Date of Graduation

7-2015

Document Type

Thesis

Degree Name

Master of Science in Agricultural Economics (MS)

Degree Level

Graduate

Department

Agricultural Economics and Agribusiness

Advisor/Mentor

Popp, Jennie S.

Committee Member

Dixon, Bruce L.

Second Committee Member

Thomsen, Michael R.

Third Committee Member

Buysse, Jeroen

Fourth Committee Member

Slay, Christy M.

Fifth Committee Member

Lewis, Sarah E.

Keywords

Social sciences; Costs; Food waste; Management; Retail; Supply chain; Sustainability

Abstract

Food waste at retail represents forgone sales and embodies store management and disposal costs. Fresh produce is the largest contributing sector to food waste at retail and bulky, seasonal products are an added challenge when stores experience a high waste event. In order to improve, retailers need to better understand the costs of food waste, as well as how management strategies can impact these costs.

Using pumpkins as an example of bulky, seasonal products, a twofold research project was conducted to better understand contributors to, and costs of food waste at the retail level. In part one, using data from a U.S. national retailer, the Heckman correction via maximum-likelihood method was developed to estimate the likelihood, quantity, and drivers of store-level food waste. In part two, a decision support tool called the Activity Level Cost Estimation Tool (ALCET), was developed to estimate both merchant and store operator costs. ALCET’s functions are exemplified in a case study which examines how costs vary by size of food waste event.

Results from the Heckman model indicate that inventory-age, available-inventory (both positively related to food waste) and per-unit sales-price of pumpkins (negatively related to food waste) had the greatest influence while year studied, week of the season, and region of the U.S. where the store is located also significantly influenced food-waste levels.

The ALCET provides a platform for tracking and reporting metrics such as cost, revenue, and profit in terms of a particular product category, its food waste levels, and disposal events. The tool produces cost estimates at the activity level that provide users with information that is within the scope of store level decision-making. The tool allows for comparisons among changes in costs as a result of regional characteristics, store attributes, waste events and/or time factors. Case study results show that even one large waste event in a season can represent substantial costs to retailers.

Results of this study are expected to support retail in efforts to reduce food waste and increase cost savings. Greater insight into the costs of store operations in the event of food waste emphasizes the value of improved tracking of food waste. Recognizing cost drivers can help store operators target efficient strategies for waste reduction and anticipate how costs may react to a given circumstance.

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