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The High Cost of Waste in the Food Manufacturing Industry

Published on: Nov 03, 2015

Food waste isn’t just a global problem; it impacts profitability in the food manufacturing industry. Food waste is an indicator that there are inefficiencies in manufacturing processes, contributing to high overhead and lower profits.

Momentum is building to address the global food waste problem. Non-profit organizations, regulators, and consumers are making waste an urgent issue due to their concerns about sustainability and world hunger. According to the Food and Agriculture Organization (FAO) of the United Nations, 30% of the food we grow is never eaten. While the majority of waste occurs at the consumption level, over 4 billion pounds of food are wasted in the manufacture and distribution of food.

Reducing Food Manufacturing Waste Increases Profitability

Generally, food manufacturing companies accept a certain amount of waste as a part of the cost of doing business and include it as overhead. Estimates say that industry-wide disposal costs are more than $100mm. Food companies could increase their profits by as much as 10% simply by reducing food waste. In a market where companies face high volume and thin margins, reducing waste can make a major impact on profitability.

Traceability is at the Core of Eliminating Food Waste

Within the food manufacturing industry, most food waste occurs in the warehousing and distribution process.  The primary sources of food waste are:

  1. Expiration and spoilage
  2. Overstocking
  3. Cross-contamination
  4. Production loss
  5. Lack of traceability

At the core of food waste problems is the lack of effective tracking. The first four causes can be improved through better traceability along the supply chain and in the manufacturing process. Improving traceability will help reduce food waste, increase productivity, improve cash flow, and mitigate the risk of a recall.

Effective traceability needs a technology solution that includes real-time data about the location of ingredients and products. It should have the ability to follow ingredients and products through the manufacturing and distribution process with forward and backward lot traceability.

Sage X3 Provides Rigorous Traceability

Sage X3 is an enterprise resource planning (ERP) system made to address the specific needs of food manufacturers and distributors. Sage X3 offers traceability tools that will help you lower losses due to food waste.

  • It includes complete forward and backward lot traceability for each ingredient and end item.
  • A full audit trail and archive of historical transactions is maintained for multi-year periods.
  • The fully integrated quality control process rigorously enforces inspections to assure item conformance to any required characteristics, operational tolerance or expected results.

IWI Consulting can help you take control of operations from recipe to delivery. To learn more about Sage X3 and its unique features built especially for food manufacturing companies, click here.

To learn more about reducing food waste with ERP, download our whitepaper, Sage ERP X3: Reducing Food Waste and Increasing Efficiency with ERP.

Our small and dedicated team specializes in helping small-to-medium size Canadian businesses and non-profits select and adapt Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Human Resource Management (HRMS), and IT services. With IWI’s 15 years in business and 100 plus years of combined experience, IWI has helped hundreds of food manufacturing, distribution, and financial service companies gain efficiency, grow, and lower their operating costs.

With the unique combination of industry knowledge and diverse technology expertise, IWI provides cost-effective solutions to help clients gain a competitive edge.  As a Sage business partner, servicing the Greater Toronto Area, we support evaluation and implementation of operations and finance systems to optimize technology, ensuring high return on investment with a quick and painless transition to new software.