Reducing Food Waste in future Retail. Trends and Implications for Operations Strategy


Master's Thesis, 2020

66 Pages, Grade: 1,0


Excerpt

Table of Contents

Acknowledgements

List of Abbreviations

Executive Summary / Abstract

Table of Contents

List of Figures

1. Introduction

2. Theoretical background & problem definition

3. Literature review: Retail food waste
3.1 Scale
3.2 Root causes
3.3 Solutions
3.3.1 Overarching concepts
3.3.2 Product & packaging
3.3.3 Logistics & supply chain efficiency
3.3.4 Marketing & consumer education
3.3.5 Redistribution & repurposing
3.4 Summary & outlook

4. Literature review: Future grocery retail operations
4.1 Overarching concepts
4.2 Trend 1: Omnichannel
4.3 Trend 2: Personalisation
4.4 Trend 3: Experience & technology in store

5. Conceptual model

6. Methodology
6.1 Research approach
6.2 Research design & process

7. Results
7.1 Omnichannel
7.1.1 Capacity
7.1.2 Supply Network
7.1.3 Process Technology
7.1.4 Development & Organisation
7.1.5 Other implications
7.1.6 Summary
7.2 Personalisation
7.2.1 Capacity
7.2.2 Supply Network
7.2.3 Process Technology
7.2.4 Development & Organisation
7.2.5 Summary
7.3 Experience & technology in store
7.3.1 Capacity
7.3.2 Supply Network
7.3.3 Process Technology
7.3.4 Development & Organisation
7.3.5 Summary

8. Discussion
8.1 Limitations & weaknesses

9. Conclusion & Outlook

References

Acknowledgements

I hereby declare that this submission is my own work and that, to the best of my knowledge and belief, it contains no material previously published or written by another person nor material which to a substantial extent has been accepted for the qualification of any other degree or diploma of a University or other institution of higher learning, except where due acknowledgement is made.

I would like to sincerely thank my supervisor, Professor Paul Cousins and industry expert Philippe Schuler, for their patient guidance, encouragement, and advice throughout the research process.

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

Executive Summary / Abstract

Food waste remains a major economic, environmental, and social challenge for different food supply chain actors. Grocery retailers play a central role in food waste mitigation due to their unique position next to producers and consumers. Root causes of retail food waste are manifold and complex but can be related to systemic operational mismatches between demand prediction and supply forecasting. Existing solutions and mitigation strategies mainly focus on today’s “brick-and-mortar” retail operation designs. Socio-economic environment and consumer habits constantly evolve with food retailers adapting operations strategies. This literature-based research explores the impact of future retail trends on retail-related food waste and provides risks and opportunities to inform retail operations strategy. Findings suggest that omnichannel business models, personalisation, experience shopping and in-store technology offer opportunities for food waste mitigation across waste-hierarchy destinations. Retail operation strategies should address increasing household responsibility and avoid food waste, shifting towards later consumption stages in food supply chains. Contributions are not empirically validated through primary data, but results may form the basis for further studies in future retail operations and/or retail food waste.

List of Figures

Figure 1.1 "Food loss and waste primarily occurs closer to the consumer in developed regions and closer to the farmer in developing regions” (Searchinger et al., 2018) using data from Gustavsson, Cederberg and Sonesson (2011)

Figure 3.3.1 Waste hierarchy adapted from Papargyropoulou et al. (2014)

Figure 4.2.1 “Characteristics and design parameters for back-end fulfilment and last mile distribution in omni-channel grocery retailing” (Hübner, Kuhn and Wollenburg, 2016)

Figure 4.2.2 E-grocery adoption across European markets (Statista based on Eurostat (2020) data)

Figure 4.2.3 Public interest in grocery delivery during coronavirus pandemic (Google Trends Public Data)

Figure 5.1 “Strategic reconciliation of market requirements with operations resources” (Slack and Lewis, 2017)

Figure 5.2 Operations strategy matrix (Slack and Lewis, 2017)

1 Introduction

Businesses are increasingly focusing on sustainability manifested by the triple-bottom-line of economic, environmental, and social goals. Factoring-in profit, people and planet to create shared value is considered a major driver for sustainable competitive advantage and innovation beyond Corporate Social Responsibility (CSR) (Nidumolu, Prahalad and Rangaswami, 2009; Porter and Kramer, 2011).

