A circular supply chain consists of products and its parts being returned or processed so they can be repaired, resold, refurbished or recycled. It involves minimizing waste, maximizing resources and obtaining resiliency, safety and sustainability. It also comes in many forms, impacting the cold chain in various ways.
Food Logistics talks exclusively with Christopher Mejia-Argueta, research scientist and director of the Food and Retail Operations Lab, MIT Center for Transportation and Logistics, about how to start a sustainable journey, what are the key drivers and how to overcome sustainable challenges.
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Food Logistics: What are some of the main challenges with regard to building a circular food chain?
Christopher Mejia-Argueta: Food supply chains are dynamic, complex, and subject to perishability. Therefore, they face several challenges when addressing circular economy models, which aim to recycle, reuse, and repurpose food. These primary challenges are:
Consumer behavior and awareness. Shopping behavior constantly changes, mainly when it depends on discounts. Most forecasting is based on aggregated models that impede grain granularity on how consumers will buy under dynamic circumstances, such as being promoted, facing a stockout, etc. These issues create higher variability in the product replenishment time, quantities, and freshness. Therefore, raising awareness about the importance of circular food chains and educating consumers on how they can contribute is vital but challenging. In addition, culturally speaking, most customers are unaware of the impact of food recovery, donation, and reusability on the supply chains.
Waste management and perishability. The perishability of the products creates the need to push more inventory downstream to keep freshness for a more extended period available to customers. However, this strategy increases the need for monitoring the food across the supply chain (up- and downstream), which grows the capital and operational expenditures for organizations looking to use temperature-controlled operations, sensors, and technology, as well as staff-intensive operations to sort, transform, store and distribute perishable items. On the other hand, perishability complicates the physical flow of products because they have a limited time, and therefore, decisions and actions to extend their life have to be made dynamically to avoid waste and losses. On the other hand, developing efficient infrastructure for collecting, sorting, and processing food waste is complex and costly.
Scalability and economic feasibility of the solutions. Despite a growing trend to improve the food supply chains from farm to fork and back to farm, scalability is the biggest challenge. First, there is a disconnection of innovations from the reality of the market, offering top-down approaches that connect easily to the most prominent players. Second, most of these innovations face low adoption and diffusion rates due to the absence of academic support that may help simulate and run pilots to find leverage points and refine ideas before launching circular supply chains into action. Finally, the cost and privacy concerns related to these solutions remain high for the users, primarily one-person firms or small firms, sometimes with no access to training, internet, and other important practices to deploy long-term sustainable circular economy models.
Supply chain coordination requires diverse stakeholders to align efforts from farmers to consumers and from consumers upstream to recover edible food. However, this coordination is challenging because it requires collaboration, synchronization, and stakeholder trust. Recovering produce and other food and keeping them in the human value chain for consumption is a race against the clock, which requires standardization in handling processes and food safety to prevent cross-contamination. In the case of food that humans will not consume, cross-industry coordination is complex, and it prevails as a niche for a limited number of products.
Regulatory and policy challenges are significant. There is no consensus on creating adequate incentives for businesses to adopt circular practices without requesting them to invest time and money. In addition, mandatory regulations on circular economy have grown for specific resources, such as water and food waste from restaurants, but not across industries. Moreover, their application has been limited to geographies focused on reducing carbon footprint, improving resource use, and mitigating adverse impacts on local ecosystems. However, overcoming these challenges requires a multi-faceted approach involving technological innovation, policy support, stakeholder collaboration, and widespread consumer engagement.
Food Logistics: What kinds of solutions has your company introduced within the last 12 months that help eliminate food waste, promote sustainable sourcing, and more? If your company does not develop solutions, what solutions do you see as important for companies to implement?
