At Spoiler Alert, we spend a lot of time thinking about how food distribution businesses can create value through waste reduction, and the unique characteristics of each distribution center that impact waste generation. How does physical location contribute? What role does product type play? How about the executive team’s perspective on the environment, or technology solutions?
It quickly becomes clear that food waste at distribution facilities is a complex problem, typically the result of demand forecasting challenges or unique, often uncontrollable, system breakdowns. But a universal characteristic that directly impacts the strategies to drive successful waste reduction is the size of a food distribution business (i.e. sales volume, number of facilities, customer count). Therefore, we want to highlight four factors associated with reducing food waste that are important to consider in the context of company size.
The need to collaborate across departments is a crucial component of tackling waste at food distribution businesses (See 4 key internal stakeholders to engage in unsold inventory management). There is key information (e.g., food type; shrink volume; root cause) that must be gathered before any reduction initiative can be implemented, and it is impractical to think that one person will be the keeper of it all. Developing a solution that drives tangible business value means tapping operations folks to identify gaps in existing inventory management processes; engaging procurement and sales to understand inconsistencies between what’s bought and sold; as well as utilizing the marketing department to sell the program internally and externally. In addition, there are opportunities to create financial value, like claiming enhanced tax deductions associated with food donation, that require working with colleagues who don’t typically interact with facility operations, such as finance and corporate tax.
Most importantly, it is essential for company leadership to be bought-in so that reduction initiatives are positioned as corporate strategy to facilitate continuous improvement. This shift will unlock investments into the tools necessary to effectively reduce waste and create maximum value.
The size of a company will undoubtedly affect the ability to collaborate across departments. We highly recommend engaging key stakeholders from the get-go so that everyone is clued in to the aspects of the waste reduction strategy that are most applicable to their role. At small distribution companies, this might mean adding a “shrink reduction/management” item to weekly or monthly leadership meetings. For large businesses, it may be more effective to schedule dedicated shrink meetings or quarterly strategy sessions. As programs are implemented, keeping stakeholders abreast of progress is necessary to show value and guarantee prolonged engagement.
Quantifying the problem
In late June, we had the opportunity to attend the 2018 U.S. Food Waste Summit. Following the event, we highlighted how accurately quantifying food waste is hard, but essential. It wouldn’t be wise to go on a long road trip without any directions. Similarly, understanding what food, how much, and why it is being wasted provides a basic roadmap for developing reduction initiatives. Although measurement isn’t a required first step to begin reducing waste, establishing an accurate baseline enables companies to track progress towards reduction goals. That being said, many food distribution companies lack access to readily available data on the total quantity of “shrink” or waste, and rely on third party measurements (e.g., purchase orders and waste hauler data) for estimating actual numbers.
Beyond third party measurements, there are tools like waste audits or management software that can be used to quantify food waste generation. The footprint of a food distribution business, particularly the number and size of facilities, will influence measurement strategy. A portfolio of many large facilities can lend itself to automated measurement tools (e.g., software), whereas manual processes to quantify waste (e.g., waste audit) may be easier within a portfolio of fewer, small facilities. For greatest accuracy, an emphasis should be placed on measurement solutions that can be consistently deployed across a portfolio, and match the level of detail desired.
It should be recognized that every distribution facility is subject to its own circumstances that can result in a higher or lower volume of waste generated (e.g., existing protocols; product type; landfill rates; state regulations), so measuring at a facility level is important. Small companies can compare facility-level data to industry reports to benchmark against competitors. For distributors with many sites, measuring at the facility level is useful for identifying “laggards” within a portfolio that will be high priority to address.
Developing a network
At Spoiler Alert, it is our fundamental belief that distressed and unsold food products are valuable business assets that should be leveraged to create financial value. This concept is underpinned by the fact that not all distressed and unsold inventory is unsaleable, and not all unsaleable product or byproduct must end up in the landfill. The trick is connecting supply and demand in real-time based on the quantity and quality of the food available. Doing this requires a network made up of discounted sales outlets, food donation partners, and organics recycling facilities.
When thinking about building an effective network of outlets for distressed and unsold food inventory, facility size and location (e.g., proximity to metropolitan areas) should be considered. These factors will impact the types of partners that can accommodate the product mix, volume, and quality of food available for sale/donation, as well as the logistics required to complete the transaction consistently. This is even more relevant for distribution businesses that focus on fresh, short shelf-life products. Understanding needs early on in the process and having these conversations beforehand will only improve network partnerships.
In addition, sustaining a network requires efficient communication, relationship management, and ensuring all parties see value in a partnership. As a network grows across a company portfolio, it may become necessary to assign internal staff to manage these activities, or seek external support from third party providers.
Implementing a solution
The final consideration we want to address should be the most rewarding stage of the process: implementation and continuous improvement. Effective implementation, in most cases, requires changing (or augmenting) status quo processes and behaviors.
A company’s size and culture will play a role in how easy it is to adopt new behaviors associated with food waste reduction. Larger, public companies may be subject to shareholder or public pressure that can increase the desire to drive down waste, whereas smaller companies may be driven by leadership’s unique priorities and passions. Regardless, a practical solution is to develop and implement standard operating procedures that will facilitate program success. An associated benefit of reducing food waste is that employees tend to feel empowered by positively contributing to the “triple bottom line” (economy, society, environment). Utilizing the sales and marketing department to highlight various impact metrics, such as meals donated or pounds diverted from the landfill, can be effective at driving employee and customer engagement as well as buy-in to the reduction initiative.
As food distribution businesses scale in size, it becomes increasingly essential to standardize initiatives and ensure that the program operates consistently across the company portfolio. This will only increase program “stickiness”, especially if employees work at different facilities.
The first step...
Before any of the factors listed above even come into play, the first step for any food distribution business is to understand how distressed and unsold inventory impact day-to-day operations and, ultimately, the bottom-line. Whether a company services 5,000 or 500,000, it is unlikely that any executive team enjoys throwing cash in the trash. When this information is in hand, it will quickly become clear how much value there is to gain from improving shrink management.