Tackling Food Waste: A System Dynamics Approach to Analyzing Food Waste in

Wholesale Markets and Developing Targeted Interventions for Sustainable

By Furqan Khalil Syed
Operations
Advisors: Dr. Chris Mejía and Prof. Sara Grobbelaar Topic Areas: Retail, Simulation, Strategy

Summary: Addressing food waste in wholesale markets is critical for a sustainable food supply chain. Using
system dynamics modeling techniques, we analyzed the impact of key supply chain factors on food waste in
wholesale markets. Our results underscore the need to balance commercial and environmental objectives,
efficient stock management, and collaboration among stakeholders to improve food ecosystems. We highlighted
potential solutions, like investment in cold storage infrastructure.

Before joining MIT, Furqan

Khalil held various roles in the
consumer goods industry,
primarily focusing on supply
and demand planning and
digital transformation in the
supply chain. He built a
foundation in Mechanical
Engineering at the National
University of Sciences and
Technology in Islamabad,
where he earned his Bachelor's
degree.

KEY INSIGHTS

1. Major supply chain factors that influence
food waste in wholesale markets can be
classified under five overarching
dimensions: Infrastructure, Strategy,
Supply Chain Operations, Partnerships,
and Macro-Trends.
2. Two critical system archetypes emerged
highlighting certain problem behaviors in
wholesale markets, where short-term
profits are prioritized over long-term
infrastructure investment.
3. Some high-impact interventions include
proactive investment in infrastructure
(especially cold chain), strategic
alliances with foodbanks and charities for
repurposing food, and introducing
processing capabilities to extend shelf
life.
Introduction
One-third of all food produced in the world is wasted.
This waste is happening while 750 million people
across the globe suffer from food insecurity. Food is
lost along every single stage of the food value chain.
This study aimed to understand and regulate
interactions between food supply chain stakeholders
to create more efficient supply chains and reduce
food waste at wholesale markets.
The research focuses on two main objectives:
identifying significant supply chain factors that may
help mitigate food waste in wholesale markets and
recommending intervention schemes that should be
applied to increase affordability and access to
nutritious foods. The study includes food supply
chains across six diverse cities, but we focus our
research on the Mercabarna wholesale market in
Barcelona, Spain, for the framework's demonstration,
focusing on two different products: potatoes and
tomatoes, whose contrasting lifespans allow for broad
applicability of the findings.
Methodology
In a joint effort with the World Union of Wholesale
Markets (WUWM), we performed semi-structured
interviews with representatives from wholesale
markets in six cities in Europe, Australia, and Latin
America. The goal was to identify challenges and
factors influencing food waste and supply chains in
these markets. The interviews revealed recurring
themes, including the absence or presence of cold
storage facilities, the cost of holding inventory versus
discarding it, the priority of waste mitigation,
partnerships with local food banks and charities, and
food loss during transportation. To help guide our
research, we classified the various factors under five
overarching supply chain dimensions: Infrastructure,
Strategy, Supply Chain Operations, Partnerships,
and Macro-Trends.
Figure 1:
Methodology Overview
Our primary qualitative research helped us create an
exploratory model about the dynamics of wholesale
market supply chains. This was done by constructing
a Causal Loop Diagram (CLD), integrating the
variables identified in our research and their
interconnected relationships. The CLD provides a
comprehensive representation of the system
dynamics - a method of illustrating and analyzing
how different elements within a system interact and
influence each other- which aids in understanding
potential scenario outcomes and guiding decision-
making. In addition, the CLD allows us to identify
emerging system archetypes (i.e., recurring patterns
of system behavior that provide a framework for
understanding and predicting the impact of specific
problem behaviors in our context).
Our final model incorporated 65 unique variables
identified through primary research. Many of these
were treated as exogenous to regulate the model's
Figure 2
Stock and Flow Model for Infrastructure Investment
parameters or guide its operation. However, we
endogenized the fundamental dynamics we aimed to
explain and simulate. Some of the most crucial of
these included: Wholesale Market Stock, Rate of
Food Loss, Local Market Demand, Average Product
Quality, Cold Storage Capacity, and Investment in
Infrastructure.
Next, we developed a Stock and Flow model based
on our variables and their interactions. This model
allows for simulating our insights from literature and
primary data collection. Due to the limited availability
and reliability of quantitative data, we concentrated on
Mercabarna (i.e., the wholesale market in Barcelona,
Spain) to develop a generic system dynamics (SD)
model for our simulation. The data, partly provided by
the market and partly collected from public sources,
was later used to generate realistic simulation results.
Simulating this model allowed us to observe the
system's behavior over time while considering the
changing relationships between variables. We
designed different scenarios to analyze our model
and gain valuable insights, which explored the effects
of unexpected supply and demand fluctuations,
varying levels of infrastructure investment, and
distinct product shelf-life durations.
Model Development
With the development of our CLD, we successfully
highlighted two system archetypes, "Success to the
Successful" and "Drifting Goals," that help illustrate
market behaviors and areas for potential intervention.
In "Drifting Goals," we consider the interplay between
yield, excess supply, demand fulfillment, and food
loss variables. This illustrates how food loss
frequently becomes an overlooked measurement,
often lacking specific, actionable targets. "Success
to the Successful" explores the interplay between
operational costs, infrastructure investment, and
cold storage expansion. Balancing immediate
returns from purchasing and selling new stock with
long-term infrastructure improvements is critical to
reducing food waste and improving efficiency.
From our CLD, we develop a Stock and Flow model,
breaking it down into four critical segments for better
understanding. We start with the market inventory
and in-out flows, then proceed to model the
dynamics of local market demand, infrastructure
development, and market cash flows. The inventory
model includes supply as an inflow and customer
purchases, food loss, and food recovery as potential
outflows. Demand creation depends on exogenous
and endogenous factors, including market
equilibrium and average product sale price.
Infrastructure development captures needs driven by
inadequate capacity and declining produce quality,
emphasizing, respectively, the necessity of
investment in capacity and cold storage expansion.
This need is translated into investment, given
sufficient funds for expanding capacity. Figure 2
illustrates this dynamic model.
Lastly, the market cash-flows model provides
insights into income and expenditures, showcasing
the importance of strategic resource allocation to
support infrastructure development and waste
management projects. By combining and then
simulating these different aspects, we can identify
Figure 3
Simulation Results – Growing Yield with Infrastructure Development
key waste sources and strategies to prioritize
investments, develop partnerships, or drive other
meaningful interventions.
Simulation
Once our stock and flow model had been developed,
we designed seven scenarios to simulate the
wholesale market supply chain dynamics, utilizing the
aforementioned endogenous and exogenous
variables. The model is fed with data for different
scenarios to understand system behavior under
various circumstances. We considered the following
scenarios: [1] Baseline, [2] Growing yield without
infrastructure investment, [3] Growing yield with
infrastructure investment, [4] Loss mitigation by
establishing partnerships with food banks, [5] Panic
buying, [6] Perishability impact on waste and
infrastructure investment, and [7] Sudden supply
shock.
Each scenario revealed unique insights into the
market dynamics under specific conditions. For
instance, the "Growing yield with infrastructure
investment" scenario showed how the system adapts
to an increasing supply and improves capacity and
cold storage over time. These dynamics are
illustrated in Figure 3. We can see that as yield
progressively increases, it initiates investment and
therefore growth in capacity at certain times, driven
by a mismatch in supply and available capacity. As a
result, we can note that the loss in the "infrastructure
development scenario" (purple line) is significantly
lower than the "no infrastructure development
scenario" (red line). We observe that strategically
developing infrastructure in response to market
growth can result in improved sales and reduced
losses.
In the "Partnerships with Foodbanks" scenario, we
saw how the presence of recovery modes could save
potential loss. Similarly, in the "Perishability"
scenario, we demonstrated how different storage
modes are prioritized and how food loss changes
based on shelf-life. The "Panic Buying" scenario
highlighted how the market behaves in response to
sudden changes in demand. An abrupt surge in
demand can trigger a phenomenon known as the
"bullwhip" effect. The latter occurs when supply
contracts are expanded to accommodate escalating
demand, but an excess supply period emerges due
to their delayed response. This surplus then
reverberates through the supply chain, creating
further imbalances.
In this study, we presented a generic model for food
waste in wholesale markets, validated via a single
case study. Future work could focus on detailed
analyses of individual markets and translating
strategies from simulations into real-world practice.
Exploring food waste categories and alternative
waste prevention methods, like sorting and cooking,
and creating circular supply chains could further
complement our findings. A deeper understanding of
decision-making processes and logistics activities
could further guide research on improving
performance around waste mitigation.

