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Photo: Avery Dennison
According to Avery Dennison, overproduction and waste are exacerbating the supply chain crisis and hitting businesses to the tune of 3.6% of their annual profits, as nearly 8% of stock perishes or is discarded. In fact, 4.3% of stock spoils in the supply chain before it even reaches the shelf; another 3.4% is discarded due to overproduction. This loss amounts to $163.1 billion worth of inventory.
This data was published in a global report released on November 2, by Avery Dennison, a Fortune 500 materials science and digital identification solutions company. “The Missing Billions: The Real Cost of Supply Chain Waste” assesses the state of global supply chains and the issue of waste across the United States, the U.K., France, China and Japan, Avery Dennison said.
The data is based on an analysis of 318 global firms across those countries representing five industry sectors: automotive, beauty and personal care, apparel, food and pharmaceutical. It shows that while companies are acutely aware of the problem, they are not investing the budget required to fix it. Supply chain-executive respondents said that, on average, 28.9% of their organizational sustainability impact comes from the supply chain. However, just 4.4% of technology budgets, on average, are specifically dedicated to supply chain sustainability improvement, Avery Dennison said.
More than nine in 10 businesses surveyed stated they are under pressure to become more sustainable, with 60% calling sustainability a “high” priority. However, respondents cited challenges to achieving supply chain resilience, including “integrating disparate systems” and “insufficient coordination among internal stakeholders,” the company said.
The Case for Transparency
The report highlights an intention to address these issues. Almost two-thirds — 61% — of organizations said they have already deployed solutions to track unique items. This percentage could rise to more than 95%, however, as a further 34.6% said they “plan to” deploy such solutions to improve supply chain visibility and traceability, Avery Dennison said.
Blockchain investment will see the single biggest leap — 97% of companies surveyed said they plan to invest in this area within five years (compared to 12% today). Within five years, approximately 99% of companies indicated they plan to use smart devices such as sensors and drones, and 97% said they will use industrial IoT, the company said.
“The current supply chain disruption is leading to a waste crisis, making the case for sustainable practices even more urgent and necessary,” said Francisco Melo, senior vice president and general manager with Avery Dennison Smartrac. “There is a huge opportunity for organizations to accelerate digital transformation that will help to create longer-term systemic change. The moral and economic case is clear, and the study shows the desire from organizations to embrace technological advancements for the benefit of business and the planet.”
Consumers Prioritizing Cost, Quality
The research also surveyed 7,500 consumers across China, France, Japan, the U.K., and the United States. Shifts in consumers’ spending continue to wreak havoc with inventories, and the Avery Dennison report also highlights mixed signals about consumer shopping habits. Cost is a high priority for consumers, the company said.
However, the research found that quality ranks equally with cost as the No. 1 concern, at 22%. U.K. consumers are the most cost-conscious, with 28% listing it as the top priority, followed closely by France and Japan, both at 25%. China is a significant outlier, at just 6%, Avery Dennison said.
The data also reveals some concerning trends around sustainability, with just 16% of shoppers putting sustainability in their top three deciding factors and only 12% prioritizing the ethical sourcing of their products.
However, the research points to a shift in the desire for durable products, with “durability” ranked by 48% of global consumers as a top-five concern. This suggests business has an opportunity to shape the future of sustainability by putting a greater focus on product durability and in enabling the circular economy, the company said.
Initiatives by businesses to achieve greater transparency can have benefits for consumers, too. More than half of consumers surveyed (52%) agreed that when buying clothing, “transparency about a product’s journey to the consumer is important to me,” Avery Dennison said. Meanwhile, “being more transparent about materials/ingredients used” is the top driver for making more sustainable decisions when buying food and beauty products — stated by 37% and 35% of shoppers, respectively.
The business-to-business research took place between May and August 2022 via 18 qualitative interviews and surveys among 250 global supply chain technology executives, Avery Dennison said. The consumer research, powered by Canvas8, was conducted via online surveys between June 3 and June 28, 2022. The survey sample was limited to those who had household purchase responsibility for apparel, food and/or beauty products.
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