Uwe Weiss, CEO at Blue Yonder discusses how as the ethical consumer rises, retailers must implement new processes to radically reduce waste.
Britain’s generation of plastic waste is showing no signs of slowing down. A Guardian investigation conducted earlier this year suggested that plastic packaging waste has reached 1.5 million tonnes a year in the UK, with more than half of this (800,000 tonnes) coming directly from the top supermarkets.
And it appears that these figures are having an impact on consumers’ shopping preferences. Research by technology consultancy ThoughtWorks reports that the key issue for 62 percent of British food shoppers is now reducing packaging to cut plastic waste, higher than the 57 percent whose number one issue was the price of food. Furthermore, 48% of adults said reducing food waste would be a top issue for the future. This is a significant and fundamental shift in consumer priorities, suggesting that supermarkets that focus solely on how cheaply they can price their products may increasingly lose ground to those retailers that focus more on sustainability and ethical issues.
New consumers demand a new approach
The UK grocery market has never been more competitive. With low-price discounters like Aldi and Lidl undercutting the traditional big players, and with innovators like Amazon disrupting the sector through their acquisition of Whole Foods, supermarkets are under more pressure than ever to cement customer loyalty and differentiate themselves. One potential avenue for this brand differentiation is taking robust action on reducing plastic waste.
Some retailers have responded well to this change in consumer demand, with an increase in ‘plastic free stores’ and a number of big retailers going above and beyond their legal obligations to address the issue head on. Co-op, for the example, cut its plastic by 44% between 2006 to 2016; from 78,492 tonnes to 43,495. The grocer then went one step further, by calling for a French style system of ‘bonus-malus’, whereby supermarkets are penalized for using non-recyclable plastic. Waste figures remain critically high however, and 72% of shoppers still think that supermarkets are not doing enough to tackle the problem of plastic pollution.
As consumer priorities continue to shift from pricing to ethical and sustainability concerns, retailers should see reducing their plastic waste not only as a critical environmental priority, but as a business imperative that can help their brand to stand out in a crowded marketplace. Making a real difference to the amount of plastic that they waste could help retailers attract the ethical consumer, increasing sales and growing brand loyalty.
However, one of the most challenging contributing factors that retailers face when tackling plastic waste is over-ordering stock. Often, as retailers struggle to predict the right amount of stock to meet customer demand, they order more than is necessary, preferring to throw food away rather than run the risk of shelf gaps.
So much perishable food is now packaged in non-recyclable plastic that if this food is left unsold and turns bad, not only is the food wasted (which is a significant environmental and societal issue on its own), the plastic in which it is packaged is also thrown away without being recycled. By adopting new ways to replenish their stores that avoid this unnecessary waste, supermarkets can make significant progress with this pressing business and environmental issue.
Artificial intelligence in plastic reduction
Many retailers still rely on outdated replenishment tactics based solely on historic sales data or inaccurate manual predictions, or even sometimes based on nothing other than sentiment. However, this approach to replenishment must change if retailers are to make a real impact on their plastic waste. Retailers must take a more innovative, data-driven approach to their replenishment if they are to optimize previously manual, error-prone processes and reduce the amount of stock that is wasted, and therefore the plastic packaging that is thrown away.
Retailers have access to an enormous amount of data, be it from past sales figures, customer footfall, public holidays or even changes in the weather. Grocers can optimize this data through artificial intelligence (AI) and machine learning to reduce plastic waste by making accurate predictions of customer demand and automating replenishment decisions, increasing their accuracy even as they continue to learn and refine their forecasting models. This can significantly improve product availability, as removing manual intervention from the process helps ensure that retailers have the appropriate level of stock to match potential sales. In the process, they will see positive benefits including reducing food waste and therefore the amount of plastic packaging that has to be thrown away.
We recently helped Morrisons, the UK’s fourth biggest grocer, undergo this transformation. One of the biggest customer satisfaction barriers that Morrisons identified was product availability. Up until that point, the supermarket chain had relied on traditional systems to replenish its stores – mostly through manual orders made by in-store teams. This proved time-consuming, created inconsistencies between stores, and was not always accurate. To improve availability, Morrisons needed a solution that could solve its two biggest challenges: understocking and overstocking. By implementing AI, the chain was able to automate the replenishment process while significantly enhancing its demand planning and replenishment capabilities, thus optimizing availability while reducing wastage.
All businesses and consumers have a responsibility to reduce their impact on the environment, especially the amount of plastic waste they create. Retailers are in a more influential position than most to make a significant difference to plastic waste by implementing AI-driven solutions that are available today to optimize replenishment and pricing, in turn reducing the quantity of wasted food and wasted plastic packaging. This move towards reducing plastic waste could help retailers to differentiate themselves in the market, reducing their environmental footprint and increasing their appeal to consumers who want to help make a positive impact on the world around them.