Food and beverage manufacturers are increasingly focused on creating more efficient internal processes to save time, money and resources, and there are more savings to come and more benefits to be released for the environment and the consumer, by working collaboratively across the supply chain to prevent waste.
Prevention is the best outcome from a commercial and environmental perspective. Where that isn’t possible, companies should divert waste away from landfill or sewers and recover some of its value through anaerobic digestion or recycling, for example.
IGD facilitates the Efficient Consumer Response (ECR) forum in the UK, where targets set in 2010 challenged 34 companies to prevent 75,000 tonnes of waste and divert 150,000 tonnes between factory in-gate and till by December 2012.
Using ECR principles, at the end of 2011, UK food manufacturers, wholesalers, retailers and food service operators had so far avoided creating 70,000 tonnes of supply chain waste and exceeded the diversion target by 30%, diverting 195,000 tonnes away from disposal.
Some activities to eliminate supply chain waste are relatively simple and others more innovative with examples, including:
In the UK, progress in waste prevention has been significant, but, as is the case across Europe, there are still many underexploited opportunities – a statement which sounds particularly surprising given that the bottom line benefits are clear.
Many companies use key performance indicators to measure behaviour that salvages the maximum income from waste, minimises disposal taxes and reduces energy tariffs, but salvaged income from waste is a fraction of the material procurement cost.
Based on average margin and disposal cost assumptions, £1 in the skip is equivalent to £6.25 in lost sales. In the case of waste, prevention is much better than cure. Companies that have prevented waste in the supply chain have also increased on-shelf availability, so there are extra sales to consider.
There is also the environmental imperative to consider. Recovery yields less than 15% of the greenhouse gas benefits of preventing supply chain waste from occurring in the first place.
Many working in the industry are unaware of the unintended consequences of their decisions on waste elsewhere in the business and in other companies. Often, waste doesn’t occur where it’s caused, so upstream and downstream trading partners need to team up to prevent waste.
“It’s good to see how much progress our industry has made on reducing waste to landfill, but now we must all focus on preventing waste arising in our supply chains in the first place,” says Simon Bailey, customer service director, Unilever UK and Ireland, and co-chair of the ECR UK product and packaging waste workgroup. “The ECR waste workgroup is aiming to make it easier for everybody within each of our organisations to understand how the choices they make could prevent waste in the supply chain. This is key to accelerating our progress.”
Analysing waste at one point in the chain reveals root causes of the waste elsewhere, which can include decisions or actions about:
It’s important that marketing, commercial, operational and supply chain functions all understand and remain mindful of the major influence they have on waste between factory in-gate and the retail tills.
In some of these areas, preventing waste is integral to the ‘day job’. In other areas, operators remain immune to the consequences their decisions have on waste.
A few simple steps can help any member of the supply chain in any country to engage with their trading partners on waste. The free ECR UK Collaborative Waste Prevention Toolkit, created by leading retailers, manufacturers and wholesalers, encourages and supports a collaborative approach.
It details a simple five-stage best practice process that all companies can follow ‘together’:
While these steps are realistic, it’s understandable that there are often barriers to collaboration.
The pressures of the FMCG industry sometimes make it difficult for trading partners to get together to discuss waste. Some of the obstacles include:
ECR UK has recently established Waste Prevent Connect, a process that links up UK trading partners and provides a forum where partners can discuss waste solutions.
While currently only in the early stages, if Waste Prevent Connect proves popular and demonstrates value in preventing supply chain waste in the UK, there is significant scope for it to be rolled out elsewhere in Europe. The principle of encouraging and facilitating open discussion of specific waste issues is an important one in the drive for collaboration.
Collaboration with trading partners and colleagues to root out supply chain waste or its causes can increase yields, on-shelf availability and ultimately sales and profits.
Aside from the commercial benefits, sustainability and environmental concerns remain fixed in the sights of FMCG companies and their consumers the world over. Preventing waste offers more significant opportunities to reduce environmental impact than simply diverting waste from landfill.
In working together, companies can also strengthen their trading relationships and build the equity of their brands.
Working collaboratively on waste could prove invaluable in unlocking the potential commercial, consumer and environmental benefits for any business.
James Tupper is ECR learning & change manager, IGD. He has 30 years’ experience of developing people and business performance in the food and grocery industry across Europe, Asia and Africa and has undertaken assignments all over the developing and developed world.
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