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Unsaleables 101 An Introduction to Unsaleables History, Opportunities, and Solutions.

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Presentation on theme: "Unsaleables 101 An Introduction to Unsaleables History, Opportunities, and Solutions."— Presentation transcript:

1 Unsaleables 101 An Introduction to Unsaleables History, Opportunities, and Solutions

2 Agenda A History of Unsaleables Gary Spinazze Unsaleables Opportunities Ted Lechner Eugene Schachte Unsaleables Solutions Rob Shifter

3 Legal Disclaimer Presentations are intended for educational purposes only and do not replace independent professional judgment. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of the Grocery Manufacturers Association (GMA), its cosponsors, or its committees. The GMA does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented. Material within this presentation is intended to be used for purposes of education and discussion stimulation only.

4 Unsaleables: A History Gary Spinazze

5 What are Unsaleables? Any product removed from the primary channel of distribution, regardless of the reason for removal. This includes, damaged, seasonal or out-of-code products. Unsaleables is defined as:

6 Unsaleables Timeline Reclamation Center Growth JIR Published JIULT Formed Initial Unsaleables Benchmark Study Initial ARP Implemented Updated JIR Published 2008 Joint Industry Unsaleables Report

7 Reclamation Centers What is a Reclamation Center? Central location for collection and processing of unsaleables product. Can be owned by distributor or 3 rd Party. What is the purpose of a Reclamation Center? To control disposition of unsaleable product As a central return point for recalls To ensure proper issuance of store credit

8 Joint Industry Report (JIR) Published in 1990 This document became the bible for unsaleables in the Industry

9 Joint Industry Report (JIR) Guidelines still used today for policy development and implementation. – Referred to as JIR Policies – Reimbursement based on list cost Study provided guidelines for: – Applicable products – Reimbursement – Disposition – Reclaim process – Shared responsibility – Costs

10 Joint Industry Unsaleables Leadership Team The JIULT was Formed in 1992 Deliverables: – Benchmarking Report – The Unsaleables Conference – Projects based on the JIULT mission statement. Mfg. Dist. FPA GMA FMI JIULT

11 The mission of the JIULT is to: Mfg. Dist. FPA GMA FMI Provide strategies, educational content and tools to help Retailers, Distributors and Manufacturers reduce the volume of unsaleable goods within the consumer package goods (CPG) value chain. This will be achieved by: Developing strategic management applications Identifying and sharing successful practices and recommendations Creating educational platforms Collecting and disseminating industry intelligence on emerging trends and developments JIULT

12 Unsaleables Benchmark Reports In 1995, the JIULT began producing recurring Benchmark Reports – Survey Distributors and Manufacturers – Report overall rates – Report state of industry

13 Adjustable Rate Policy (ARP) WHAT IS IT? Rate based policy Assessments of supply chain damage & root cause Requires substantial resources & investment Requires use of independent 3 rd party months to develop and implement In 1997 the first ARP was introduced in the industry 60% of Market Share is currently on ARP * * 2008 Joint Industry Unsaleables Report

14 Joint Industry Report Update In 2005, a New JIR was published Mfg. Dist. FPA GMA FMI Support original JIR Address industry changes Raise Unsaleables to a Senior Management Issue Importance of reclaim centers Identify Unsaleable ARP Components – What should and shouldnt be included Continued Collaboration JIULT


16 Unsaleables Benchmark Reports The 2008 version is available on the GMA website –

17 What Are The Opportunities Today? Tight Economy ARP GAPS Sustainability Exit Strategies Inventory Management Collaboration Commitment SKU Rationalization Shelf Life

18 Unsaleables Opportunities Ted Lechner - HEB Danielle Kowalkowski – Heinz North America

19 Unsaleables Opportunities: Part I Recalls Open Code Dating & Expired Open Code Dating & Expired Seasonal & New Items Seasonal & New Items Discontinued Damage Policy Unsaleables

