Zero is not a number

Research and recommendations to reduce waste in fresh product categories.

Fresh products are “living products” - sensitive to how they are handled and stored, they transform over time, and they expire if not used in time.

Almost 1.3 billion tons of food produced for human consumption is lost or wasted per year globally. That amounts to almost $950 billion.

Retailers often view this waste as a fact of life. However, the opportunity to reduce waste is actually pretty significant and, if pursued in the right way, there is a large upside for producers, retailers and consumers alike.

We worked with the Efficient Consumer Response (ECR) Community Shrinkage and On-shelf Availability Group to investigate how reducing waste affects on-shelf availability, and vice versa. To this end, we launched a major international study that was conducted by a leading research institute in the retail sector, Eindhoven University of  Technology in the Netherlands. The results show that waste is a choice and retailers have many opportunities to reduce it, increase category and store efficiencies, and improve profits.

This work led to three key recommendations for retailers to find the right compromise between reducing waste and driving sales for their business.

  1. Set the right waste and availability targets.
  2. Target stores and categories that have more scope for improvement.
  3. Increase product shelf life. 
Oliver Wyman Answers 3 Questions
  • 1Why are retailers so resigned to waste as a fact of life in the fresh supply chain?

    Fresh supply chains are complex to manage and fresh departments in a grocery store are the most challenging to run. The challenge is: You have to have enough product to serve your customers’ demand, ideally at all times. The product must always be of great quality and it must be displayed in an attractive way. However, even the smallest error in planning or execution can cause product that the retailer cannot sell and, ultimately, waste. Virtually every retailer has made the experience that trying to eliminate that waste will have a strongly negative impact on the customer experience and sales. Therefore, most retailers accept that waste is just a part of doing business in fresh.

  • 2What will retailers want to take away from the results of the study?

    While clearly no-one likes having waste in the fresh supply chain, it is not feasible to avoid completely. In fact, some retailers have tried to embark on a goal of zero or near-zero waste and found that it led to a host of negative unintended consequences: Poor quality products offered to customers and empty shelves. That said, there is a big difference between accepting a certain level of waste and ‘resigning’ to the issue of waste. In most cases, waste can be reduced by retailers. The study shows ways in which this can be accomplished without hurting sales or customer experience, and how retailers can set the right targets for waste. Retailers will take away a ‘fresh look’ at the issue of waste and identify new ways in which they can drive waste to a lower level – even if that level is not zero!

  • 3How can Oliver Wyman help retailers implement the recommendations in this report?

    Oliver Wyman has worked with many of the largest retailers worldwide to improve their fresh business. Reducing waste is an evergreen issue, but we always look at it in the context of improving sales and fresh market share at the same time, because fresh is the most important lever for growth and competitive advantage in grocery. However, ‘getting fresh right’ is not a quick fix but a long journey. The recommendations featured in the report are key steps in that journey of becoming a leader in fresh. We have helped many retailers to achieve this by getting the offer for the customer absolutely right – and building the tools and capabilities in merchandizing, supply chain and operations to deliver it every day.