Mejia-Argueta:
Sustainable food packaging. Food-related companies such as retailers, wholesalers, and food service companies use a lot of packaging. However, an emerging trend in converting food residues into biodegradable disposable items or part of the product has grown in the last five years.
a. Replacing oil-based single-use plastics. The use of pineapple peels, corn, avocado pits, and other materials has grown in the U.S. and Latin America to reduce pollution. In Mexico, companies such as Biofase collect avocado pits to transform them into bioplastic to manufacture straws, disposable cutlery, and containers. A similar case is observed in Colombia, where Lifepack gathers maize and pineapples to produce similar items.
b. Alternative materials such as bamboo, sugarcane, or cassava, which are biodegradable and natural, are used to package food. Companies such as Universal Biopack in Thailand, and Canyapack in Spain, among many others, aim to replace Styrofoam and other plastic packages by using materials linked to nature, which are strong, flexible, and durable. PackBenefit from Spain, on the other hand, has patented a method to create compostable food trays that, together with non-invasive, plant-based stickers like StixFresh, protect the freshness of fruits through natural coatings.
Giving food another life. Multiple organizations look to divert food waste, insert it as part of another value chain, or transform it into something else. Simple forms of transformation that extend the product's life are not tackling the growing food waste and loss; therefore, besides sorting, freezing, cooking, and recovering it, startups and organizations are developing groundbreaking circular supply chains.
a. Transforming food manufacturing residues and other paper leftovers into bioplastics for other industries – Mi Terro in LA
b. Processing pulses and grains into fine fertilizer, which reduces energy and water usage – Lucent Biosciences and AGT Foods in Canada
c. Designing female hygiene products based on agricultural residues that are compostable and non-toxic, which are affordable for underserved communities – Aruna Revolution in Canada and Saathi or Aakar in India
Waste sorting and biogas facilities. Some companies have developed interesting methods to classify food, primarily produce, depending on quality, size, color, etc. Nowadays, computer vision and sensors allow for sorting items based on the remaining shelf lifetime by identifying emissions when the ripening starts in fruits and vegetables. Big e-commerce companies and U.S. retailers use this sorting process to divert items that will not arrive to the consumer or be sold on time. These products may be diverted into other industries, as illustrated before. An interesting example comes from connecting waste to creating energy. One-third of the food production is lost worldwide every year. The latter, together with the forest residues and other organic waste, may be used to extract methane to manufacture ethanol that may power ethanol-powered vehicles, such as maritime vessels. A tangible example is Renewi, a European business that has been able to sort waste in Belgium and convert it into gas and other raw materials.
End-to-end traceability in food supply chains is improving. Banana supply chains, for instance, are increasing their traceability upstream in international supply from Central America, Colombia, and Ecuador by using new sensors and emerging technologies to understand humidity and temperature variations. The same is happening with other products like avocados from Mexico. However, there are still opportunities to process these data into predictive and optimization models.
Food Logistics: What advice do you have for those companies who haven't started the sustainable journey? Where/how should they start?
Mejia-Argueta: Starting a sustainability journey is not trivial. However, organizations must start by reflecting carefully on the expectations and the outcomes around sustainability. Decision-makers need to create a strategic perspective around sustainability, its stages, potential futures, and the way to measure its impact.
Any organization must start by understanding the primary purpose of starting this journey, what they want to get, and how they want to measure it. After defining this initial vision, organizations must conduct a baseline assessment to identify gaps, set clear SMART goals, and prioritize their efforts. Also, organizations should educate leadership and staff about the significance of sustainability, create a change management plan, and engage stakeholders to gauge their expectations. Immediately after, organizations must start analyzing their current practices and find ways to improve them based on their new sustainable vision.
The journey will require companies to connect with other stakeholders, extend their networks, and build trust and accountability. Decision-makers need to remember that investments in training, energy-efficient technologies, waste reduction, sustainable sourcing, and the development of green products will be needed. Finally, a clear and straightforward communication protocol and dashboard are needed to perform regular audits and keep everyone informed about the progress of this sustainability strategy.