20 Unsaleables- Damage Packaging Issue – Cardboard Strength – Compression Damage – Tray Pack vs. full Case – Is going Green, Costing us GREEN? Platform Issues – Poor Pallets Use Pool Pallet, CHEP, IGPS, PECO WW Grade A or B only – Pallet overhang or underhang Damage Reduction is an Attitude – Damage is not an acceptable supply chain practice

21 Manufacturer Discontinued – Normally funded – Product disposition options Mark down at Retail, or bill back through Reclaim Retailer Discontinued – Normally not funded by supplier – Retailer specific discontinued – Product Disposition – Mark down at retail, Salvage sales, Unsaleables- Discontinued

22 Seasonal – Special one time pack – One time buy items – Holiday product Easter, Halloween, Christmas etc, – Exit plan needs to be discussed up front New item introduction – Product failure – Included in SWELL policy – No exit strategy Is it Really the greatest thing since sliced Bread? Unsaleables- Seasonal & New items

23 Open Code Dating – What is the correct shelf life – Who determines the correct shelf life – Why is some Julian Dated and some open code dated? Receiving Shelf life – How much shelf life should be left at time of receiving – Who determines that shelf life? Retailer, Manufacturer? When do you pull out of date from Shelf – When it is expired or days before? – Who owns Expired Product Financials? Freshness belongs to the Consumer not the Supply Chain Unsaleables- Open Code Dating & Expired Product

24 Recalls – Quality issues – Handling Charge dispute Store Handling RGC Handling Quality Assurance handling, notification – Product disposition Who is responsible? Hazardous Material? Certificate of Destruction? Land fill charges? Unsaleables-Recalls

25 – What is the Right Policy JIR or Swell Benefits of Policy JIR you see data, Swell you dont – Exploring the GAP Who should pay the difference? Shared Responsibility Trade funds? – Where should we focus our energy? Policy dispute or Reducing Damage? – IF you focus on the right thing you will do the right thing Unsaleables- Policy

26 What did you learn? Unsaleables is complicated! It takes Retailer and Manufacturer to make a different! Facts not Emotions! You can make a difference! Focus on the right thing, and you will do the right thing! Cost Reduction is why you are here today! Failure is not an option

27 Dont Miss These Sessions Wednesday – 10:45 Breakout Session – Retailer/Wholesaler Discontinued – Manufacturer Discontinued Wednesday – 2:45 Breakout Session – Recalled Products Thursday – 10:00 General Session – Damaged Products – Expired Products Reverse Supply Chain Improvement Project Work Groups

28 Unsaleables Opportunities – Part II Gene Schachte Sr. Manager, Reverse Logistics

29 Unsaleables Opportunities: Part II 1.Expired Product – Open Code Dating – Product Rotation 2.Recalls and Withdrawals 3.Organizational Structure

30 Best if used by, Sell by, or Expires on format Freshest possible product Primary and secondary packaging Bill of Lading What Is Open Code Dating? A complete guide to open code dating and the supply chain was published in 2007 and can be found at: penDate.pdf

31 Open Code Dating Examples Month – Day – Year Format Month – Day – Year Format Legible and easy to find Legible and easy to find Use of Best By Use of Best By Month – Day – Year FormatMonth – Day – Year Format Legible and easy to find Legible and easy to find What does the date mean What does the date mean Use by, sell by, expires?Use by, sell by, expires?

32 Open Code Dating Examples Month – Day – Year FormatMonth – Day – Year Format Legible and easy to find Legible and easy to find Use of Best By Use of Best By Correct Size Correct Size Month – Day – Year FormatMonth – Day – Year Format Too Small Too Small Hard to find Hard to find Bottom of case Bottom of case

33 Remaining shelf life = ongoing debate The amount of shelf life left at time of receipt at the customer warehouse Customer requirements vary Most manufacturers WMS systems are not capable of different ship statuses for different customers What does the consumer require for pantry Open Code Dating Challenge

