Unsaleables Rx : Look To Your Supply Chain

Unsaleables are more burdensome during these challenging economic times. Experts suggest a holistic, systems-based approach to eliminate unsaleables.


"This causes inefficient unit load handling practices because you are not considering the total system of the load on the pallet, the type of pallet you require, and the distribution system the pallet will move through," Rupert explains. "When these components don't converse with one another, they create a system with inherent increased costs and increased damage rates." He notes that companies are beginning to understand the consequences of approaching their supply chain from a siloed perspective. "But we still have a long way to go."

In an effort to help companies tear down these silos, the Center for the last eight years has offered a seminar focused on the total systems approach. The Unit Load Design Short Course, designed for industry professionals, is offered twice a year. "We hope to educate the industry about how not to establish a system that is counterproductive to the systems-based approach," Rupert reports. "The sad truth is people get rewarded for saving their respective dollar spend in packaging, pallets and material handling systems while not realizing they are creating the situation for unsaleables."

Pallets: Kinks In The Chain
Once products are placed on pallets, it is assumed they will arrive at their destinations on-time, safe and undamaged. But in the real world, that is not always the case. The folks at CHEP USA understand this all too well, having invested in studies to help food companies reduce and eliminate unsaleables.

CHEP conducted its first study in unsaleables in 2003 and updated the study in 2006. The company is a regular contributor to the Joint Industry Unsaleables Management Conference. "About 18 months ago we hired the two major players in damage reclamation and reverse logistics: Inmar and Genco Supply Chain Solutions," notes Derek Hannum, director of marketing for the Orlando, FL-based company. "We wanted to understand the contribution CHEP is making in unsaleables reduction by having them study the relationship between our pallets, unit load design and product damage."

The study concluded that about 0.82 percent of products shipped on traditional white wood pallets qualify as damaged vs. 0.54 percent of products shipped on CHEP pallets (equating to 34 percent less damage).

"This is significant from a dollar perspective because of the volumes we are talking about," says Hannum. "Percentage points of improvement equate to tens of millions of dollars in unsaleable products." The study also concluded that 38 percent of product damage happens on 18 percent of unit loads due to poor unit load design.

Its innovation center examines and evaluates unit load design using its proprietary software to optimally design top board spacing to reduce the potential for the edge of a case falling into a gap that can cause creased cases and ultimate unsaleables. Hannum reports that CHEP pallets are designed with 76 percent more top-deck coverage than traditional one-way pallets or limited-use pallets.

There is also a double-whammy effect inherent in unsaleables. Because companies continue to optimize their supply chains, they operate under a model that eliminates overstocks and excess inventories. So when products wind up as unsaleables, they never reach the consumer because of the increased potential for out-of-stocks and lost sales, says Hannum.

Recognizing the amount of damage caused when material handling equipment comes in contact with pallets and products, CHEP engineered a small device called the Blue Guardian that reduces pallet and product damage. It is distributed exclusively through the Raymond Corp.

Plastic pallets also play a role in the food supply chain. ORBIS manufactures reusable plastic containers, crates, pallets, and bulk containers that retailers return to the company once products have been delivered. "We take a holistic end-to-end view of the supply chain through our relationships with manufacturers, growers, distributors, and warehouses," reports Bob Klimko, director of marketing for the Oconomowoc, WI-based company.

ORBIS helps its customers choose the right application by first auditing the portion of the supply chain a customer needs to understand better, says Klimko. "Unsaleables and damaged products are areas we explore within our audit process conducted by our packaging engineers."

Assuring Packaging Quality
Today's packaging might appeal to consumers because of its colorful and clever designs. But there is a lot of engineering going on behind the scenes. "The role of packaging is to protect the product inside," reminds Rupert at the Center for Unit Load Design.

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