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.