Company Profile
Taking the High Ground on Waste in the Low Lands
Dutch Supermarket Giant Albert Heijn’s Waste Journey Reduces Costs and Carbon
The well-known idiom“waste not, want not”dates back to the 16th century when it was used to educate the poor about the wiser use of resources to help them escape poverty. It came into its own during the two world wars of the 20th century with rationing and“making do and mending,”but the rationale lives on and is truly embodied in today's corporate social responsible (CSR) world where cutting costs and “carbs”—CO2 emissions—and changing company culture is on every European board agenda.
In terms of reducing retail shrinkage—loss through theft, compliance or process failure, damage, or waste—the amount of food that is simply thrown away in the supermarket and hospitality industry is quite simply “public enemy number one.” In 2013, international research carried out by food recycling charity Refood claimed that billions of euros were literally being thrown away. The survey, which called for zero food waste into landfill by 2020, said that in the UK alone, €20 billion worth of food was wasted every year and reducing it would prevent 27 million tonnes of greenhouse gas from entering the atmosphere. In addition, it could result in 1.3 million tonnes of nutrients going back to the soil as well as generating more than one terawatt-hour of electricity, which is enough to power over 600,000 homes.
In another international research project carried out by Planet Retail, it was calculated that food wasted across Europe and the US in one year could feed the world more than three times over and the eradication of this waste would be the equivalent of taking one in four cars off the road in terms of CO2 emission reduction.
It is a global issue with the EU and UN committed to reducing it by 50 per cent by 2025 through a “Joint Declaration Against Food Waste” programme, and the Dutch Government has set itself a target of cutting food waste by 20 per cent by the end of this year. Technology can, and has, played a part in reducing waste for many European businesses, but the end game is about cultural change—altering the way people at every level of the business think about waste—from the supplier to the shop floor.
Albert Heijn
Indeed, this kind of big-picture thinking has become something of a cause célèbre at one of the Netherland's biggest employers, Albert Heijn, the supermarket operating name of Ahold, where the board has set about cutting around one third of its waste in just two years and shaving millions of euros from the cost of doing business at the giant retailer.
Founded in 1887 with headquarters in Zaandam, the Netherlands, Ahold employs more than 220,000 staff across more than 3,000 locations worldwide with store types varying from convenience outlets to full-scale hypermarkets that generate a collective revenue of more than €30 billion.
Ahold is a high-profile business and has in six successive years confirmed its position as a responsible retailer on the Dow Jones Sustainability World Indices (DJSI), a benchmark ranking that recognises the progress that the business has made with its “Reshaping Retail” strategy.
The company scored an average of 75 (out of 100) in the food and staples retailing sector in 2014—improving on last year's 74 and compared to an industry average of 48, with the sector lead scoring 76. The company scored particularly high in a number of areas, including supply chain management practices, carbon emissions and waste reduction programmes, and its active contribution to the health and safety of associates by offering multiple health and well-being initiatives.
These rankings make Ahold an attractive proposition, not only for global investors but also for customers who want to be associated with success and a brand that is not being profligate with its profits and is continually looking for ways of improvement in service and reducing costs.
One of the key figures in bringing waste under control is Peter Werre, a specialist in the Excellent Supplier Management Department at Albert Heijn whose job is to identify where the business can make a difference in controlling its waste.
“The CEO instigated a project team to reduce waste by 30 per cent in two years,” said Werre. “And after more than 100 interviews in stores and distribution centres within the Albert Heijn organisation, we identified a number of areas where we could make improvements. These were primarily working with our suppliers and our colleagues at head office, in our distribution centres, and in our stores. We started to involve all kinds of people and come up with ways of cutting the waste from our ways of doing business.”
Extending Shelf Life
Werre continued, “In relation to our suppliers we made shelf life, and how to improve upon it, the primary focus. In terms of fresh meat and poultry, we worked towards extending the shelf life by one day and optimising the supply chain at the supplier end. From our interviews, we realised that commercial decisions can influence the whole supply chain. For example, having too much stock in the supply chain because of inaccurate forecasts can cause problems and generate wastage. Instead, if everyone has greater knowledge of replenishment requirements and access to the information, it will help us all to make better decisions.”
This more forensic analysis of the supply chain led to some more dramatic decision making, including closer examination of what is in the distribution centres (DCs) at any given time and, where necessary, making the decision not to take stock to the stores but straight to the food bank project where waste goods go to charities and those in need. This cut out a number of unnecessary food journeys and led to an even closer inspection of replenishment patterns.
The story was also the same in the stores where the team worked on shelf life discounts of products close to the sell-by date.
The team was aware of changing buying habits—the shift from large family shops every week to more targeted smaller shops as and when food is required. This change has been more seismic and spread across Europe, possibly in response to more adverse economic conditions, but householders have generally been reducing their own household waste, primarily to save money.
