Managing food waste to zero should be easy. Keep the forecasts tight and under control, manage to a limited assortment, shorten supply chain lead times, work with vendors on packaging and case sizes, and always get the weather forecast right! Oh, and at the same time, never go out of stock, make sure the shopper gets the impression of choice, with abundantly filled displays of fresh items with long shelf lives.
It was with these dilemmas in mind that ECR commissioned research with Eindhoven University. The objectives were to quantify the relationship between lost sales (through poor availability) and retail food waste (created by too much product, too few sales, etc) based on the data from three categories, in three retailers across 27 stores.
Their research brought this dilemma to life in the form of the 'Efficient Frontier' analysis, which identifies the formal relationship between lost sales and retail food waste. Said another way, what the Efficient Frontier presented to retailers and producers was the idea that there is a choice: if you don't want to lose ANY sales, then the cost in terms of retail food waste will be €x and vice versa.
Importantly, for practitioners, the research also developed three pragmatic tools:
1) A 'what if' model that could help quantify the benefits of shifting the Frontier to the left. What would an extra day of shelf life deliver?
2) A profit optimisaton model - using margin and other cost factors, what is the 'sweet spot' between foregone sales and retail waste?
3) The Fresh Case Cover metric - developed after the research was published, and the most widely adopted model from this research, it helps retailers to predict retail food waste, leading to interventions that can prevent retail food waste, encourage smaller case sizes, increase daily sales through a narrower assortment and longer shelf life in store.