Unsaleable products used to be considered one of the costs of doing business. Not anymore. The price is strangling margins and action is imperative.
According to the Joint Unsaleables Report of 2008 undertaken by the Grocery Manufacturers Association and the Food Marketing Institute, the cost to the food industry is about $15 billion annually [extrapolated based on 2006 food and beverage and health and beauty sales of $1.23 trillion and the survey retailer weighted average unsaleables rate of 1.21 percent], or 1 percent to 2 percent of gross sales, on average.
The good news is the report's assertion is that these dramatic costs are avoidable. So what are companies doing about reducing and eliminating these phantom villains to the bottom line?
Unsaleables are defined as products that are removed from the supply chain because they have expired, or have been damaged or discontinued. This article will examine methods to prevent damaged unsaleables. It might seem too simple to state, but the first step requires getting back to basics. This means examining your supply chain to identify where, why, and how damages are occurring.
Best Practices: First Line Of Defense
Having analyzed the movement of products along the supply chain for over 20 years, Inmar Inc. developed a list of five best practices that should be considered holistically, suggests Mike Rawlins, senior director for supply chain services for the Winston-Salem, NC-based company. "These are the common themes we continue to see in the data we receive from our food manufacturer clients," he says.
The first step to best practices is to maintain and calibrate equipment regularly. Rawlins points to frequent situations involving malfunctioning case-folding and case-sealing equipment that can cause damaged products downstream. Secondly, maintain pallet quality so damaged and sub-standard pallets do not enter the supply chain.
Third, make sure to use wrap properly for unitizing. "Tying it to pallets to increase the stability of unit loads so product won't slide off a pallet during transportation can reduce damage significantly," Rawlins advises. "Also make sure the wrap is pre-stretched and appropriate force-to-load stretch wrapper settings are used with respect to product weight, density, and shipper-case design. This is an area of inherent weakness almost inevitably through most manufacturing environments."
Fourth, don't allow damaged shipping units and cases into the supply chain in the first place. "This means don't allow these damaged items to be loaded into trailers," Rawlins continues. "Doing this doesn't cost any money, yet it can result in millions of dollars of savings." So make sure your workforce understands the importance of catching these potential cost-producers at the point of loading trailers.
Finally, make sure loads and bulkheads are stabilized. If airbags are being used, they should be blown up properly and stabilized between pallets. Decisions made at this point can have positive or devastating effects once the customer receives the shipment, Rawlins says. "These five points are the first line of defense that should be orchestrated together. Everything you can fix here will have a positive and rippling effect along the supply chain."
Gentlemen, Tear Down Your Silos!
Once you have followed best practices, it's time to think about unit load design. According to the Center for Unit Load Design at Virginia Tech in Blacksburg, VA, the efficiency of unit load material handling is based on the interactive performance of packaging, pallets, and material handling equipment. The Center is the nation's only laboratory with facilities to evaluate all aspects of unit load and material handling design and efficiency.
Ralph Rupert, director of the Center, explains that packaging, pallets, and material handling systems are designed separately at different locations by different teams of individuals with no consideration given to how the components will interact with each other throughout the supply chain. Such a siloed approach creates mismatched systems.