In 2006, the Food Industry Sustainability Strategy (FISS) presented the industry with a major challenge: “to reduce the amount of food and packaging waste that is produced each year… without compromising food safety; and to recycle or otherwise gain value from the waste that does arise ” (Defra, 2006: 37). The FISS also suggested a target of reducing waste by 15-20% by 2010.
The government has made significant investments in best practice programmes such as the Waste Resources Action Programme (WRAP) and Envirowise to help the industry reduce waste and meet the targets set by FISS. These programmes have made good progress in various areas of waste minimisation such as packaging, manufacturing and home waste, however, an area that has so far been neglected is the waste generated in the interface between retailers and their suppliers. Waste generated at this stage has important financial and environmental implications because products have already gone through most of their value adding activities, accumulating costs and embedded energy. Therefore, reducing waste at this stage would not only reduce costs for the companies involved, but would also reduce greenhouse gas emissions.
Waste is a significant problem for the UK food chain. It has been estimated that the industry produces about 10% of all industrial and commercial waste in the UK and volume figures range between 18 – 20 million tonnes of waste per annum. Waste is generated at various stages in the chain. UK homes alone are responsible for 6.7 million tonnes of food waste and an additional 5.2 million tonnes of food-related packaging (Hogg, 2007). It is estimated that this would generate at least 15 mt of CO2, mostly embedded energy and methane emissions in landfill (Hogg, 2007). For the retail sector there is a wide range of figures; WRAP (2006) reports 1.5 million tonnes per annum, while Envirowise (2002) goes as high 12 million tonnes with a cost to businesses of around £360 million. According to WRAP (2006), food manufacturers contribute with an additional 3.5 millon tonnes.
For food producers and retailers alike, waste is part of the complex problem of matching supply and demand. On the one hand, not producing enough to satisfy customers’ demand leads to poor customer service and lost sales, on the other, producing more than is being demanded leads to increased inventories which can generate waste. This problem may be exacerbated by certain policies such as penalties for late deliveries which make suppliers hold higher levels of inventory “just-in-case”.
Research has shown poor communication between customers and suppliers can lead to demand amplification, a phenomenon known as the bullwhip effect (Geary, et al., 2006; Disney and Towill, 2003; Lee et al., 1997a; 1997b), which disrupts the balance between supply and demand. Some of the factors contributing to the bullwhip effect include the lack of joint planning, inaccurate forecasting, poor visibility of inventory and demand information and ineffective coordination during promotions and new product introductions. There is evidence that by addressing these factors it is possible to reduce the bullwhip effect, leading to better customer service and less waste (Disney et al., 2008; Cohen Kulp, et al., 2004; Chacon and Fisher, 2000; Lee, et al. 2000). Recent research conducted by the Food Chain Centre indicates that this is a significant problem for the majority of food chains in the UK.
This project aims to address the problem of waste at the supplier – retailer interface in the UK food chain. More specifically the objectives of the project are:
1. To assess the prevalence and magnitude of food and packaging waste in the supplier / retailer interface.
2. To identify the main root causes of waste
3. To identify good practices and examine the enablers and inhibitors to their implementation
4. To provide recommendations for policy and practice that will help the food and retail industries to jointly address the root causes of waste.
To achieve these objectives a four-stage approach is proposed. Firstly, we will develop the already extensive literature review we have accumulated in previous projects in the food and retail industries in order to maintain an up to date focus on best practices around the world. Secondly, we will conduct a series of case studies focusing on the relationships between retailers and suppliers to estimate the magnitude of the problem and identify the root causes of waste. A second wave of case studies will focus on identifying best practices and documenting the enablers and inhibitors to their implementation. A final report will present the results from research as well as a series of recommendations for policy and practice. (References included in Q7b attachment)