Supply chain costs make up around 55% of a product's cost ©  Fairfax Media via Getty Images
Supply chain costs make up around 55% of a product's cost © Fairfax Media via Getty Images

Supply chain waste costing Australia and NZ $1.72bn

29 June 2020

Supply chain inefficiencies are causing Australia and New Zealand to lose between 18% and 22% of fresh food produce at a cost of around $1.72bn, according to a report.

The State of the Industry report 2020, by the Produce Marketing Association Australia-New Zealand (PMA A-NZ) and commissioned by Ernst & Young, said supply chain costs amounted to roughly 55% of total product costs.

The report said six key supply chain performance drivers had been identified, including facilities, inventory management, transport, information and communication, workforce, and supply and demand.

Ruth Ahchow, partner, economics, regulation and policy at Ernst & Young, said: “Inefficiencies across the supply chain have a huge impact in terms of overall product costs.

“For example, we waste fresh produce along every point of the supply chain, and about 20% of produce is wasted throughout the supply chain.”

Ahchow said fresh produce spent up to 50% its shelf life in transit.

“There is a huge role in terms of temperature and transport conditions to deliver the freshness and quality we need at point of sale,” she said.

“Also, supply chain performance can impact on consumer trust and awareness.”

She said the key driver of long-term value was collaboration in relationships along the supply chain, as well as the sharing of information and data to better understand consumers and demand.

“I think at the moment the current market is production and product-based, rather than market driven, so there’s a mismatch with what the consumer wants. For example, growers harvesting early to make a better profit,” Ahchow added.

Darren Keating, CEO at PMA ANZ, said consumers may not always like seeing packaging in retail stores but it delivered better “point of sales” outcomes in terms of improving quality and freshness.

Ahchow said: “The other thing in terms of this new Covid world, something in a package is less likely to be having something going wrong with it along the supply chain.

“There’s also [the customer] picking up and testing that things like avocados are ripe then putting it back again. I think we have had enough information out there that less packaging is better.”

Craig Taylor, general manager fresh produce at Coles, said producers and retailers needed to rethink the way produce is marketed.

“We need to get used to using the term ‘home life’ as opposed to ‘shelf life’ in our vernacular,” he said. “You don't get measured on shelf life at home; you get judged on how long it lasts in the fridge or fruit bowl.”

 Want to stay up to date with the news? Sign up to our daily bulletin.

CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates