Reducing Food Wastage in the Supply Chain: The Role of Demand Forecasting and AI

By Sunil Saini, Chief Data Officer, CENSA, A WayCool Foods Enterprise

Did you know, about 40% of the total food produced in India is wasted, as per Food and Agriculture Organization (FAO)? According to the Indian Ministry of Food Processing Industries, the annual value of harvested crops lost in India is estimated to be around ₹92,651 crore (approximately $13 billion) as of the latest available data.

Food wastage is a pressing concern that casts a long shadow over our food supply chain, exacting significant economic, environmental, and ethical tolls.

Why Is Food Wastage a Big Problem?
Food wastage is a pervasive issue, resonating through the supply chain and leaving a profound impact on economic, environmental, and ethical fronts. In India, where an alarming 40% of food is wasted, the economic toll is staggering, amounting to nearly ₹89,000 crore per year, equivalent to 1% of the nation’s GDP. This colossal loss permeates each stage, affecting farmers, manufacturers, and retailers.

On the environmental front, discarded food contributes to one-third of human-caused greenhouse gas emissions, escalating environmental degradation and resource depletion. This wasteful practice adds an 8% annual increment to greenhouse gases. Beyond economic and environmental concerns, the ethical dimension is stark — millions face hunger while large quantities of food go to waste, underscoring the urgent need for a more conscientious and responsible global approach to food utilization.

Main Reasons for Food Wastage
Overproduction, an inherent challenge in agriculture, leads to a surplus of food that frequently remains underutilized. A supply chain that is push led rather than being demand led causes for lack in the food ecosystem. Inefficiencies of logistical hiccups, inadequate storage, or transportation contribute to the spoilage and loss of vital food resources. Yet, the most substantial drivers of food wastage is the misalignment between demand and supply. When production fails to harmonize with demand, surplus food results in the huge wastage that poses both an economic and ethical conundrum in our global food systems.

Where Does Food Wastage Occur in the Supply Chain?
Food wastage pervades every stage of the supply chain, contributing significantly to losses in India and globally. In India, a staggering one-third of produced food is lost or spoiled before reaching consumers, as reported by the Food Safety and Standards Authority (FSSAI).

Globally, the United Nations notes that approximately 13% of the world’s food production disappears between harvest and retail. Inefficiencies abound throughout the supply chain: from overproduction and poor harvesting techniques, leading to significant losses, to quality control issues and mishandling during processing and packaging. Transportation and storage inefficiencies set the stage for further deterioration and pest infestation.

Even at the retail level, supermarkets contribute to wastage by discarding products nearing expiration dates or with minor imperfections. A holistic approach involving technology, responsible practices, and innovation is essential to create a more efficient, sustainable, and responsible food supply chain.

Demand-Driven Supply Chain to reduce food wastage
A demand-driven supply chain is a solution that aims to deliver products to retailers within hours of harvesting. By synchronizing production with real-time demand data, this approach minimizes food wastage.

Role of Demand Forecasting: Demand forecasting serves as a crucial tool in the fight against food wastage. By utilizing predictive analytics and historical data, accurate demand estimation becomes possible, enabling meticulous planning and procurement. This proactive approach helps mitigate overproduction and subsequent wastage.

Comprehensive Approach: Demand forecasting goes beyond estimation, extending to optimizing the entire supply chain. Aligning production and distribution with forecasted demand significantly reduces surplus food that often goes to waste. This synchronization results in a streamlined farm-to-fork process, enhancing overall efficiency.

Supplier Allocation Engine: Innovations like the Supplier Allocation Engine intelligently select suppliers, reducing costs and slashing wastage. This intelligent system ensures efficient supplier-retailer matching, further contributing to the reduction of food wastage.

Inventory Management: Efficient inventory management becomes achievable through demand forecasting. Retailers benefit by maintaining optimal inventory levels, preventing excess stock and reducing the likelihood of food going to waste.

Strategic Impact: Demand forecasting is not merely an analytical exercise; it is a pivotal strategy to combat food wastage and foster an efficient and sustainable food supply chain.

AI’s Role in Reducing Food Wastage
The integration of AI introduces groundbreaking innovations to combat food wastage throughout the supply chain, revolutionizing key aspects from delivery routes to inventory management.

Optimized Delivery Routes: AI leverages its capabilities to calculate the most efficient delivery routes, reducing transportation time and minimizing spoilage and losses.

Shelf-Life Estimation: AI plays a pivotal role in estimating product shelf-life through advanced algorithms. This predictive capacity enhances inventory management, resulting in a substantial reduction in discard rates.

Last Mile Optimization: AI extends its impact to the last mile of the supply chain, ensuring that products reach consumers in optimal condition and punctuality.

Comprehensive Optimization: The holistic integration of AI across the supply chain contributes to the overarching goal of mitigating food wastage and fostering a more sustainable food supply chain.