34 Opportunity: Product Rotation Shared Responsibility Manufacturer – Ensure FIFO of shipments – Maximize turns – At-shelf rotation schedules – Case identifier Retailer / Distributor – At-shelf – Periodic – During category resets – Proactive communication

35 Opportunity: Product Rotation Shelf ready trays Shelf rotation racks

36 Product Rotation: Challenges 1.Labor costs 2.Other Priorities – shelving, pricing, new item etc. 3.Variable Formats / Hard to Read code dates

37 Recalls and Withdrawals Product recalls have become more frequent… and more expensive. Fines and fees have been introduced by most retailers. - Formalized and substantial Cost of recall - anywhere from 300% - 3,000% of normal reclamation volume

38 Considerations as you begin Where is your program now? What is your end state? How is your corporate culture? Do you understand the causes? What do your customers think?

39 Unsaleables Program Roadmap Support & Structure Executive Support Organizational Structure Resources Company focus and priority Corporate culture Performance measurement Long term program stability Customer relationships Executive support Executive support needed Size Varies by company Average is manager and analyst Reporting Relationship Sales, Supply Chain, Finance, Cross-functional Structure Structure varies based on: Size of company Culture Core competencies Organizational Structure

40 Structure - Example Unsaleables Manager Responsible for strategic direction Interface to customers Resource for front-line sales Unsaleables Analyst Reporting Data Analysis Tools Liquidation Analyst Alternate channels FinanceSales Supply Chain Unsaleables Program Roadmap

41 Support & Structure Resources A versatile skill set Unsaleables Program Roadmap Executive Support Organizational Structure Communication: oral + written Aggressive + An Influencer Detail Oriented + Strategic Focused + Flexible Broad cross functional skills

42 Opportunity Support & Structure Resources A versatile skill set Executive support Organizational structure Reporting tracking and measuring Unsaleables Program Roadmap Do We know our Unsaleables Expense? Can we rank our: Customers Factories Brands Warehouses Where are we vs. our Peer Companies?

43 Opportunity Support & Structure Resources Tools Develop enablers Capability building tools Unsaleables Program Roadmap 1. Internal reporting and tracking 2. Customer reviews 3. Internal root cause studies 4. Customer collaboration studies 5. Discontinued markdown programs 6. Product rotation schedules Levers and Enablers:

44 Opportunity Support & Structure Resources A versatile skill set Executive support Organizational structure Reporting tracking and measuring Tools Develop enablers Capability building tools Strategy Customer relationships Policies and procedures Long term plan Unsaleables Program Roadmap

45 Unsaleables Solutions Rob Shifter

46 This applies to: – Vendor / Manufacturer – Wholesaler / Distributor – Retailer Lets work together

47 Data Audits (3 rd party and internal) Damage reduction Inventory management Current practices Supporting policies Policy assessment Collaboration Building blocks for success Big opportunities

48 Unsaleables data – defined and consistent Measured vs. sales volume & dollars Total unsaleables by SKU Total profitability by SKU over time Using data

49 Who? Retailer/Distributor, Manufacturer, 3 rd Party, Industry benchmark True and accurate Complete Does it represent the entire supply chain? Representative sample size Understand the data sources Using data

50 Analyzing the Data What is captured and compared? Warehouse damaged and expired Damaged, distressed, and expired at store level Short dated receipts New product launches Discontinued items Can we identify root causes? Product handling Rotation Delivery practices Packaging issues Inventory management and position Inadequate remaining shelf life Using data

51 Discussing Data Be fact based Removes emotion from discussion Confirm accuracy Cornerstone for solving problems Using data

52 3 rd party audits Audit Planning Have a mission statement and a goal Frequency – One shot or ongoing 3 rd Party or Manufacturer/Distributor team Scope Statistically significant Fulfill pre-defined parameters Document current process flows Broad product and geographic scope Should include all classes of trade Should audit complete supply chain – plant to shelf Include hidden damage assessment Shared responsibility Should include interviews with key players

53 3 rd party audits Obtain Actionable Data Product age Expired rate Damage by product/package type Product unit location where damage occurred Shipping platform Inbound damage disposition Are we reacting at time of receipt?

