August, 2023
Fresh produce is the crown jewel for food retailers. It’s no coincidence that fresh produce leads the majority of promotions, and awards for best fresh produce are hotly contested by leading grocers. Food retailers know customer’s love “fresh”. And if they can draw customers to their store to find their favorite fresh ingredients, there is much more opportunity and probability they will leave with a lot more in their basket. So naturally, fresh produce has the prime location at the store entrance, and has expanded in total floor and shelf space. However as grocers compete to offer the widest range, the highest quality and the freshest items, they also know there is a cost: huge, and often untraceable inventory loss.
Fresh produce, for example dairy, fruit and vegetables, meats, fish, bakery and fresh flowers, account for the highest loss of all products in a supermarket. This loss includes theft, disposal as a result of damage, and removal due to expiry and use by dates. High value items, for example premium meat and fish products, can reach over 20% inventory loss on a single line item, a major impact on profit. The 'first in, first out' policy that many supermarkets operate under often exacerbates this issue, as it does not always present the right products on the shelf at the right time, leading to increased loss through expiry. Why is it not easy to fix?
The loss challenge is growing
Inventory management is the single greatest drain on in-store staff resources every day. Customer habits are part of the issue. We’ve all done it; sorting through fresh produce, digging to the bottom of fruit crates and to the back of fridge shelves to find the item with the longest expiry date and no imperfections. Retailers have only one solution to mitigate loss, constantly reorganizing shelves, often multiple times a day to bring the products with expiry dates to the front and to replenish removed items. Research by Coresight reveals over 50% of stores claim to check product freshness at least once a day. It can add up to thousands of micro tasks in every store. In this dynamic and unpredictable environment, maintaining disciplined and methodical inventory management is an almost impossible task. What is predictable is the more fresh produce and perishables a food store offers, the more loss they can anticipate, and the more time staff spend reorganizing shelves. Food retailers do not publicly share their loss statistics, however the conservative estimates are that a minimum of 10% of all fresh produce inventory never makes it to the checkout. As shared in our infographic on waste, the missed revenue and the environmental costs are meaningful.
In contrast, online orders which are fulfilled by robots picking products in automated warehouses have demonstrated near zero loss rates. These systems always select the expiry date that is next in line, eliminating human error from staff and human preference from shoppers.
Fresh ideas for inventory management
People love to see, touch, smell, and pick their ingredients. So how can existing technology be applied in-store to keep the best click-and-collect and in-person customer experience, and help leadership and in-store staff bring loss down to low single figures?
The game-changing decision is to implement item-level identification for any product. From the moment an item receives a label with RFID, whether it is applied in-store for example at the bakery, or it is applied by a producer at the start of the supply chain, the product’s journey is traceable. If it is damaged and placed in waste containers, or it leaves the store through theft or human error, it can be logged in a system and management learns exactly where the problems are that need addressing.
In-store this transforms inventory management. Staff can instantly scan shelves to identify expiry date risks, and a more structured process can be maintained throughout each day that presents the products you want to sell first, and prevent the newest deliveries immediately getting front shelf space.
In North America alone, Coresight research calculates waste is costing grocers $16 billion in lost profits. Additionally, our own research reveals waste in the supply chain accounts globally for over 10% of inventory being lost before it reaches consumers. The majority of this inventory loss is unnecessary. The question is do grocers feel the damage it does to the business justifies rethinking their inventory management systems? Once they embrace technologies such as RFID, it will lead to the same paradigm shift that has been experienced by global fashion retail leaders. In-store it arms managers and staff with the insights and tools they need to optimize inventory and reduce loss. Once extended along the supply chain it can create item-level traceability from ‘farm-to-fork’, removing waste and loss at every stage of the supply chain and giving marketing the insights to create more powerful customer experiences.
Offering customers the best fresh range is possible without a negative impact on profit, in-store personnel, and sustainability. The future of food retail lies not just in the quality of the produce and the customer experience, but in the smart use of technology to manage it.
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