TAKEAWAYS
Waste Eats Away the Bottom Line Overproduction and waste may push margins in the wrong direction. A recent Avery Dennison report finds that 8% of stock perishes or is discarded before it reaches consumers–inventory losses worth up to $163.1 billion or 3.6% of annual profits. Of the 8% waste, slightly more than half (53.8%) is lost in the supply chain before products reach store shelves. The report, The Missing Billions: The Real Cost of Supply Chain Waste , examines data from 318 companies and centers on issues of waste in supply chains in the United States, the UK, France, China, and Japan ( see chart ). Although the companies surveyed say they are aware of the waste issue, study authors contend that the needed budgeted funds to address the issue are lacking. “The current supply chain disruption is leading to a waste crisis, making the case for sustainable practices even more urgent and necessary,” says Francisco Melo, senior vice president and general manager, Avery Dennison Smartrac. Some companies turn to technology to help implement the measures needed to reduce supply chain waste. For example, 61% of organizations surveyed have deployed tracking solutions at the item level, with another 34.6% exploring options to implement this technology. Nearly all responding companies are embracing technology: 97% plan to invest in blockchain applications for the supply chain, 99% plan to increase smart device usage, and 97% say they will use industrial IoT, all within five years, The report also surveys consumers and finds their main concerns are cost and quality. But consumers do show interest in the journey taken by the products they purchase. For example, more than half of consumers (52%) agree that “transparency about a product’s journey to the consumer is important to me” and they are “being more transparent about materials/ingredients used” when buying clothing.
AI AND ML IN RETAIL: HELP OR HYPE? Top-performing retailers are bullish on artificial intelligence (AI) and machine learning (ML), with 71% of respondents to a Retail Systems Research report saying AI-enabled analytics will fundamentally change their merchandising forecasting by 2025. outperforming the norm.” Key reasons these retailers are considering AI and ML include the technologies’ potential to guide decision-making processes, including supply chain planning and management, and store performance evaluation methods. The report defines top-performing retailers, or “winners,” as “those whose sales are already “There is a veritable ocean of external data available from an increasingly digitized global marketplace, and the hope is that AI/ML technology can be used to turn that data into insights, and help retailers better understand the environments they operate in,” according to the report. Many retailers seek game-changing technology to improve business analytics, which bolsters their ability to respond to marketplace change. But the signals are mixed for retailers’ expectations for AI and ML. The report shows that retailers expect AI and ML to provide much-needed analytics for supply chain planning and management within three years; however, they don’t expect this process to come easy. Although more than half of all “winners” say they agree that AI-enabled analytics will significantly impact demand forecasting, supply chain planning, and customer interactions, just more than half (52%) say their company has a good idea of how AI-enabled technologies would impact operations over the next three years, while 37% describe AI’s value as “overblown.” Change management seems to drive this cautious optimism. Interestingly, retailers not labeled as “winners” are more optimistic, with 71% saying they know how AI would affect operations and just 15% not buying into the hype.
WASTE DUE TO OVERPRODUCTION IS LARGEST IN THE US AND THE UK
US 4.9%
UK 3.7%
JAPAN 3.5% FRANCE 3.5%
CHINA 1.8%
Source: Avery Dennison
December 2022 • Inbound Logistics 17
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