Reducing Seafood Shrinkage

The seafood industry, and society at-large, has a strong focus on sustainability. Most agree that a well-managed seafood resource is in everyone’s best interest. However, sustainability efforts should not stop at the seafood resource, but rather be an integral part of the complete supply chain. Statistics show that around half of every pound of harvested seafood protein ends up as waste; 10 to 20 percent pre-distribution and retail, eight percent at retail, and 31 percent at the consumer’s home.

Members of the supply chain have differing explanations of this waste problem. Some argue poor purchasing procedure, others argue large variation in demand, and others argue varying product qualities. All of the reasons are interrelated; varying quality leads to varying demand; varying demand makes it difficult to predict how much to order. The end outcome is often increased product waste either by the retailer or by the consumer.

At Trace Register, we have found that lot-by-lot variation for seafood products can be a serious contributor to increased shrink at retail. For instance, it is assumed in the supply chain that the age and therefore quality of the product is constant. Unfortunately, these assumptions do not always hold true.

This variation in product attributes is a measurement of the product’s quality. If a product attribute such as age, fishing method, and harvest area is outside of the expected range, then the product has a quality problem. Therefore, we recommend restating the problem from one of “reducing seafood shrinkage” to one of “improving seafood quality.”

The Cost of the Problem

According to the USDA, the average shrink for seafood in retail stores is 10 percent. This means that for a retailer that sells $500 million of seafood annually, the shrink represents a $50 million loss.

Solving this problem has clear benefits, not only from a monetary basis, but also from the point of being a “good citizen of the world” and creating a more sustainable food supply chain.

The seafood industry is not the first to face quality problems or experience the effect of quality differentiation. Our acceptable level of quality changes over time. The American auto industry provides a good example. During the 1930s, most drivers expected to have a flat tire during any lengthy journey. Throughout the 1950s, we expected cars to overheat. By the 1970s the American auto industry suffered multiple quality issues and experienced significant competition from higher quality Japanese manufacturers. Imagine trying to compete in today’s automobile market with a car having the reliability of an American car from the 1970s. This is the challenge facing the seafood industry today. Just as quality improvements dramatically changed the landscape for the auto industry, it is now changing the landscape for the seafood industry.

Some people think that this problem cannot be solved, that the problem is simply inherent to the business. Seafood is not like dealing with nuts and bolts, but rather biological products that naturally decay.

However, the problem can be solved by implementing a continuous improvement process, a similar methodology that has been applied to manufacturing, data management, insurance, and sales industries over the years. It’s estimated that by applying this process, a 10 percent reduction in shrink can be achieved each year.

The Solution

There is a silver lining to this story—from the sea to the store to the consumer’s plate, the industry is starting to work together to make changes and create a more sustainable seafood supply chain.

While some view traceability simply as a risk-mitigation cost, others are recognizing the tremendous value that traceability data can deliver. Retailers are now using enhanced electronic traceability systems to manage their seafood supply chains. They realized conventional systems based on item codes (SKU numbers) do not provide enough information.

Managing a supply chain based on item codes (SKU numbers) assumes that the lot variable attributes (LVA) set is small and consistent. Many retailers are finding that the size of the LVA is larger and less consistent than expected. These retailers are addressing this fact by employing enhanced traceability systems that collect and manage LVA. They apply advanced automated validation routines to ensure that their products consistently meet their product requirements on a lot-by-lot basis.

For example, knowing it is a “fresh wild Alaskan sockeye salmon fillet” is not enough. Retailers want to know where, how, and when it was caught, to determine whether it really is premium salmon that deserves $25 per pound price instead of the $15 other salmon fillets bring. Knowing when it was caught is also critical for estimating the remaining shelf life of this high-priced perishable product.

Bottom-Line Benefits for Retailers

Traditional traceability is viewed as only a cost used for record keeping, point-in-time auditing, and correcting problems after they happen. Enhanced traceability, with its powerful analytic tools, enables companies to monitor and analyze their seafood supply chains in near real-time to proactively prevent problems, reduce waste, and improve supply chain performance and product quality.

By reducing costs and delivering more consistent quality food, retailers are seeing a positive impact on their bottom line and consider enhanced traceability as a must-have for their seafood supply chains.

Reducing Seafood Shrink

Improving consistency of an inherently inconsistent product like seafood is one way that enhanced traceability can be used to reduce shrink. Often retailers may not really know when their fish left the water. One delivery of fresh fillets of fish might be four days old, while the next delivery of the same product is eight days old. With such variation in remaining shelf life, it becomes extremely difficult to avoid discarding good product while not selling bad fish to the consumer.

Retailers using enhanced traceability will be able to automatically monitor the age of fresh fillets they buy, and work with their vendor to only supply fillets that are either four or five days old. More consistent product will enable the retailer to better manage shelf life and reduce shrink.

The scanned QR code displays Wood’s Fisheries traceable path for shrimp.

Verifying Sustainability Programs

Retailers’ seafood sustainability programs typically make representations to customers about the seafood they sell. However, they struggle to guarantee these claims because they may lack supporting information or the data they do have is too voluminous to monitor and check manually.

For one retail client, Trace Register estimated they would have to manually check a stack of papers 16 stories high to verify their seafood sustainability claims. To manually check even a portion of this data would require many employee hours and cost hundreds of thousands of dollars. Retailers that do not authenticate such claims run a higher risk of misrepresenting the products they sell to customers..

Enhanced traceability enables retailers to capture and verify sustainability information for each seafood product as it arrives to measure its compliance with program requirements. Essentially, it enables retailers to check 16 stories worth of data automatically, without any extra labor. Specific feedback can then be provided to suppliers delivering non-compliant product about what they need to do in order to improve their performance.

Building Consumer Confidence

The Gulf of Mexico has suffered many recent disasters including a drought, Hurricane Katrina, and the BP oil spill. Because of this, U.S. consumers lost confidence in the seafood coming from the Gulf States.

To regain the confidence and trust of consumers, the Gulf States Marine Fisheries Commission launched the Gulf Seafood Trace Program. This program provides assurance to the consumer that the product was traceable back to the Gulf where it was harvested, and that the data was checked and verified. Trace Register provided the following three main components on the back-end to power this program.

• Electronic Traceability Platform—enables companies in the seafood supply chain to easily and efficiently link and share data and information about the seafood they buy and sell.
• Data Checking—provides assurance that shared data is valid and reliable.
• Marketing Module—enables seafood businesses to tell consumers a compelling and unique story about why their seafood is healthy and good to eat.
• The Gulf Seafood Trace program continues to be successful with program participants reporting increased sales.

Another example of a successful consumer campaign is the “Every Shrimp Has a Tale” campaign hosted by the Mississippi Hospitality and Restaurant Association. This consumer-engaging program targeted restaurants instead of retailers, and informed consumers where their shrimp originated—assuring consumers about the quality and safety of the seafood.

Using Trace Register’s marketing module, restaurants encouraged diners to scan a QR code with a smart phone to learn about the seafood they ordered off the menu. This storytelling tool allowed diners to view the exact origin of their seafood as well as track the shrimp’s path from fishing vessel to processor to retailer or restaurant. Consumers gained a sense of control over their food buying choices, and felt reassured by the availability of reliable information.

In conclusion, companies need to understand that if you can’t measure it, you can’t manage it. By implementing a continuous improvement process and enhanced traceability, the seafood industry can improve product quality, which will ultimately enable companies to reduce waste, increase margins, and deliver consistently good food to consumers.

Heggelund is the chief technology officer at Trace Register. Reach him at dheggelund@traceregister.com.

References Furnished Upon Request