Cracking Down On Unsealables

Trading partners work together to eliminate some of the lesser-known causes of unsaleables.


Whoever said that famous line must have been talking about unsaleables. Yes, the drumbeat of product returns continues due to damages along the supply chain. Manufacturers and the distributors have focused on unsaleables for at least 20 years. