Supply Chain Asked to Help as Food Waste Hits Historic Highs

Supply Chain Asked to Help as Food Waste Hits Historic Highs

The USDA has funded project to figure out how to reduce the food waste, which accounts for 18% of landfills.They will test online marketplaces and mobile apps.These emerging sharing economy companies could help farmers, restaurants, retailers and households manage problems with day-to-day food waste.

The USDA’s Agriculture and Food Research Initiative  is looking to researchers from ASU’s W. P. Carey School of Business to find solutions to food waste.

“In Arizona and around the country 18% of landfills is food waste, according to the EPA - and that may be a conservative number,” says Tim Richards, Marvin and June Morrison Chair in Agribusiness at the W. P. Carey School.

“If we can figure out a way to better utilize food that would otherwise be wasted we can minimize what goes into our landfills and more importantly make better use of the water that’s used to irrigate plants, saving 25% of our freshwater supply each year.”

Two unique research projects are being funded by the USDA’s Agriculture and Food Research Initiative. The first project will test online marketplaces and mobile apps. These emerging sharing economy companies could help farmers, restaurants, retailers and households manage problems with day-to-day food waste. For example, if a farmer has a box of ugly fruits or tomatoes that won’t sell in the supermarket because they’re too big for the grocery store display, for instance he can use an online platform to let others know he has a surplus of food. Consumers then visit the app or website, select the items they want, and the app coordinates delivery logistics and payment for the farmer.

Researchers at ASU are teaming up with Imperfect Foods, a startup delivery company based in San Francisco to test market theories and demand conditions. In addition, the experiment will use 400 business school students at Arizona State University and California Polytechnic State University to measure their use of food waste.

At the conclusion of the two-year research period, investigators hope to be able to answer the following:

  • How will these innovations impact farmers and consumer food prices?
  • How will knowledge and information impact demand uncertainty among food manufacturers, family meal planning, and food waste?
  • Are stakeholders in the food supply chain receptive to dealing with collaborative enterprises?

A second ASU research project will put scan-based trading (SBT) under the microscope. SBT is a newer type of contract used by food suppliers and retailers like Walmart and Target, where the supplier retains ownership of the inventory in stores, until the product is scanned at the register for checked-out by the customer.

Suppliers, such as dairy producers or bakery vendors are responsible for keeping products in stock, while the retailer provides vendors with valuable shelf space and its employees manage that space. Any loss of product between delivery and checkout is typically the responsibility of the supplier, not the retailer.

One major problem in SBT is ‘shrink,’ the loss of product between delivery and checkout – anything from expired inventory, broken cartons, and even theft. This could mean a loss for the supplier under an SBT contract, who may decide to increase wholesale prices to cover its losses. The retailer could then pass that increase along to customers, by raising prices according to lead investigator Elliot Rabinovich.

“We hope to explore the causes of shrink and how to address it. Can suppliers do a better job at managing it? Or do retailers need to have greater sensitivity - regardless of whether they own the inventory or not,” said Rabinovich, a supply chain expert and John G. and Barbara A. Bebbling Professor of Business at the W. P. Carey School. “It’s not finding out who’s at fault, it’s how do we work together.”

SBT contracts do have benefits, including giving suppliers access to real-time sales information from retail checkouts and the flexibility of replenishing stock in-store, without having to go through a distribution center which traditional contracts often require.

At the conclusion of the two-year research period, investigators hope to be able to answer the following:

  • How can SBT contracts support the objectives for both retailers, suppliers, and the farmers who sell to them?
  • Is there potential to minimize food waste through the supply system by using SBT?
  • How does shrink at SBT stores and non-SBT stores impact wholesale and retail costs?
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