Food loss and waste today remains a global phenomenon playing against any sustainability aspirations of society. Every year, between one third and half of the world’s food production is not consumed – equivalent to 1.3 billion tonnes of edible food (Gustavsson, Cederberg and Sonesson, 2011). In the EU alone, estimates suggest 173kg of food is wasted per capita per year (Stenmarck et al., 2016).

There are inconsistencies in the scientific landscape concerning the definition of food loss and food waste. The Food and Agriculture Organization of the United Nations, FAO (2019) refers to “food loss” if the “decrease in the quantity or quality of food” is related to decision by actors and stages before goods reach retail, food services and consumers. “Food waste” is used for “food that is of good quality and fit for human consumption but that does not get consumed because it is discarded – either before or after it spoils” in later supply chain stages (Lipinski et al., 2013). It can be concluded that retailers “waste” food themselves but contribute to “food loss” upstream. In the literature, both terms are sometimes used interchangeably to describe the same materials which leave the food chain regardless of actor or stage.

The scale of the global food loss and waste (FLW) problem can be quantified along economic, environmental, and social dimensions.

FLW can be assessed in monetary terms to record costs and economic value, such as lost product sales . A UN assessment of the full costs of global food wastage suggests the problem to cause $1 trillion in economic costs per year, environmental costs of around $700 billion and social costs of approximately $900 billion (FAO, 2014). In the EU, two-thirds of the costs associated with food waste occur in households since they waste significantly more than other sectors and costs per ton of food wasted accumulate along the supply chain (Stenmarck et al., 2016).

The environmental dimension captures FLW in terms of natural resources and pollution footprint. Wasting food products inevitably means wasting all resources included therein, such as the water consumption in agriculture, energy, labour, fuel, electricity, cleared forest for cultivation land use, fertilisers, pesticides and many more. FLW’s environmental footprint can be quantified, e.g. in water used, land used or by greenhouse gas (GHG) emissions in CO2 equivalents. FAO (2013) estimates that every year, 1.4 billion hectares of land is used to produce food that is lost or wasted. This corresponds to almost 30% of the world's agricultural space and represents an area greater than the size of China. At the same time, FLW accounts for 4.4 Gigatons of CO2 equivalents every year, an equivalent to 8% of the total GHG emissions caused by human activity (FAO, 2015). If FLW was a country, it would be the third-largest greenhouse gas emitter after the US and China (FAO, 2013).

FLW’s social and ethical dimension refers to the unbearable situation that occurrence happens while large parts of the world population are in need. Resources are becoming scarce due to population growth or climate change effects and expenditure on food as a percentage of income remains high in developing countries. In 2018, about 820 million people were malnourished worldwide and in total, “2 billion people do not have regular access to safe, nutritious and sufficient food” (UN, 2018). Food insecurity is also prevalent in developed economies: In the EU, “33 million people cannot afford a quality meal (including meat, chicken, fish or vegetarian equivalent) every second day” (European Commission, 2018) and in the US, one in nine Americans is struggling with hunger (USDA, 2019). It is estimated that the nutritious value of food “lost, discarded and wasted can feed some 2 billion people, or more than double the number of undernourished in the world” (FAO, 2016).

FLW reduction contributes to solving some of the world’s most pressing issues, which is why the topic ranks high on the global political agenda requiring many stakeholders to act together. United Nations Sustainable Development Goal (SDG) Target 12 (“Ensure sustainable consumption and production patterns”) includes sub-target 12.3 related to food waste. It aims to “halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses by 2030” (UN, 2015).

