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Important Considerations for Reverse Food Logistics

This article discusses the important consideration when integrating reverse logistics in the food industry. These considerations indicate the connection between reverse logistics and food wastage. Additionally, it highlights the beneficiary aspects a company can gain through implementing efficient reverse logistics. Firstly, it helps to minimize the impact of food wastage by creating new values for the rejected food products. Secondly, it provides partnership opportunities and allows the company to gain competitive advantages in the market. Lastly, the company can obtain genuine information that was utilized to improve the company’s current business strategy on products and services to increase customer satisfaction and retention rate.

Global Awareness for Food Wastage

On average, 2.54 billion tons of food are wasted in a year, which is equivalent to 40 percent of the total food produced within a year. These potentially contribute to 10 percent of the greenhouse gases produced which trapped heat on the earth’s surface, resulting in climate changes. Food wastage comes from either food being disposed of within the supply chain process or consciously disposed of during consumption. Food wastage implies both resources and financial loss for the company and consumers. This has rapidly become an important consideration for a company that seeks to maximize profitability and move towards a more sustainable and eco-friendly business process. Companies such as Nestle and McDonald’s are currently attempting to incorporate reverse logistics to reduce, if not mitigate food wastage. The key concept of reverse logistics is to process discarded food waste into reusable resources to minimize wastage. Ultimately, it improves a company’s reputation as an eco-friendly company and is more likely to attract environmentally conscious consumers.

Importance of Competitive Advantage

With digitalization, consumers can now purchase their daily necessities from multiple platforms. E-commerce, which involves online shopping through devices such as smartphones and tablets is the most trending platform. However, online businesses today would only be able to market their products and services through images, live-streaming, and videos without the ability to provide customers with a sensory experience. Survey has shown that online businesses face up to an 89 percent return rate where nearly 50 percent comes from high-value foods products. Often, products sold from online purchases have failed to meet the consumer expectation in terms of the food appearance and taste, etc. Thus, online businesses must establish a hassle-free return policy for their consumers. In this way, a business can build greater trust in consumers and assurance for their purchase which aids in promoting a fruitful long-term business relationship with the company. Thereby, companies that can provide return services for consumers will gain a competitive advantage over their competitors and will aid businesses to increase market shares.

Importance of Product Value

The value of a product diminishes once the product has been rejected either by the company or the consumer due to various reasons. For instance, damage in food packaging due to shipping fault or other reasons, expiry of food products, or massive food recall by a company or by the relevant government sector. These will create a substantial financial and resources impact on the company if they have no means of reusing the rejected products. Successful companies such as Amazon are looking into integrating reverse logistics to create new values for the rejected food products through different means. Amazon’s warehouse work as a distribution and reprocessing center where rejected food waste is examined on whether they are qualified for reselling purposes. This allows companies to retrieve a minimum value from the rejected foods rather than letting them go completely to waste. Thus, a company with reverse logistics should continuously seek improvement in its reverse process to further maximize its gain from this process. As shown in statistics, the company is able to minimize its cost for reverse operation from 10 percent to 1 percent of its total supply chain cost with efficient reverse logistics.

The Partnership Opportunity

Reverse logistics can only be implemented successfully when a company has the knowledge, skills, capacity, and capability to convert food waste into reusable and profitable products. In order to achieve successful reverse logistics, companies will have to source partnership opportunities to re-manufacture rejected food products into valuable products. For instance, “Waste2func” is a US campaign that involved a partnership between 12 parties from universities, SMEs, and large enterprises such as Evonik. These parties gather food waste through reverse logistics and turn them into bioplastic with aids in research, innovation, and technology.

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Edmond Fong Mun Seong, DLSM
Edmond Fong Mun Seong, DLSM
Edmond Fong Mun Seong has substantive years of experience in warehousing and logistics operations, and specifically in the skincare and FMCG industry. He holds an Executive Certificate in Supply Chain Management and he is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). Edmond completed the Diploma in Logistics and Supply Management (DLSM) in March 2022 at SIPMM Institute.

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