Food Logistics: Walk us through some of the government regulations in place or coming down the pipeline that will force food manufacturers, trucking companies, and the like to adjust how they do business. For example, meeting Scope 1 regulations, any EV regulations, FSMA updates in relation to food waste, fuel/emissions, etc.
Mejia-Argueta: Circular economy regulations and initiatives are related to reducing food waste, promoting recycling and composting, and encouraging sustainable food systems. At a federal level in the U.S., the Food Recovery Act will impact businesses and schools participating in food recovery to reduce food waste. This act implies that businesses follow standard ways to report food waste and keep track of their inventories, forecasting, and handling/manufacturing operations, leading to operational cost savings and improved sustainability profiles. Additionally, companies benefit from tax incentives and enhanced brand image by participating in food recovery efforts.
However, supply chains will adjust with businesses working closely with suppliers to reduce waste and optimize logistics for food donations. Adopting technology solutions to keep track of the perishability of the items and make decisions to divert products on time for donation. In addition, more prominent companies and consortia of food supply chain stakeholders will need to improve their forecast accuracy at a more granular level to understand the variability of freshness and remaining lifetime for products, as well as to explore different supply chain network designs, truck consolidation and shipment pool strategies and pick-to-zero approaches in the warehouses to keep product moving faster across the supply chain.
Finally, private organizations and the public sector should invest in developing spinoffs or support startups to close the existent gaps in technology, synchronization across supply chain stakeholders, connection between farmers and final markets, as well as to train human talent and certify and test food across the supply chain to ensure compliance.
Food Logistics: From your vantage point, what do you consider to be the Top 3-5 key drivers of circular food chains and why?
Mejia-Argueta: The key drivers of circular food chains include 1) sustainability concerns, 2) economic benefits, 3) regulatory pressure, 4) dynamic consumer demand, and 5) technological advancements. Sustainability efforts focus on resource efficiency and climate change mitigation, reducing the environmental impact of food production and consumption. Economically, reducing food waste saves costs and creates new revenue streams through upcycling waste into products like animal feed or bioenergy. Also, the perishability component adds extra pressure to reduce environmental, social, and economic impacts.
Regulatory pressure from federal and state legislation compels businesses to adopt circular practices to avoid penalties and access incentives. Consumer demand for sustainable and ethically produced food further drives this shift, as companies aim to build brand loyalty with eco-friendly customers while understanding their changing consumption patterns. Technological advancements enhance the transition by improving food waste tracking, repurposing technologies and practices, and supply chain efficiency, making circular food systems more feasible and practical.
Food Logistics: What are some things not addressed above that may be pertinent to our cold food chain readers?
Mejia-Argueta: There is plenty of data, but it has been challenging for organizations to connect data to decision-making models in advanced business analytics. In circular supply chains for food, finding patterns and filling the existing gaps is crucial. For instance, food banks do fantastic work rescuing food and connecting donors to beneficiary organizations (e.g., orphanages, community kitchens) and vulnerable population segments. However, they still struggle to find donations and match that data to beneficiary needs. Using data and models, startups may help close this gap and match unsold products to nonprofits and schools. An extended effort to develop frameworks that connect across industries.
There is also a significant challenge related to the digitization of nano, micro, and small business owners because they do not trust the system. They are concerned that their transactional records might become transparent to the tax authorities, creating a lack of synchronization, inefficient operations, lack of visibility, and obsolete practices.
Planning future scenarios to overcome potential disruptions by developing agility, adaptability, and alignment capabilities across supply chain stakeholders to create mitigation strategies. This strategy will evolve our thinking of efficient organizations and high-performance supply chains into resilient and effective logistics ecosystems, which are interconnected and proactive to demand and supply shocks.
To address these challenges, connecting academia, private stakeholders, public authorities, NGOs, startups and society is key to developing reliable, data-driven supply chains that proactively recommend actionable items based on dynamic conditions.
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