Despite international consensus about the goal itself, progress and implementation are slow: National governments representing 50% of the world’s population have set explicit national targets to achieve SDG 12.3, but only 12% are systematically measuring FLW, and only 15% execute far-reaching reduction actions (Flanagan, Lipinski and Goodwin, 2019). Scholars like Lipinski et al. (2013) and Hanson (2017) state that the SDG needs further refinement to become actionable. Therefore, they provided guidance to policymakers and practitioners to monitor progress more effectively.

Measuring FLW is possible across different angles and units. One possibility for quantification is along the various food supply chain (FSC) stages. FSCs are heterogeneous and dynamic depending on many influencing factors, such as product categories, markets environments or distribution models. For the purpose of this work they are divided into five stages: (1) primary/agricultural production (harvest, slaughter, catch); (2) post-harvest, storage, handling, processing and packaging; (3) wholesale and logistics; (4) retail and distribution; and (5) consumption at the individual household level or through food services (FAO, 2019; Hegnsholt et al., 2018; Lipinski et al., 2013; Papargyropoulou et al., 2014; Stenmarck et al., 2016).

Depending on geographic conditions, FLW occurrence is distributed very differently along the FSC, as shown by FAO data in Figure 1.1. Gustavsson, Cederberg and Sonesson (2011) conclude that in developing countries, about 40% of loss occurs at stages (1) and (2), while in industrialised countries, 40% of waste is related to the last two stages (4) and (5).

However, estimating geographic differences by regions is challenging not only because of intra-regional diversity, but also because cultures have different definitions about which parts of the food are considered edible.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1.1 "Food loss and waste primarily occurs closer to the consumer in developed regions and closer to the farmer in developing regions” (Searchinger et al., 2018) using data from Gustavsson, Cederberg and Sonesson (2011)

This work focuses on FLW caused by retail either directly or indirectly. This FSC stage is responsible for 5-8% of food waste in selected European countries, (Lebersorger and Schneider, 2014) and for ca. 13% in the United States (ReFED, 2016).

The most common product categories in FLW are fresh, perishable items with limited shelf-lives rather than ambient, shelf-stable goods. Shelf-life refers to the time products maintain their quality and remain safe to be consumed. In many cases, the term corresponds to the time between production and use-by date (Jedermann et al., 2014).

Despite retailers’ low direct food waste relevance compared to other FSC stages, the sector plays a central role due to its unique position at the balancing interface between production (supply) and consumption (demand). It, therefore, substantially influences household food waste and food loss upstream (Cicatiello et al., 2017; Dreyer et al., 2019).

Retail food waste has recently gained public interest due to the global outbreak of the coronavirus (COVID-19) pandemic. Measures to restrict the proliferation of the virus have led to immense pressure on food systems and amplified existing weaknesses therein. Grocery retailers had to deal with strong shifts in demand patterns when food services, restaurants and cafés were forced to close, and occasional bulk-buying led to empty shelves in supermarkets as worried customers bought unforeseen quantities (Eley and Hancock, 2020; Teichmann, 2020). At the same time, food loss dramatically increased upstream. Farmers were unable to harvest produce due to travel restrictions hindering season workers from crossing borders. Ultimately, in the UK, charitable food redistribution almost doubled during lockdown (Smithers, 2020).

The supply and demand disruptions showed that today’s global FSCs are fragile and lack resilience. The exogenous shocks demonstrated food systems’ vulnerabilities and acted as catalysts for existing deficiencies. Experts recommend moving towards more locally produced food and FSC diversification (Garnett, Doherty and Heron, 2020). Simultaneously, the pandemic increased public awareness about consumption habits and household food waste, particularly since many are threatened to experience financial hardship in a future economic downturn.

In this context, it is almost ironic that the initial spread of the coronavirus itself was assumed to be located around a traditional food market in Asia (Readfearn, 2020).

Grocery retailers’ reactions to COVID went beyond improving their daily operations. More than ever, they felt the industry’s acceleration towards emerging distribution concepts.