Discussion and Recommendations

Our simulations provided valuable insights into the

wholesale market dynamics, especially under
varying conditions. For instance, the "Growing yield
with infrastructure investment" scenario
emphasized the importance of proactive
infrastructure investment. This ensures the supply
chain's adaptability to increasing yields, maintains
product quality, and ultimately reduces food waste.

Partnerships with food banks and charities were

also highlighted as a critical factor in mitigating food
waste. Such alliances can easily convert potentially
lost food to recovered food, especially during
periods of erratic supply. We also recommend
contingency plans to manage sudden demand
spikes, such as panic buying. These plans should
minimize negative impacts on food loss and supply
chain efficiency.

In the case of perishability, we suggest a tailored

approach for products with different shelf lives. For
short-shelf products, we suggest ways to extend
shelf life through processing, like making soups or
pulp.

Additional recommendations include consistent

tracking of waste and strategic investment in long-
term growth. These measures can not only reduce
waste but can also generate increasing profits over
time.

Conclusion and Future Work

In collaboration with WUWM, this project used

system dynamics models to examine food supply
chain dynamics in wholesale markets. It aimed to
understand how to reduce food waste and improve
food security. By identifying key factors affecting
food waste and suggesting interventions, we
highlighted the need for proactive infrastructure
investment, partnerships with food banks, and food
processing capabilities to minimize waste and
improve efficiency in wholesale markets.