Understanding the impact of food logistics system problems: Statistics and financial losses

The global food logistics system is a complex network responsible for ensuring the seamless movement of food products from producers to consumers. However, this system faces several challenges that lead to significant inefficiencies and financial losses. This article, compiled by the Vira team, examines the statistics of worldwide problems in the food logistics system and the financial consequences of these issues, including food waste and product returns, based on reliable and official data.

Scope of food logistics

Food logistics includes various stages from production, processing, storage, transportation to distribution. Each stage brings unique challenges that can disrupt the supply chain and lead to food waste. According to the Food and Agriculture Organization of the United Nations (FAO), approximately one-third of all food produced for human consumption is lost or wasted, amounting to approximately 1.3 billion tons annually.

Major problems in food logistics

1. Transportation and storage problems
   • Break the cold chain: Perishable products need a continuous cold chain to maintain quality and safety. Interruption of the cold chain due to inadequate infrastructure or equipment failure leads to significant food spoilage. FAO estimates that 14% of the world’s food is lost between harvest and retail due to poor cold chain management. In many countries, especially in developing countries, food logistics challenges are greatly exacerbated by problems in the cold chain. Shutting down truck refrigerators, either to save fuel or due to equipment failure, is a common problem that can quickly spoil perishable products such as fruits, vegetables, and dairy products. In addition, the lack of sufficient and accurate data in the field of cold chain management, monitoring, and improving efficiency makes this system difficult. Without accurate information about temperature and transportation conditions, product spoilage and wastage cannot be effectively prevented.

1. • • Inadequate infrastructure: Developing countries often lack the necessary infrastructure for efficient food storage and transportation. This leads to higher rates of corruption and waste. The World Bank emphasizes that in African countries, 25% of post-harvest food waste occurs due to a lack of storage facilities.
2. Supply chain inefficiencies
   • Fragmented supply chains: The complexity and fragmentation of supply chains can lead to misunderstandings and delays. These inefficiencies often lead to spoilage of perishable products. A report by McKinsey says that inefficiencies in the food supply chain contribute to 20% of waste in the world.
   • Poor logistics planning: Inefficient logistics planning, such as overproduction and supply-demand mismatches, exacerbates food waste. The United Nations Environment Program (UNEP) reports that poor logistics planning and market inefficiencies account for 8% of global food waste.

1. Legal and compliance issues
   • Trade barriers: Tariffs, quotas, and strict import/export regulations can delay the movement of food products and lead to corruption. The International Trade Center (ITC) reports that non-tariff measures affect 70% of global agricultural exports and contribute to food waste.
   • Safety standards: Compliance with different food safety standards in different countries can complicate logistics and lead to product rejection and return. The World Health Organization (WHO) says that foodborne illnesses cause 600 million illnesses and 420,000 deaths annually, highlighting the importance of strict safety standards.

Financial implications of food logistics problems

The financial losses caused by food logistics problems are staggering. These losses result from food waste, product returns, and inefficiencies in the supply chain.

1. food waste
   • Economic impact: FAO estimates that the global economic cost of food waste is about $936 billion per year. This includes direct economic losses for farmers and producers as well as indirect costs such as environmental degradation.
   • Losses of the retail sector: Retailers also suffer significant losses due to food waste. The Waste and Resources Action Program (WRAP) reports that UK retailers alone lose around £2 billion a year due to unsold food.

1. Returning and recalling products
   • Cost of Returns: Product returns in the food industry can be costly both financially and in terms of reputation. The Reverse Logistics Association (RLA) notes that food product returns cost the US food industry more than $7 billion annually.
   • Impact of recalls: Food recalls, often due to contamination or safety concerns, can have severe financial consequences. A study by the Grocery Manufacturers Association (GMA) found that the average cost of a food recall to a company is $10 million in direct costs in addition to serious brand damage and reduced sales.
2. Supply chain inefficiencies
   • Operating costs: Supply chain inefficiencies such as shipping delays and poor inventory management increase operating costs. A report by Capgemini Research Institute suggests that companies can lose up to 3-5% of their annual sales due to supply chain inefficiencies.
   • Environmental costs: Inefficient logistics contribute to more greenhouse gas emissions. According to the FAO, food waste accounts for 8% of global greenhouse gas emissions, translating into significant environmental and financial costs.

Dealing with challenges: Solutions and innovations

To reduce food logistics problems and reduce related financial losses, several solutions and innovations are being implemented:

1. Advanced technologies
   • IoT and Blockchain: IoT and blockchain technology have revolutionized food logistics by increasing traceability and transparency. These technologies help monitor the condition of food products in real-time and ensure compliance with safety standards.
   • AI: Artificial intelligence and machine learning algorithms optimize logistics planning by predicting demand and managing inventory more efficiently. This reduces overproduction and minimizes wastage.
2. Improving infrastructure
   • Investing in cold chain: Investing in strong cold chain infrastructure, especially in developing regions, can significantly reduce food spoilage. The Global Cold Chain Association (GCCA) emphasizes the need for public-private partnerships to improve cold chain logistics.
   • Improved storage facilities: Building better storage facilities, such as silos and warehouses with advanced conservation technologies, can reduce post-harvest waste. FAO supports the use of pyramid storage solutions to prevent spoilage and contamination.

1. Political and legal reforms
   • Harmonization of standards: Harmonization of food safety standards and reduction of trade barriers can simplify international food logistics. The Codex Alimentarius Commission seeks to establish uniform food standards to facilitate global trade.
   • Supporting small farmers and producers: Providing training and resources to small farmers and producers can improve their handling and storage methods and reduce food waste at the source. The World Bank supports initiatives that improve agricultural practices and infrastructure in developing countries.

Conclusion

The challenges in the global food logistics system are significant and multifaceted and lead to food waste and major financial losses. Tackling these issues requires a comprehensive approach that includes technological innovations, infrastructure improvements, and policy reforms. By implementing these solutions, we can improve the efficiency of food logistics, reduce waste, and minimize financial losses, ultimately contributing to a more sustainable and resilient food system.