Consumer and retail food waste have been subject to extensive research over the past decades. This work seeks to explore the characteristics of future grocery retail and underlying implications for retailers’ operations to reduce FLW. The purpose is to provide grocery retailers with insights into risks and opportunities which eventually inform their strategic decisions.

The remainder of this work is organised as follows: Chapter 2 introduces the theoretical lens applied and further refines the research problem. Chapter 3 discusses the issue of retail food waste in terms of scale, root causes and solutions as established from literature. Chapter 4 reviews three interrelated trends which can be expected to influence retail operations in the future. Chapter 5 introduces operations strategy as a conceptual model. Chapter 6 describes the research, design and process followed. Chapter 7 summarises research findings per trend which are critically discussed in chapter 8. A brief conclusion and outlook are provided in chapter 9.

2 Theoretical background & problem definition

The problem of retail food waste in the future can be explored through various conceptual lenses. For instance, it can be framed-up as an ethical problem, an environmental problem, the problem of a specific local store, a product lifecycle analysis, a transaction-cost challenge, a supply chain issue and many other types.

The theoretical foundation applied in this work is Hart's (1995) natural resource-based view (NRBV) of the firm, which highlights the connection between the competitive advantage of firms and their relationship with the natural environment. The concept provides managers with a framework on how to use unique tangible and intangible resources to stay ahead of the competition. Hart states that resources need to be valuable, rare, non-substitutable and supported by tacit skills or socially complex organisational processes that must fit in the natural environment. Overall, the author argues that challenges posed by the natural biophysical environment will be the most critical drivers for dynamic resource and capability development in firms today.

In a revised version of the concept, Hart and Dowell (2011) illustrate that firms may benefit from four interconnected strategies to remain competitive. Their first proposed strategy (“pollution prevention”) describes how firms should minimise their environmental damage to reduce costs and achieve competitive advantage. This basic argument serves as the starting point for food waste reduction as the overarching goal for retail businesses.

Retail food waste can be regarded as a mismatch between food supply and demand, partly driven by high customer expectations in terms of on-shelf availability, quality, and price as well as by internal decisions on operations. The mismatch is only a symptom which reveals how grocery retailers are operating under pressure: On one hand, they must effectively meet different stakeholder requirements whilst deploying their resources efficiently. As stakeholder requirements usually contradict, i.e. fulfilling them all at once is impossible, decisions in operations strategy always deal with trade-offs. These are inevitable when reconciling market requirements with operations resources as highlighted in Slack and Lewis's (2017) definition of operations strategy.

Retail operations strategy serves as the unit of analysis in this work. According to Slack and Lewis (2017), it is comprised of four decision areas and five performance objectives, forming a decision matrix. There are other frameworks for strategy formulation available in the literature. Still, the operations strategy matrix appears to be the most suitable model due to its specificity in operations contexts and universality with regards to industry application. The concrete model and theories used are further described in Chapter 5 and 6.

Other limitations of scope concern the focus on perishable goods as the product category with the highest food waste rates; the exclusion of beverages from the analysis; and a geographical focus on Europe and the US markets.

This work aims to assess retail operations and food waste from a future-perspective, as opposed to historical developments or the present situation. In the past, retail operations research commonly focused on how to maintain full shelves and avoid stockout situations, with less attention to food waste as a by-product (Trautrims et al., 2009). However, today, there have been numerous studies addressing the issue from different research perspectives. The closest version of this work for food waste impact in present retail operations is by Teller et al. (2018). They evaluated retail food waste root causes and mitigation strategies in the most dominant existing store formats.

This paper helps to close the research gap mentioned by Teller et al. (2018) through an explorative, theoretical study which may serve as a basis for hypothesis development, quantitative testing, and other primary research initiatives later.

Among others, this work seeks to find answers to the following research questions:

1) What is retail food waste; to which extent is food wasted in retail; why does retail food waste occur, and which solutions are available to solve the problem as of today?
2) What external trends will impact retail operations in the future, and how will retailers adapt their operations?
3) Considering selected future retail trends, what are implications for retail food waste?
4) How can retailers’ operations strategies be informed to manage food waste better while satisfying stakeholder requirements?