“We therefore looked at ways of reducing our waste. At store level, we worked on realisation that on the last day of the food date, the discount is 35 per cent, which means that we are more likely to sell it instead of throwing it away. But that also means that our colleagues in stores must apply the reduction tickets in time, which was not always the case.”
“This is in part due to supply chain optimisation projects we have been engaged in. We investigated, for instance, the order units in the store and worked with the suppliers to reduce the amounts delivered. We even went to the lengths of altering the store display fixings so that we no longer make shelves too big. Instead, we agree with the supplier to use crates with fewer products. Working with our logistics team has meant that we been able to make dramatic savings. It is all about getting people to think differently.”
ECR
Albert Heijn is not alone in trying to reduce its waste. The ECR (Efficient Consumer Response) Group Europe has studied a number of European examples of waste management projects, including a technology solution based around dynamic pricing and digital signage to reduce fresh produce wastage.
Working with partners including Cap Gemini and Toshiba, the participating supermarkets established an intelligent waste management pilot that adjusts messaging on electronic signs to reflect price changes, product information, and promotions. The system compares predicted and actual sales rates and analyses expected deliveries and current stock levels to ensure there is no overstocking.
This is achieved through wireless digital displays and hand-held scanners used by “mandated” individuals in the business—those who can make decisions regarding freshness and the optimum times to introduce promotions that increase sales and reduce waste. This has resulted in reduced costs, better sales, and improved CSR because it is seen as addressing the food waste issue that the Dutch Government has pledged to tackle. In addition price discrepancies are eliminated.
A Matter of Life and Death
Similarly, Albert Heijn has waste management technology in place to check on availability in its central ordering systems in order to optimise the fine balance between stock rotation and shelf life. Ultimately, in terms of livestock, this is the difference between life and death. Making a more accurate rather than arbitrary calculation based on the amount of beef steaks that will be sold means the livestock suppliers need to kill fewer cattle. Only what is used is slaughtered.
“We simply don't kill the cow that we do not need to,” said Werre. “Likewise, we have almost met our targets, and we are no longer looking at this as a project; this is the way we now conduct business going forward in the real world. We have managed to save millions of euros over the last couple of years. It has been a learning point; we started the journey in order to make people understand what cooperation from all parties can mean to the business. Consequently, we all do things differently now to how we did them two years ago. Primarily, we order less because we know we won't sell it, and we communicate this fact to avoid over-supply.”
It has been a complete mind set change for Albert Heijn, which now treats every item as a scarce commodity. And in terms of the supply chain communication, the more people that know, the more cooperation takes place at all levels.
A lot of people have benefited from this paradigm shift in the Albert Heijn business model, not least the food banks that help the Netherlands' less fortunate communities.
A European Solution
Although supply chain cooperation has worked in the Netherlands, a European country that has pledged to dramatically reduce waste by the end of this year, such waste cuts may not be possible in other countries where the supply chains are more stretched, according to Werre.
“Logistics for us are easier in a small country. It has worked for Albert Heijn and many other companies in countries that are smaller and the supply chains operate on a more intimate scale. However, I doubt whether this can work in the US where there are much larger distances involved and where the found solutions may represent more of a challenge,” he said.
Working Together
The moral of the story is that people do not realise what they are causing in the supply chain with their decisions, and such programmes as that introduced by Albert Heijn really help businesses cut costs and be good neighbours. But it takes more than the actions of retailers to impact the waste agenda.
Back to the ReFood Vision 2020 research in the UK that seeks to end food-to-landfill waste in the next five years: the parties involved—retailers, local authorities, Government, and the recycling industry—recognise that influencing change takes more than one group and represents a collective responsibility.
Industry and retailers are now working towards best practice models across their supply chains, but the programme called for the message to be drip fed to householders—the biggest cause of food waste across Europe—and a clear timetable for the phased introduction of a ban on food-to-landfill waste. This would allow industry the time to finance and develop an optimum collection and processing infrastructure.
There will also need to be compulsory separate collections of food waste from homes and businesses, with an outcome that optimises its value to provide energy, nutrients for agriculture, and, preferably, heat.
The final piece of the education jigsaw is the integration of food waste education into school, college, and professional training programmes, and increased support for initiatives such as WRAP's (Waste and Resources Action Plan) “Love Food, Hate Waste” scheme.
Across Europe retailers such as Ahold remain at the vanguard of helping to turn the waste juggernaut around. The provision of incentives to change behaviours along the entire supply chain, from the farm to the fork, means that less food is ultimately being produced so that less is thrown away. Likewise, consumer buying patterns have changed to a more “just in time” manner, purchasing today (possibly at a discount) what they will consume this evening rather than making larger and longer shopping trips. This pattern is leading major supermarkets not just to change their distribution patterns, but even to reduce the number of larger stores and to focus upon their “express” or convenience models. It is now the huge, out-of-town supermarkets that are falling victim to the “waste not, want not” agenda.
