ArrowStream Foodservice Blog

Food Waste and the Supply Chain

Posted by Bill Michalski on Nov 22, 2021 12:24:45 PM

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Restaurant chains spend millions on branding, marketing, and even atmosphere to attract customers and turn them into repeat customers. But in the end, a restaurant’s success really comes down to one thing: the food. Yet, while it is the primary reason restaurants are in business, there is a never-ending struggle to allocate the resources needed to avoid wasting the very thing that keeps them in business. Food waste between farm and fork is a significant issue not only in global resource scarcity, but in the financial success or failure of restaurants. It only stands to reason that such attention would be placed on avoiding food waste and gaining better visibility to how and why it happens…the question is, are they making a difference?

Looking beyond the prep area.

The first place most restaurant chains and their franchise owners look for food waste is in the kitchen, whether for non-compliance in recipe preparation or spoilage that takes place due to poor handling or mismanagement of ingredients. While not excusing what happens in the four walls of the restaurant, to be fair to just about every restaurant operator out there, food waste occurs at all levels of the supply chain. In truth, long before the ingredients ever hit the prep table, a lack of supply chain visibility and coordination makes inventory obsolescence the larger overall contributor to food waste. 

If we had a crystal ball, this would all be simple. But forecasts are never exact, and day-to-day consumer demands will always shift, creating a discrepancy between what is believed to be needed and what is actually needed. This leads to the supply chain phenomenon known as the bullwhip effect. It occurs as demand distortion travels upstream in the supply chain from the retailer through to the wholesaler and manufacturer due to the variance of orders which may be larger than that of predicted sales. The result is not enough product when you need it, and, more relevant to food waste, too much product when you don’t. In foodservice, that product usually has an expiration date, creating a ticking clock to obsolescence and financial impact to the restaurant chain. We need look no further than March of 2020, the onset of COVID-19 in the United States, to see the financial exposure created by unpredictability in restaurant sales.

Creating order from the chaos.

The bullwhip effect, and by extension food waste, can only be countered with data visibility, supporting better coordination and communication between each link in the supply chain. That visibility ideally extends to all links simultaneously, so that manufacturers, distributors, and chains are looking at the whole picture at once – simply looking one layer up or back may be a more accurate game of telephone, but the person at the end will still get a distorted message. Some industries have it easier than others in gaining this level of data visibility. Foodservice has the perfect storm of challenges. It is highly fragmented both vertically and horizontally, with chains often working with multiple distribution companies spread across dozens of individual operating locations, and hundreds of suppliers. It is also highly dynamic, with products and product sources changing, whether seasonally, during menu promotions, or through product substitutions. Toss in the challenges of cold chain management, with truckloads of product able to be lost due to refrigeration problems, and you have a supply chain that is so disconnected and unpredictable that significant and constant food waste is the status quo.

Unless, that is, you can bridge the gaps, by pulling the data together from those sources, cleanse it, organize it, and link it together into a single, continuously updated snapshot of the supply chain. Only with that picture can parties quickly recognize what is happening across the entirety of the supply chain and swiftly react with the precision and communication needed to address food waste before it happens. All it takes sometimes is to update a purchase order here, modify a production plan there, or reallocate some inventory. However, doing any of that requires the right data in the right hands at the right time. Fortunately, technology is catching up with the challenge at hand to make this possible.

Here’s a simple test: Are you able to monitor DC inventory levels and planned purchase orders to warn of product buildup? Are you able to track supplier production plans and inventory against your expectations? Can you measure your financial exposure at every node of your supply chain at any given moment? Can you chart product shelf life against inventory days on hand, to highlight risk? If the answer to these questions is no, you are, without a doubt, experiencing elevated and avoidable food waste. 

Visibility into your supply chain is critical. And the earlier in the process you can acquire it, the better. With data and software, you can modernize your operations, and have the agility to resolve issues and quickly respond efficiently to supplier and distributor disruption. Would you like to know about, and be able to respond to discrepancies, shortages, and/or errors in your supply chain faster? Would you consider understanding price variability and that contract savings opportunities are valuable? Could having the ability to identify prevailing trends and partner performance changes to transform your operation? Would you like to have more confidence in the quality of the food products being delivered from your manufacturers? And would reducing costs across your supply chain make all the difference?

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