Fighting Food Waste with Math

Rob Greenfield does not directly have much to do with supply chain management, at least not at a corporate level, but he does have a pretty neat story, and he is creating awareness around the topic of food waste. When it comes to sustainable living, Rob has been referred to as a “dude making a difference.”

In the summer of 2013, while on a 4,700-mile bike ride across the USA, Rob committed to eating only locally sourced, organic natural foods. He however ran into some availability issues along the way and ended up sourcing 70% of the food he ate from the dumpsters behind grocery stores, a practice referred to as dumpster diving. Since his cross country adventure, Rob has rummaged through thousands of dumpsters across 25 states in an effort to bring awareness to the fact that $165 billion worth of food is thrown away every year in the United States. He has found many neglected food treasures on his journey. Here is an example from Nebraska:

By no means am I encouraging the practice of dumpster diving. In fact, it could even get you into some trouble. However, as Rob said in his video, he does not believe there is a food shortage problem, but rather a food distribution problem, which in the end, is quite obviously a supply chain problem!

Rob presents his viewers with three very logical and highly philanthropic solutions:

• Compost the no longer saleable items
• Use it to feed local animals
• Give the food to people in need / donate the items that are still edible

Stop food waste higher up in the chain

While these solutions are great, even better would be if the retail chains did not have to throw away so much food in the first place. The same holds true for wholesalers and manufacturers. Curbing the problem higher up in the chain is a very viable option and something that is currently being extensively examined by leaders in the field of operations research. A new study looking to improve sales forecasts in the grocery trade has brought together three industry experts:

1. Zurich University of Applied Sciences (ZHAW)
2. INFORM – Institute for Operations Research and Management GmbH
3. PrognosiX – Spin-Off of ZHAW focused on predictive analytics

Sales forecasting in the grocery trade is no easy task as special factors including best before dates, promotions, weather, day of the week and holiday consumption patterns complicate the process. Additionally, customer expectations are growing, forcing retailers to have everything at top quality, available at all times, which can lead to over-ordering and eventually hefty contributions to the $165 billion in food waste. This is why the three organizations named above want to take demand forecasting in the grocery trade to the next level.

The project team is working with data which was provided by Swiss grocery producers and food retailers. A software prototype is currently being developed based on the new algorithms. A plan to comprehensively evaluate the prototype in August 2015 is currently underway. The aim is to further optimize the algorithms according to individual commodities and trades. Apart from the grocery industry, the restaurant and hotel industries can also profit from optimized forecast tools which reduce waste and effectively predict inventory. Results from the initial phase of the research project have also discovered great potential for the healthcare industry, where external factors also play a significant role in terms of staff planning.

Current utilization of forecasting algorithms

Existing mathematical algorithms are already being utilized in the grocery trade to help off-set some of the industry challenges. One example is Switzerland’s leading grocery discounter, Denner, which employs 4,000 people in 800 stores. The company is currently using a forecasting method based on advanced analytics to plan over 1,400 items in each of its three distribution centers. The inventory planning process has been significantly improved, resulting in reduced inventory levels which in turn can lead to less waste.

Closing Words

Whether it is Rob Greenfield’s eye-opening grassroots movement or the creation of awareness regarding the power of math within the supply chain industry, the fact is that something needs to be done about the food supply chain “distribution” problem. Rob perfectly illustrated the sad supply chain truth after he discovered bananas sourced from Columbia in the dumpster: significant resources (time, money, fuel, water etc.) were used to grow the bananas in Columbia, transport them to the USA (approx. 3,000 miles), stock the shelves, and in the end, they landed in a dumpster. Perhaps in the future, with the power of math and a greater awareness, a more appropriate amount of bananas (and other groceries) can be ordered so that less ends up in a landfill after such a long and expensive journey.

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If you want to find out more about how Denner is utilizing advanced analytics to improve its inventory planning methods, you can request a copy of the story here.