Supply chain execs will soon have a new resource to help them better manage unsaleable products.
By Jenny McTaggart
Dented soup cans, expired salad dressing and discontinued candy bars certainly aren’t supermarket sex symbols – but they’re the stars of a new educational tool being developed by the Food Marketing Institute/Grocery Manufacturers Association Trading Partner Alliance (TPA), with the help of supply chain services provider CHEP.
Officially known as “unsaleable consumer goods,” these misfit products aren’t a new problem, but up until now, much of the industry’s focus has been on accounting for them, instead of finding ways to reduce them. One highly cited figure from a 2008 Deloitte study estimated that unsaleables cost the industry at least $15 billion annually.
With the new online educational platform, which was unveiled earlier this year and is expected to go live in the fall, TPA and CHEP hope to create a centralized resource for employees across all areas of the industry, encompassing various supply chain functions, to learn the basics of what unsaleables are – the different types and key drivers – as well as best practices that can lead to their reduction.
“Not only are unsaleables a large problem, they’re a persistent problem,” notes Ben Eugrin, director of supply chain solutions, North America, for Atlanta – based CHEP, the research partner helping TPA’s Joint Industry Unsaleables Leadership Team. “While there’s been a lot of work done in the past several decades, with this initiative, we’re taking a look at how to reduce the amount of unsaleables in all categories, including expired, discontinued, and damaged.”
The platform will be particularly useful for people who are new to the industry, he observes.
“A large number of people are retiring or moving on to new roles in their companies,” explains Eugrin, “so we hope to enable new people to get onboarded and understand the process so that they can have an impact, and enable them to get their organizations, as well as their partner organizations, up to speed.”
In addition, the platform’s launch will serve as an important tool to help suppliers and retailers better work together in combating unsaleables, according to Daniel Triot, senior director of TPA. After all, unsaleables don’t fall into one specific department or function, at either the manufacturer or retail level.
“One of the challenges with unsaleables is that they aren’t necessarily captured in the same function,” says Troit. “If you look at discontinued products, for example, which may become unsaleable, that responsibility really falls under the buyer, the category manager. But if it’s a product with physical damage or an expired item, that would fall under the logistics or supply chain operations person at the retailer, and the same goes for the manufacturer. So, at the end of the day, cooperation between retailers and manufacturers needs to take place with a different function.”
3 Top Solutions
CHEP’s research, which included in-depth interviews with retailer and manufacturer supply chain experts, identified 48 strategies being used to reduce unsaleable goods and generate cost savings. The strategies represented multiple functions, including warehousing, shipping and receiving, sales, merchandising, and reverse logistics. The only categories that weren’t included were fresh produce, fresh meat, and direct store delivery (although Triot notes that he’d love to include research on fresh categories in the future).
CHEP presented its research during TPA’s annual Supply Chain Conference in May, and highlighted what research participants ranked at the three most effective solutions: enhanced shelf-life management, effective management of discontinued items, and sharing of UPC-level data. CHEP’s Eugrin and Mike Boersig, manager, supply chain solutions, were joined by Rob Shifter, Nestlé supply chain manager; Greg Riggs, SpartanNash senior supply chain analyst; and Ted Lechner, H-E-B senior reverse logisitics leader, to discuss these solutions.
The first solution, managing shelf life throughout the supply chain, includes understanding how much shelf life is left and managing that in your data streams and the way you manage your inventory, explains Eugrin.
Adds Boersig: “Factoring in the shelf life at the time of sale and the time of shipment is one of the big ones that was thought to have a high impact. Both retailers and manufacturers agreed that that has a high impact. But the manufacturers thought that they were using that practice a little more than the retailers thought they were using that practice.”
Boersig, who oversaw the research, says he purposely structured the study to uncover differences in perception among retailers and manufacturers, as well as which strategies were viewed as being used most frequently.
As Eugrin observes, “This points to an incredible opportunity to increase collaboration and work together, which is probably the most important key theme we found and something we tried to highlight during our presentation at the conference.”
The second-leading best practice, which also requires good communication between all trading partners, is the effective management of discontinued items. During the presentation, SpartanNash’s Riggs urged companies to take a more strategic approach, ensuring that all of their systems are updated to reflect discontinuation changes and employing a markdown schedule with discounts.
Last but not least, H-E-B’s Lechner talked about using UPC-level data to reduce unsaleables. Among his suggestions to retailers were to “utilize robust systems to collect UPC-level unsaleables, share data with suppliers, hold high-damage items for review by the supplier and packaging team, support reclaim audits, and review internal handling practices.”
A ‘Living Document’
Once the educational platform is unveiled in the fall, users will find a plethora of data, including an overall definition of unsaleables, a glossary of terms, and a further discussion of best practices. It will also feature a prioritization graph, as well as a white paper on “Unsaleables 101.”
Ultimately, this will be a “living document,” points out Eugrin. “Everyone will have the ability to contribute and add to it as we move forward.”
The content will go beyond a digital platform, adds Triot. “We’re thinking of the word ‘platform’ not only as a website, but also as documents that people can download, along with webinars and educational sessions,” he says, going on to note, “As part of education, we want to raise the awareness of what we’re working on, and also get more people to contribute more to what we’re doing.”
If the initial response to the topic during the TPA conference is any indication, many folks in the industry will be eager to get on board with collaborative efforts to tackle unsaleables. “We noticed a lot of interaction during our presentation – a lot of people wanted to talk to their trading partners about this, especially how to work with some of their smaller suppliers,” says Eugrin. “It was a huge win for the effort, and that’s really what we wanted to get out of this.”
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