54 3 rd party audits Debrief on audit and share results Identify areas of opportunity Revise processes (i.e. damage handling process) Review new processes with key players Initiate improvement plans Measure results and continually improve Adopt zero loss mentality Summarize, Analyze Data, Process Improvement

55 Damage reduction Manufacturing/packaging improvements Corrugate strength Pallet configuration Shipping container design (headroom, etc.) Adhesives Date code printers Stretch wrap application Load configuration Dunnage Distribution improvements

56 Inventory management Working Capital Focus Increased focus on reducing inventory for all parties Moving closer to Just-in-Time inventory processes Rapid replenishment models – LTL shipment impact Resets - How do we minimize the impact to unsaleables? Recalls - Proactively coordinate the removal of product from the full supply chain quickly and efficiently Store-Level Data – How do we leverage store sell-thru data Additional Inventory Impact Activity

57 Inventory management Code Dating We are in an open code date environment Are we using this as an effective tool to prevent unsaleables? Are we auditing and validating that product rotation is taking place? In Warehouse At shelf Manufacturer owns within their supply chain Warehouse Management System (WMS) Maximize turns Periodic at shelf rotations Product Rotation

58 Drivers for discontinuations Package/Size change Product changes SKU rationalization Category management Seasonal items Brand ownership changes Slow movement Store redesigns Product Discontinuations Inventory management

59 Processes and procedures are the key Execute established exit strategies Is the plan proactive? Is there a phase out approach? Customer Geography Class of Trade Liquidation Product Discontinuations Inventory management

60 Can be in conjunction with entrance strategy for new items Success is better when trading partners collaborate and communicate Implementation improves sell through and minimizes reclaim Effective program addresses warehouse inventory (full case) and shelf inventory Effective program tools include: Markdowns (Separate from unsaleables program/policy) Trade funds Coupons Primarily for discontinued products, but can also be used for underperforming products Exit Strategies and Collaboration Inventory management

61 What is embedded in our process that causes damage? What tools are in place to ensure they are correct and measured? What are our policies on: Loading and unloading Ordering Product rotation New or discontinued Items Seasonal items Code date requirements Current practices Practices Review

62 Supporting policies OS&D Policy Receiving process is a key step to eliminate unsaleables damaged product from entering the distributor supply chain. Provides visibility to product damaged through the supply chain. Enabling and executing compliance to OS&D policy. Report data and use to drive solutions. Address hidden damage cases in warehouses. Minimize excess and aged inventory. One option for disposition on discontinued/seasonal items. Customer Initiated Return Policy

63 Policy assessment Measures offered vendor policies using a consistent and methodical process. Acts as a catalyst for review of internal policies to identify opportunities in your organization. Available at: Unsaleables Policy Assessment Tool

64 Collaboration New item introductions Discontinued items Seasonal items Resets / Plan-o-gram changes Recall management Promotion planning Activities that require collaboration

65 Benefits are achieved by both trading partners through: Collaboration Data sharing Shared focus on unsaleables Steps to Effective Collaboration Open lines of communication Develop trust Share data Identify issues (internal and external) / Develop a plan Agree on goals Commit to improvement Take action – Work together for Win-Win solutions Measure and analyze results Working together Collaboration

66 The key is understanding of mutual supply chains Create a cross functional team Manufacturer: Distributor/Retailer/Wholesaler Effective collaboration in action SalesFinanceLogistics PackagingWarehousingCustomer Service Unsaleables Management Supply Chain LeadersMarketing ReclamationCategory ManagementFinance Supply ChainLogisticsWarehousing Inventory Control

67 Moving forward 1.Its OK to disagree, but dont let that stop the process. 2.Avoid data paralysis. 3.Use the data to move toward collaboration. 4.Go after low-hanging fruit first, then stretch. 5.Work with a goal of improving trends. As We Move Forward, We Should Remember:

68 Questions

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