The research is based entirely on literature and secondary data synthesised in a one-shot study design.

3 Literature review: Retail food waste

Retail food waste is typically distinguished between amounts directly caused by retailers and FLW across other FSC stages which retail is indirectly responsible for. Direct retail food waste refers to all “unsalable products that need to be discarded or recycled” (Teller et al., 2018).

Direct retail food waste represents promising leverage in the FSC since retailers concentrate waste quantities at a few locations which may facilitate collection and processing (Brancoli, Rousta and Bolton, 2017). However, retailers also have a significant indirect impact on upstream activities resulting in food loss, e.g. through trading practices, supply agreements and cosmetic requirements when they reject items from farmers. (Feedback, 2018). Marketing activities and communications are the instruments through which retailers have impact on consumer food waste downstream.

Some retailers consider food waste a chicken-egg problem and blame consumer habits for causing food loss upstream. This perception has been proven wrong because retailers have the power to educate and influence consumer behaviour in many ways. Although there is consensus among scholars that all actors within the production-consumption system should be held responsible collectively, the debate about food waste responsibility complicates possible resolution measures (Teller et al., 2018; Welch, Swaffield and Evans, 2018).

Retailers fear that food waste reduction practices might jeopardise their own business. This concern is unfounded, too. Reductions in household food sales do not necessarily lead to a loss in retailers’ revenue, because customers tend to spend large parts of the accrued savings again in-store on higher-value food and non-food items (Hanson and Mitchell, 2017; WRAP, 2014).

3.1 Scale

Measuring food waste and quantifying its extent is crucial in the first place to manage it effectively. As retail food waste has many facets, different dimensions and units of measurement are possible.

A commonly used quantification unit in retail operations is financial value. This is due to the basic economic principle that whenever food leaves the food chain before it gets consumed, an FSC entity is unable to capture its return on the investment made earlier. The economic damage caused is remarkable: According to ReFED (2018), the U.S. grocery retail sector accounts for 8 million tons of waste per year across distribution centres and stores which represents $18 billion in lost value annually. Tracking the financial resources wasted allows actors to establish business cases and model scenarios on a larger scale (Hanson and Mitchell, 2017; ReFED, 2016).

On a micro perspective, the valorisation of food waste remains challenging for individual stores. In some instances, the only key performance indicator (KPI) measured to potentially capture food waste is “shrinkage” which does not differentiate between theft, spoilage, or deliberately wasted items, neither between unsaleable nor inedible products. Instead, the parameter subsumes the value of products declared unsaleable with losses due to price markdowns which undermines profitability assessments (Holweg, Teller and Kotzab, 2016).

Östergren et al. (2014) highlight that several product groups remain unrecorded in in-store measurement processes. Therefore, they classify retail food waste into pre-store waste, recorded in-store waste, unrecorded in-store waste, and missing quantities. Similarly, Cicatiello and Franco (2020) found that items without machine-readable barcodes were often not counted-in and might account for up to one-third of additional “hidden” retail food waste.

Food waste’s environmental impact is typically measured through lifecycle analysis evaluating the carbon footprint of items discarded (Scholz, Eriksson and Strid, 2015). Key challenges remain with generalisability across different product ranges, heterogeneous FSCs, varying local climate conditions and other parameters (Brancoli, Rousta and Bolton, 2017; Scholz, Eriksson and Strid, 2015).

To cover both, economic and environmental impacts of retail food waste, Dreyer et al. (2019) propose an innovative combination metric to guide managerial intervention. Today, indicators to quantify reputational benefits of food waste reduction practices remain to be developed or integrated into existing units of measurement.

Brancoli, Rousta and Bolton (2017) studied the composition of retail food waste in terms of product categories. They measured food waste in a Swedish supermarket using different dimensions, e.g. weight, economic value, or CO2 equivalents. Apart from other findings, their data revealed that wasted fruits and vegetables account for almost 30% of food waste mass. At the same time, both cause very low environmental impact, e.g. compared to meat and bread.

