How to tackle the costs of supply chain waste

Bou­tique gin and vod­ka brand Silent Pool Dis­tillers could tell you plen­ty about bot­tle­necks and bro­ken glass.

Fed up with both, in 2021 it became the first dis­tiller in the world to use paper bot­tles, reduc­ing waste and sup­ply chain issues by switch­ing its Green­man Gin brand from hard-to-source glass bot­tles into fold­able paper cylin­ders. 

The eco-friend­ly Fru­gal­pac bot­tles are smash-proof and can be stored more eas­i­ly. They’ve also removed a bot­tle­neck for the com­pa­ny, which sells to 40 coun­tries from its Sur­rey Hills base. 

“Bot­tle sup­ply is very tight and expen­sive,” says Ian McCul­loch, man­ag­ing direc­tor of Silent Pool Dis­tillers. “A Ukrain­ian bot­tle plant was tak­en offline and demand is now chas­ing sup­ply from oth­er plants.”

Green­man Gin’s high-wire act of deliv­ery speed ver­sus cost will sound famil­iar to many SMEs. Nor­we­gian e‑grocer Oda, for exam­ple, has cut waste almost to zero. 

The gro­cer was found­ed in 2013 and deliv­ers in Nor­way and Fin­land, soon to launch in Ger­many. It bakes every loaf of bread to order, leav­ing no back-up sup­ply on shelves. This demands a bake speed of 1500 loaves per hour.

Every pal­let of fruit and veg­eta­bles is also sold the day it arrives, mean­ing a waste sur­plus of only 0.5%, way ahead of many oth­er Euro­pean e‑grocers. No plas­tic bags are used in cus­tomer deliv­er­ies, with reusable card­board box­es tak­ing their place. 

This approach helped gen­er­ate rev­enue of €200m (about £170m) last year, allow­ing Oda to open its biggest fac­to­ry — the size of 70 super­mar­kets — in Lier­top­pen, Nor­way. The gro­cer cov­ered the whole exte­ri­or of the site in solar pan­els, mean­ing one-third of its future total ener­gy needs could be met from a sin­gle loca­tion. 

The 10 founders com­bine dif­fer­ent back­grounds in data soft­ware and car assem­bly line man­u­fac­ture to fine-tune every inch of the process, one of the key fac­tors in the company’s suc­cess. The made-to-order mod­el kills waste on the shelves, too, says CEO Karl Munthe-Kaas. There isn’t enough wastage to require flash sales or buy-one-get-one-free deals, which helps reduce the company’s car­bon foot­print.

Potential shocks

But hav­ing only lim­it­ed back-up stock depends on a con­sis­tent and reli­able flow of goods, says Alex Sar­ic, smart pro­cure­ment expert at Ival­ua, whose data-dri­ven plat­form allows organ­i­sa­tions to test deci­sions and sav­ings. “Like the just-in-time mod­el, made-to-order expos­es sup­ply chains to poten­tial shocks if man­u­fac­tur­ers aren’t pre­pared for dis­rup­tion. Organ­i­sa­tions need to be in con­stant com­mu­ni­ca­tion with sup­pli­ers as cus­tomer demand fluc­tu­ates.”

It is incred­i­bly dif­fi­cult to gauge cus­tomer demand and plan effec­tive­ly every time, says Sar­ic. “While the mod­el may bring effi­cien­cy ben­e­fits and reduce wastage at first, with­out any back­up sup­ply, organ­i­sa­tions can strug­gle to meet unex­pect­ed surges in demand or adapt to sud­den short­ages.”

This can be off­set by onboard­ing sup­ply chain tech­nol­o­gy. Woohoobox allows con­sumers to cre­ate their own sta­tionery sets from 20,000 poten­tial prod­uct types and gift them in bespoke pack­ag­ing. A sud­den surge in demand placed stress­es on ware­hous­es and pack­ing, result­ing in sig­nif­i­cant waste, says co-founder Azar Shiri­nov.

“As the vari­ety of our prod­ucts increased, we start­ed hav­ing issues with com­plex­i­ty and not being able to ful­fil orders cor­rect­ly. As we could not accept returns cor­rect­ly, we encoun­tered prod­uct loss, stock loss, and imbal­ance in stock num­bers.”

To resolve the issue the com­pa­ny hand­ed some con­trol to a sup­ply chain tech­nol­o­gy called OPLOG, which pro­vides SMEs Ama­zon-like ful­fil­ment ser­vices which gave dig­i­tal trans­paren­cy to the whole process and reduced waste. “OPLOG saved us from the prob­lems in returns man­age­ment, inven­to­ry man­age­ment, stor­age process, stock con­trols, pick­ing, pack­ing, val­ue-added ser­vice, and ship­ping oper­a­tions,” Shiri­nov says.

This allowed Woohoobox to cut waste and mass deliv­er while main­tain­ing the bespoke touch to its busi­ness.

Data dividends

Made-to-order busi­ness­es can also make sav­ings by tak­ing their equip­ment from — or sell­ing it to — the cir­cu­lar econ­o­my. A typ­i­cal small to mid-sized facil­i­ty will often hold parts inven­to­ry worth £200,000, but many indus­tri­al busi­ness­es have moun­tains of sur­plus spares in case of an out­age, with much even­tu­al­ly sent to land­fill.

To put these spares to use, the Machine Com­pare mar­ket­place allows firms to sell unused spare parts direct­ly to oth­er buy­ers, reduc­ing the need for ware­hous­ing on both ends. This also cre­ates a way for wannabe made-to-order firms to make more things in-house at reduced cost, either in the short or long term. By shar­ing parts across indus­tries, Machine Com­pare can also offer shared data, says Ben Find­lay, the company’s CEO.

“An indus­tri­al busi­ness might only have 3–5% of the data relat­ing to their own stock of spare parts, mean­ing that they only real­ly know a tiny frac­tion of infor­ma­tion about their own stock. We can increase that to 70% with a bit of extra work. It’s an insight that makes the whole world your spare parts store­room.”

Made-to-order can cut costs in some areas. But if it isn’t man­aged with per­fect demand fore­cast­ing and hyper-effi­cient com­mu­ni­ca­tion, it can unwit­ting­ly increase costs and waste, says Sar­ic. “On paper, the made-to-order mod­el can offer envi­ron­men­tal ben­e­fits, as it min­imis­es the amount of sur­plus stock. How­ev­er, in prac­tice, man­u­fac­tur­ers can be forced into unsus­tain­able trans­port and logis­tics solu­tions as it relies on small­er and more fre­quent ship­ments, rather than in bulk.”

Silent Pool Dis­til­leries has found that by keep­ing every­thing in-house, there are sav­ings that can’t nec­es­sar­i­ly be put on a spread­sheet, says McCul­loch. “We cre­ate at greater vol­umes, we bet­ter utilise machin­ery, we hire bet­ter staff – all of that has reduced our cost per bot­tle.”