On November 16, 2022, corporate overproduction and waste are exacerbating the supply chain crisis, with nearly 8% of inventory deteriorating or being discarded, negatively impacting companies as much as 3.6% of their annual profits. This significant loss included 4.3% of inventory spoiling at the supply chain stage before it hit the shelves, and another 3.4% of inventory being discarded due to overproduction, resulting in a combined inventory loss equivalent to $163.1 billion.

1. Inventory worth up to $163 billion a year is discarded due to expiration or overproduction;

2. The interviewed companies are expected to lose 3.6% of their annual profits;

3. The five major industries analyzed by the global report (automotive, beauty and personal care, clothing, food and pharmaceuticals) are facing an average inventory waste rate of up to 8%;

4. 10.2% of inventory in the beauty industry is discarded (6.2% due to overproduction, 4% due to spoilage or damage), while 10% of food is discarded before reaching consumers (2.9% due to overproduction, 7.1% due to deterioration or damage);

5. 90% of global business leaders are "under pressure to improve business sustainability", but on average only 4.4% of technology budgets are dedicated to improving supply chain sustainability;

6. The quality and durability of products are selected as the three most concerned issues of prudent consumers, which are far more important than product sustainability.

The above data comes from a global report released by Avery Dennison on November 14, 2022. The report, Evaporated Billions: The True Cost of Supply Chain Waste, provides an in-depth assessment of the current state of global supply chains and waste in China, the US, the UK, France and Japan.

By analyzing the financial data of 318 multinational companies, the report found that although companies have been keenly aware of the problem of waste in the supply chain, they have not invested the corresponding budget to solve this problem. Respondents indicated that an average of 28.9% of their impact on business sustainability comes from the supply chain. However, on average only 4.4% of technology budgets are dedicated to improving supply chain sustainability.

More than 90 percent of companies surveyed said they were under pressure to improve business sustainability, with 60 percent citing this task as a "high" priority. Among the challenges mentioned by interviewed companies on how to enhance supply chain resilience, their concerns mainly include "challenges of integrating disparate systems" and "lack of sufficient coordination among internal stakeholders".

Enterprises urgently need to improve supply chain transparency

In this report, we can see that as many as 61% of enterprises have deployed solutions to track unique products, highlighting the intention of enterprises to solve these problems. But with the need to improve supply chain visibility and traceability, this percentage will rise to more than 95%, as another 34.6% of enterprises also have related "plans". Blockchain investment will see the biggest leap forward, with 97% of companies surveyed planning to invest in the space within five years (compared to 12% today). Within five years, about 99% of enterprises plan to adopt smart devices (including sensors and unmanned equipment, etc.), and 97% of enterprises will use industrial Internet of things.

Francisco Melo, general manager of Avery Dennison Xtron, commented: "The current supply chain disruption is leading to a waste crisis, which makes the case for sustainable practices more urgent and necessary. Enterprises face a huge opportunity to accelerate digital transformation. Will help create long-term systemic change. The moral and economic benefits are clear, and research shows that businesses want to embrace technological advancement for the good of business and the planet."

Melo added: “Digital triggers, such as radio frequency identification (RFID), provide unprecedented end-to-end visibility in an efficient and precise manner. Connected products not only stand out in supply chain processes, but also reveal valuable New information, including product transparency and carbon footprint data, can therefore help consumers make better decisions."

Consumers value better options that offer more durable products

The Avery Dennison report also highlights mixed signals about consumers' shopping habits as changes in consumers' daily spending leave businesses with massive inventories and wreaks havoc on the environment. Unsurprisingly, cost is the top priority for consumers. But 22 percent of the 7,500 consumers surveyed for the report ranked quality and cost as equally important considerations. By geography, UK consumers are most concerned about cost, with 28% of consumers citing it as a top consideration, by France and Japan, both at 25%. China has a very different consumption mentality, with only 6% of surveyed consumers saying that cost is their top concern.

In terms of sustainability, the survey data also revealed some worrying trends: only 16% of consumers listed sustainability as one of the top three consumption decision-making factors, and only 12% Whether the selected products meet ethical sourcing standards. But the survey also notes that nearly half of global consumers (48 percent) have shifted their need for durable products, listing "durability" as one of the top five consumer decision considerations, suggesting that there is an opportunity for companies to build on this by paying more attention to products. durability and promote a circular economy to shape a sustainable future.

Corporate initiatives to increase transparency can also benefit consumers. About two-fifths (43%) of consumers surveyed agree that “transparency in a product’s journey from production to consumer is important to me” when purchasing clothing, and when purchasing food and beauty products, respectively. 37% and 35% of consumers cited "companies need to be more transparent about the raw materials or ingredients they use" as the top driver for making more sustainable consumption decisions.

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Research Methodology/Editor's Note:

With the support of Canvas8, a consumer insights agency, this consumer survey will be conducted in the form of an online survey from June 3 to June 28, 2022. The survey sampled 7,500 consumers in China, France, Japan, the UK and the US, who are responsible for purchasing clothing, food and/or beauty products at home.

This enterprise survey interviewed 250 global supply chain technology executives in five major industry sectors in the form of 18 qualitative interviews and quantitative surveys. The survey was conducted in China, France, Japan, the UK and the US from May to August 2022.

For research purposes, "supply chain" is defined as all the processes involved from the delivery of raw materials, through the manufacture of goods and materials, to the final delivery to the end consumer.