On a macro-level, Lebersorger and Schneider (2014) compared retail food loss rates in various industrialised countries and across product categories. Their results showed that despite different reference bases for measurement, there is consistency in terms of retail food waste rates overall.

Scholars agree that challenges exist in standardising food waste measurement techniques across SFC stages and geographies. In 2019, the EU adopted a standard methodology to facilitate coherent food waste monitoring among member states and expects credible reports on national food waste levels as of mid-2022 (European Commission, 2019). Other international methodology harmonisation initiatives were introduced in the Food Loss and Waste Accounting and Reporting Standard (FLW Standard), Food Waste Index (FWI) and Food Loss Index (FLI) (FAO, 2019; Hanson, Lipinski and Robertson, 2016).

3.2 Root causes

There is extensive research available about the root causes of retail food waste. Apart from minor in-store food loss due to product damage and wrong handling, the most common reason for food wasted in retail operations is items’ passed expiry dates (Kaipia, Dukovska‐Popovska and Loikkanen, 2013). Yet “outdated” products are only the symptom or result of several underlying root causes which vary depending on store formats and product categories. Most researchers have categorised root causes into 2-3 groups.

According to Mena, Adenso-Diaz and Yurt (2011), the reasons for retail food waste lie within (1) mega-trends in the marketplace that shape customer habits and expectations regarding quality and freshness; (2) natural, product- or process-related constraints such as perishability and (3) root causes related to management practices.

Teller et al. (2018) perceive the drivers of retail food waste to be related to (1) undesirable customer behaviour and unpredictable demand; (2) inefficiencies in in-store operations, and replenishment policies; and (3) high-quality requirements by consumers, authorities and retail organisations alike. Scholars also highlight the shared responsibility among customers, the store, its parent organisation and legislators (Kliaugaite and Kruopiene, 2018).

In their contributions, Moraes et al. (2020) and Moser (2020) differentiate between internal and external causes which are partly controllable by retailers and partly related to other actors in the FSC. Both stress that the leading root causes are interrelated and should be addressed through comprehensive multi-stakeholder initiatives.

Jedermann et al. (2014) describe food waste as a consequence of (1) the natural product decay over time, combined with (2) oversupply in operations. They focus on the central trade-off in retail operations to reduce food waste while managing surplus situations: costs for unsold products wasted play against opportunity costs for stock-outs and unmet demand.

Root causes related to customers include two behavioural aspects: First, there is the overall unpredictability of demand quantity which is estimated through inventory forecasting. Second, there is in-store consumer behaviour to select products with the longest use-by date or remaining shelf-life (“last-in-first-out”) as opposed to picking items that were replenished first (“first-in-first-out”) (Teller et al., 2018; Tromp et al., 2016). Inaccurate predictions lead to product “outdating” on the shelf if customers’ aesthetic expectations, e.g. in terms of product colour, shape and size are not met, forcing retailers to declare imperfect goods unsaleable (FAO, 2019).

Root causes related to operations processes and operations management include poor execution of forecasting, replenishment and ordering, long order lead times or fixed order units (Tromp et al., 2016); incorrect transportation, handling and packaging (Cicatiello et al., 2017); as well as management- and personnel-related factors, such as ethics among staff, store manager leadership, employee awareness, skills and training (Gruber, Holweg and Teller, 2016).

Root causes related to product features include factors like perishability, shelf-life limitations, quality decay and sensitivity, but also width and depth of product range and packaging sizes. Teller et al. (2018) highlight the notable differences between packaged and loose produce, as well as between fresh and ambient products. Moreover, date labels which are initially designed to ensure food safety may lead to household and retail food waste if different confusing terms are used (e.g. “sell-by”, “best before”, “use by”) without sufficient information on their meaning (Gruber, Holweg and Teller, 2016).

