While much of food waste conversations over the past few years centered on consumers, the COVID-19 crisis shifted the food waste focus from homes to the supply chain. Currently, more food is going to waste in the supply chain—just the opposite of the pre-coronavirus situation—according to Dana Gunders at ReFED, a multi-stakeholder non-profit committed to reducing U.S. food waste.
Choke points in the processing sector and changes in consumer habits have created volatility in the food chain. All food sectors continue to face immense challenges in delivering food where it’s needed in the way it’s needed.
Just in time inventory.
Before coronavirus, food storage strategies and distribution channels adapted to serve consumers in the now, rather than stockpiling food for the future. Known as just in time (JIT) inventory, this system reduces costs and eliminates waste.
And for decades, JIT worked.
For decades, Just in Time inventory management worked. However, no one could have predicted a global pandemic.
However, no one could have predicted a global pandemic, let alone food hoarding and soaring demand for certain products. Surpluses piled up due to cancelled orders and products deemed non-essential, contributing to food waste.
Widespread closures or slowdowns in foodservice operations continue to pressure and disrupt the supply chain. Food portions packaged for businesses and foodservice are too large for the average consumer and quickly go to waste. It’s not easy for processors to convert production lines and equipment to produce retail portions.
So, what’s to be done?
Shifting to a new strategy.
With JIT, companies order only what they need when they need it. Recently, though, food manufacturers began stocking up on raw materials to maintain production and mitigate impact if supply systems fail or imports take market share.
This shift is a shocking adjustment for many food companies that have long used a JIT strategy. Although panic buying and food hoarding has decreased, companies are increasingly shifting to a just in case (JIC) inventory strategy, maintaining larger inventories to reduce risk of back orders in the face of uncertainty. Having up to three months’ supply on hand may be a smart decision, especially in food-insecure countries, according to Dan Basse, leading industry economist and president of AgResource.
Just In Case inventory management requires 75 to 100 million square feet in freezer or cooler space to meet changing consumer habits.
While JIC keeps companies running without interruption, the strategy has its downfalls as well. Large inventories increase storage costs and heighten product loss risk. Food can become damaged, spoiled or obsolete when sitting in storage, ultimately increasing food waste. Let alone JIC inventory isn’t feasible for every sector of the food chain. While flour can easily sit for six to eight months in storage, perishable goods like fruits and vegetables have a shelf life of a few days to weeks, depending on the product.
Regardless, JIC requires more warehouse and cold storage space. The U.S. Commercial Real Estate Services estimates that 75 to 100 million square feet in freezer or cooler space is needed to meet changing consumer habits. Although this is an expensive investment upfront, increased storage ultimately increases food security for years to come.
Adjusting the supply chain.
So, if JIT and JIC inventories are both contributing to food waste in a time when many are hungry, what’s the solution? The simple answer? It’s complicated.
As many restaurants and business remain closed or operate at reduced capacity, retail-ready food is highest in demand. A widespread adjustment across the supply chain will provide consumers with food they can access and use. As known and unknown challenges crop up throughout this crisis, it’s hard to forecast food production. However, many companies are resilient in adapting to the ever-changing food landscape.
Reducing food waste is something both the supply chain and consumers must tackle.
Reducing food waste applies globally and is something both the supply chain and consumers must tackle. Although eating the leftovers from last night’s dinner or buying only what you need from the grocery store doesn’t seem like a milestone in combating food waste, it’s a step in the right direction while the supply chain catches up.
Our team of subject matter experts focuses on food and agriculture—farm field to processing to entrée on a plate. We can help you build a new brand, protect an old one or target customers to foster sales. Let’s talk when the time is right to handle your next strategic marketing and communications challenge: Marcy Tessmann, email@example.com.