How active and intelligent packaging in the supply chain could solve the food waste crisis
Every year, approximately one third of the food humans produce around the world is wasted. According to the United Nations’ Food and Agriculture Organisation, this means that we throw away more than 1.3bn tonnes of food intended for human consumption every 365 days. That represents more than $900bn in losses and is more than twice as impactful in developed countries than developing nations. Reportedly, “every year, consumers in rich countries waste almost as much food (222mn tonnes) as the entire net food production of sub-Saharan Africa (230mn tonnes).”
For CPOs and supply chain professionals in the food, pharmaceutical and other industries that deal in products with limited longevity and specific environmental requirements, waste reduction and increased efficiency is only becoming more important.
In the UK, a study by WRAP indicated that 60% of household food waste arises from people not consuming edible goods in time. The answer may lie in the twofold approach of more effective branding and labeling that allows consumers to better understand the shelf life of food, and in active and intelligent packaging innovations that help foodstuffs last longer.
According to the report, “there is a clear interest in packaging that can maintain food freshness, both before and after opening, and also in clearer on-pack messages about how to store food.”
This is where active and intelligent packaging comes into play.
Active packaging is defined as “packaging in which subsidiary constituents have been deliberately included in or on either the packaging material or the package headspace to enhance the performance of the package system”, meaning anything that makes packaging better at protecting its contents.
Intelligent packaging “contains an external or internal indicator to provide information about aspects of the history of the package and/or the quality of the food.”
Active and intelligent packaging can include anything from moisture reduction sachets and anti-microbial linings to allergen sensors and physical shock indicators. The upshot is that products - particularly perishables - packaged in this way provide greater transparency to both enterprises and consumers.
Guy Cuthbert, CEO of UK tech firm Atheon Analytics, notes that “innovations such as split-packs, resealable packaging and sustainable alternatives to plastic may help to reduce waste but will not survive if sales are adversely affected.”
Earlier this week, global procurement market intelligence firm SpendEdge released its latest report into the effects of the active and intelligent packaging market on the procurement space as a whole. In addition to foodstuffs, the other area that is seeing significant growth with regard to active and intelligent packaging is the pharmaceutical industry.
“Food and beverage and the pharmaceutical are the two major end-users that are contributing to the spend growth in the active and intelligent packaging market. Buyers from the food and beverage sector are adopting active packaging solutions to enhance the shelf life of frozen food that is gaining immense popularity across geographies. This sector alone accounted for about 50% of the entire market share last year and is expected to continue impacting the active and intelligent packaging market size on a global scale. Intelligent packaging solutions are widely being adopted by buyers in the pharmaceutical sector with a view to improve the traceability of products. Such packages enable easy access to information pertaining to medicine through smartphone scanning,” says the report.
In a recent interview with the Active & Intelligent Packaging Industry Association (AIPIA), James Adkin, Senior Global Brand Manager at Unilever spoke about the ability for augmented reality (ar) technology to provide supply chain transparency, not only to supply chain professionals, but also to the consumer. Unilever’s AR provides its customers access to instructions and secondary information that allow them to get the most out of and minimise the environmental impact of their purchases.
“We think that AR can help us share the higher purpose of our brands to consumers in different and engaging ways,” Adkin says. “We will learn more about the experience of our consumers with our brands and use this to deliver a better experience. We also think that it gives us the opportunity to offer customers more shopping options such as via e-commerce sites - particularly when AR is used as part of a connected packaging programme.”
Better insight into the condition of perishable goods along the entirety of the supply chain, from crop to consumer, could be a key driver in reducing the amounts of food and other goods with delicate environmental requirements and short shelf lives across the planet.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”