Retail food waste is closely linked to food safety regulation. In most countries, it is forbidden to sell products after the use-by date, and accountability for donated items remains with the distributor. Legislation rarely allows this responsibility to be transferred through waiver agreements as, e.g. in Italy . There is evidence that existing bureaucratic hurdles for food donation represent a considerable barrier that causes food waste internationally .

3.3 Solutions

Reducing or eradicating retail food waste requires collaborative efforts by all actors involved. The expected economic benefits are promising: Hanson and Mitchell (2017) demonstrate that retailers can expect more than $5 additional value in return for every dollar invested in food waste reduction. The authors emphasise that the benefit-cost ratio of 5.1 does not factor-in numerous nonfinancial motivators which could further increase its attractiveness, e.g. through improved customer relationships, employee pride and other social effects.

3.3.1 Overarching concepts

The most popular, yet generic framework to map food waste destinations is the “waste hierarchy” model which identifies and prioritises options for prevention and waste management (Papargyropoulou et al., 2014; US EPA, 2015). It describes a range of five treatment options, ranked by favourability: (1) food waste prevention including source reduction along FSC stages; (2) re-use including redistribution and donation; (3) recycle, e.g. for animal feed or composting; (4) recovery, e.g. through anaerobic digestion; and (5) disposal via landfill or incineration.

Abbildung in dieser Leseprobe nicht enthalten

Figure 3.3.1 Waste hierarchy adapted from Papargyropoulou et al. (2014)

Actions addressing retail food waste on the store level can be divided into technical, logistical and marketing interventions (Tromp et al., 2016). Technical interventions delay the natural decay of perishable products, shift their saleability criteria or increase their shelf-life/use-by-dates. Logistical interventions aim at decreasing the storage time of food in the FSC, assuming stable demand. Marketing interventions aim at decreasing the storage time in the FSC by influencing consumer demand assuming steady supply.

Teller et al. (2018) separate their proposals into measures at the retail store level; the retail parent organisation level and the consumer level. Moraes et al. (2020) classify them into approaches related to work methods; machines and equipment; human resources; materials; and measurement. Kulikovskaja and Aschemann-Witzel (2017) distinguish between six types of food waste avoidance actions related to pricing, product, unit, communication, collaboration, and in-store management. The EU Platform on Food Losses and Food Waste (2019) suggests measures related to upstream activities, in-store logistics and consumer awareness. ReFED (2018) identified and mapped 27 solutions by profit potential, feasibility and waste hierarchy destinations to support retailers in prioritising their efforts.

An alternative overarching solution to drive retail food waste reduction has been discovered by Cicatiello and Franco (2020). The authors prove that merely measuring and reporting on food waste quantities can sensitise staff to rethink operations processes. As an opportunity to make retail food waste more tangible, measurement results could be integrated into sustainability dashboards to monitor and track KPIs as proposed by Bloemhof et al. (2015). Already today, individual retail groups in the UK report on food waste levels internally and externally (WRAP, 2019).

The overarching concepts show that food waste reduction can be achieved through efforts in various strategic areas. The next sections focus on food waste prevention and re-use measures which are preferable from a resource perspective.

3.3.2 Product & packaging

Extending in-store product shelf-life by just one day may result in food waste reductions of over 40% (Broekmeulen and van Donselaar, 2019) and improved service levels (Teller et al., 2018). Although product features are mostly determined in the first FSC stages, retailers can contribute by adjusting item storage, packaging, and labelling.

Packaging size affects household food waste if pack size does not precisely match customer requirements. On a store level, smaller pack sizes can help reduce food waste if individual items in a pack are declared unsaleable and full packs are disposed of. On the other hand, smaller packages may eventually cause more single-use-plastic waste (ReFED, 2018). Another major challenge remains with manually separating packaging from actual products for optimal resource recovery outcomes (Brancoli, Rousta and Bolton, 2017).

EU data suggests that 10% of food waste can be traced back to confusion around expiry date labelling (European Commission, 2019). Therefore, the European Food Safety Authority (EFSA) is developing a date marking guidance to provide SFC actors with clarity. Standardisation of date labelling together with producers represents a very cost-effective opportunity for direct and indirect retail food waste reduction (ReFED, 2016).

