{"id":33409,"date":"2018-11-13T16:46:41","date_gmt":"2018-11-13T21:46:41","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/walmarts-dual-incentive-to-do-good-bottom-line-profit-through-elimination-of-food-waste\/"},"modified":"2018-11-13T16:46:41","modified_gmt":"2018-11-13T21:46:41","slug":"walmarts-dual-incentive-to-do-good-bottom-line-profit-through-elimination-of-food-waste","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/walmarts-dual-incentive-to-do-good-bottom-line-profit-through-elimination-of-food-waste\/","title":{"rendered":"Walmart\u2019s Dual Incentive To \u201cDo Good\u201d: Bottom-Line Profit Through Elimination of Food Waste"},"content":{"rendered":"

Eden: Optimizing the Fresh Food Supply Chain <\/em><\/strong><\/p>\n

Just over one year ago, Walmart was managing its entire fresh food supply chain\u2019s quality audits through a highly manual combination of visual inspections and photos, referenced against USDA specifications to determine if the product should be accepted or rejected [1]. Fast forward to today; born from an internal hackathon one year ago, the organization created an algorithm that leverages machine learning to inspect and manage the quality of produce from its farm to shelf lifecycle. The program, Eden, has the ability to collate the numerous and always-changing produce specifications to develop a \u201cfreshness algorithm\u201d that optimizes the movement of perishable goods. Eden\u2019s goal is to bring transparency and efficiency to this complex fresh food supply chain, with the end results being to 1) offer consumers the freshest produce available, and 2) eliminate food waste [2].<\/p>\n

Walmart\u2019s Roll-out and Expected Impact<\/em><\/strong><\/p>\n

Since being launched six months ago, Eden has been rolled out to 43 distribution centers and has saved Walmart $86M, with the goal of eliminating $2Bn of produce waste in Walmart\u2019s supply chain over the next five years [2]. Beyond the environmental and human welfare implications, this technology will also be impactful for the customer experience and for Walmart\u2019s bottom line. For the customer, the technology ensures he or she is purchasing the freshest fruits, vegetables and even dairy. For Walmart, this eliminates food waste write-offs, and also helps manage inventory levels to increase customer satisfaction, further growing the topline. This is significant, as today fresh products account for up to 40% of a grocers revenues [3].<\/p>\n

In the medium term as Eden continues to scale, Walmart\u2019s stated intention is to eventually predict the exact shelf life of fresh products leveraging actual product imagery and live temperature tracking inside of trucks and warehouses where perishables are stored. Further down the road, Walmart plans to channel this into active inventory management; as an example, if temperatures were to rise on trucks carrying produce, Eden could reroute the truck to a closer destination to extend customer-facing shelf life [4].<\/p>\n

Further consideration when measuring Eden\u2019s financial opportunity will be determining the tradeoff between decreased food waste at the risk of out of stocks, seen across the horizontal axis of Figure 1 below. Today there is a higher focus on avoiding out-of-stocks to battle for customer loyalty, but perhaps there is room to run retailers at lower inventory levels if armed with Eden. If so, this could result in lower food waste for Walmart, while achieving quality levels that rival competitors such as Whole Foods, who has been recently plagued by declining quality and stock levels [6].<\/p>\n

Figure 1: In-Stock & Quality vs Food Waste Tradeoff [3]<\/p>\n

\"\"<\/a><\/p>\n

Global Expansion<\/em><\/strong><\/p>\n

Because Walmart\u2019s core strength is its command of a global supply chain, I would recommend Eden be spread to all distribution centers following this pilot in order to leverage the full network effects. In practice, this would enable all distribution centers across the word to optimize overall freshness and transportation. However, I would caution Walmart to ensure that this same global competency is eradicated by Eden, and it continues to allow its customers to enjoy the benefits of a global supply chain (e.g., not letting the machine optimize decreased waste so extreme that grocery stores only get locally grown products).<\/p>\n

As Eden continues to scale, its greatest potential could be in developing countries. Although in these countries consumer waste is minimal, the per capital total food waste is actually equivalent to developed nations, since these countries have weaker supply chain infrastructure and technology, as seen in Figure 2 [5]. However, this is also where food shortages are most dire, making this a top candidate for benefitting from Eden.<\/p>\n

Figure 2: Food waste by region [5]<\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

Once proven out, Eden could be a solution to global food wastage in developing areas where every kilogram of food counts, resulting in profound impact on the lives of fellow humans and the well-being of our environment. This change is being catalyzed by big organizations such as Walmart that have the resources and financial incentives to solve this pressing issue; now it is time to continue to test and expand to see just how big of an impact Eden can have.<\/p>\n

Questions to Consider<\/em><\/strong><\/p>\n

Should Walmart double down on piloting Eden in developing nation supply chains, or first fully develop and test the product in more developed supply chains such as the United States? Should the \u201cdoing good\u201d aspect be ascribed any value?<\/p>\n

Will improving the quality of produce to be best in class in the industry give Walmart the opportunity to compete directly with Whole Foods? Will Walmart need to explicitly tell customers about Eden in order to gain goodwill and customer conversions, or will the quality improvement be obvious?<\/p>\n

(word count: 792)<\/p>\n

Bibliography<\/strong><\/em><\/p>\n

    \n
  1. Walmart Wants To Sell The Freshest Produce, And It’s Using iPhones To Do It. Forbes<\/em>, Mar 1, 2018, https:\/\/www.forbes.com\/sites\/phillempert\/2018\/03\/01\/walmart-wants-to-sell-the-freshest-produce-and-are-using-iphones-to-do-it\/#20bf6f68593e<\/a>, accessed November 2018.<\/li>\n
  2. Eden: The Tech That\u2019s Bringing Fresher Groceries to You. Walmart Blog, <\/em>Mar 1, 2018, https:\/\/blog.walmart.com\/innovation\/20180301\/eden-the-tech-thats-bringing-fresher-groceries-to-you<\/a>, accessed November 2018.<\/li>\n
  3. Glatzel, M. Hopkins, T. Lange, and U. Weiss . The secret to smarter fresh-food replenishment? Machine learning. McKinsey & Company <\/em>(November 2016).<\/li>\n
  4. Walmart is unleashing a weapon worth $2 billion that could deal a blow to Whole Foods. Business Insider,<\/em> Mar 1, 2018, https:\/\/markets.businessinsider.com\/news\/stocks\/walmart-saves-2-billion-with-machine-that-inspects-food-for-spoilage-2018-3-1017567256<\/a>, accessed November 2018.<\/li>\n
  5. How are food losses and waste an environmental concern? Foodsource.org, https:\/\/foodsource.org.uk\/56-how-are-food-losses-and-waste-environmental-concern<\/a>, accessed November 2018.<\/li>\n
  6. Whole Foods has a ‘high class’ problem that’s leading to ‘entirely empty’ shelves. Business Insider, <\/em>Jan 9, 2018, https:\/\/www.businessinsider.com\/whole-foods-out-of-stock-problems-and-deteriorating-produce-2018-1<\/a>, accessed November 2018.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

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