markdown practices.
For many retailers, understanding the true cost of waste, and the drivers which impact it can still prove complex, time-consuming and opaque; focus on waste alone and availability starts to drop resulting in a focus on availability… and a seemingly mysterious rise in waste. Best-in-class grocery retailers recognise that waste and availability form a delicate balance and adjustments need to be subtle, detailed and specific; broad-brush attacks on either present more problems than they solve.
Many retailers still rely on disconnected data silos feeding tabular reports and spreadsheets to inform their decision-making. Whilst all grocery retailers can readily determine the cost of waste and markdown as a percentage of sales, and most set subcategory waste budgets and measure waste against them, the ability to track waste cost by product – and its impact on each product’s gross margin – remains unobtainable.
Subsequently, retailers get caught in a cycle whereby they positively affect either availability or waste but prompt an adverse effect on the other. The key is to find a balance between improving product availability and reducing waste.
In order to get this right, retailers need to take a more detailed approach; modelling and measuring individual products in individual stores. Modern range management techniques account for waste and markdown in the commercial return that each product makes; attempting to solve this at a category or sub-category level results in sweeping ‘solutions’ which don’t deliver results when implemented.
One of the major challenges lies in understanding how to deal with the vast amounts of data required to identify primary waste drivers; case size, shelf life, promotional patterns, local shopper behaviour, price architecture all influence the “ability to sell” (the number of cases sold within code life). Occasionally, the answer to addressing waste is simple – reducing the price, changing the case size or removing the promotional cycle may work right across the business. In most cases, however, the answer is to tailor range more subtly and change product distribution, carry two case sizes or adopt a more just-in-time markdown process.
Embracing modern technology, retailers can find solutions in a blend of machine learning and data visualisation to create guided visual analytics tools which point the way. Their ability to present macro and micro details in context, and highlight sub-par performance in specific stores, regions, items and product groups makes them a powerful tool for matching supply with demand – improving both availability and waste in tandem. Once armed with appropriate reporting and analytics, better-informed decisions become a matter of course.
There are many innovative ideas around reducing waste, from improved packaging to diversion from landfill, but retailers and suppliers need to maintain profitability using all the tools and techniques available to them to change traditional lines of thought. Rather than taking a long-lead approach, with sweeping company-wide initiatives, retailers should be more agile, identifying key areas where multiple smaller incremental improvements can be made to drive commercial value from best-practice waste and availability control.