3.3.3 Logistics & supply chain efficiency

Liljestrand's (2017) analysis identified nine logistics solutions across FSC stages covering measures to improve forecasting, lead times, safety stock, make-to-order flows and others.

Effective demand forecasting and inventory planning represent a key area to prevent food waste. If retailers trade-off lower safety-stock levels for higher out-of-stock risk, the impact on food waste is remarkable, as demonstrated in simulation modelling (Tromp et al., 2016). There is also empirical evidence for the underlying concept. In an illustrative case, Stenmarck et al. (2011) estimate that on average supermarkets, e.g. ordered 7% more bread than their expected demand.

More advanced forecasting systems may contribute to reducing this buffer by factoring-in external data on weather conditions, media, events, and other highly fluctuating parameters.

Apart from rich data sources, accurate forecasting requires tight FSC integration and information sharing to avoid bullwhip effects and excess inventories. Such measures eventually improve operations performance and reduce food waste (Frohlich and Westbrook, 2001; Lee, Padmanabhan and Whang, 2004).

Other initiatives, such as risks sharing with suppliers, ordering automation to reduce human errors and establishing supplier return policies represent different approaches for logistics-related food waste reduction (EU Platform on Food Losses and Food Waste, 2019).

With regards to in-store logistics, flexible replenishment policies are recommendable to optimise shelf-life of displayed goods and limit customers’ “last-in-first-out” picking (Tromp et al., 2016).

3.3.4 Marketing & consumer education

Retailers’ marketing activities and corresponding consumer decision-making is considered another crucial factor in tackling retail and household food waste (Aschemann-Witzel et al., 2017; ReFED, 2016). Reducing demand variance and adjusting customer selection behaviour also reduces food waste in Tromp et al. s' (2016) retail simulation model. Besides, it can be assumed that customers consider food waste reduction for environmental benefit less controversial than, e.g. restrictive diets related to meat and dairy consumption.

Typical interventions include raising customer awareness as well as adjusting promotion- and pricing policies.

Raising awareness, building capabilities, and sharing knowledge are possible ways retailers can influence and motivate their customers to adopt food avoidance behaviour. Young et al. (2018) demonstrate that retailers can encourage pro-environmental behaviour long-term through repeated messages shared through existing communication channels. Yet retailers may fear that information campaigns could conflict with their own commercial goals while casting a poor light on the little efforts they might be undertaking.

Retailers should review their promotion policies and avoid multi-item offers or discounts for big pack sizes which causes consumer food waste (Stenmarck et al., 2011). Turning “buy one get one free”-offers into “buy one now, get one later” as done, e.g. by Tesco is considered an industry best-practice in this context.

As products become suboptimal, e.g. due to mechanical damage, time or environmental factors, they tend to be declared unsaleable or significantly reduced in price (“marked down”) (Raak et al., 2017). Aschemann-Witzel et al. (2019) examined how to sell such suboptimal products best. They concluded that in addition to price reductions, they require effective communication and targeting of specific consumer motives. A limiting factor for research in this field is that retailers prefer to not publicly share details about their markdown policies which they fear could incentivise customers to adopt counteracting behaviour.

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Details

Title
Reducing Food Waste in future Retail. Trends and Implications for Operations Strategy
College
The University of Liverpool  (Operations and Supply Chain Management)
Grade
1,0
Author
Year
2020
Pages
66
Catalog Number
V979542
ISBN (eBook)
9783346330345
Language
English
Tags
stop food loss, stop food waste, grocery, logistics, supply chain, e-commerce, e-grocery, business model, data
Quote paper
Simon Schäffer (Author), 2020, Reducing Food Waste in future Retail. Trends and Implications for Operations Strategy, Munich, GRIN Verlag, https://www.grin.com/document/979542

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Title: Reducing Food Waste in future Retail. Trends and Implications for Operations Strategy



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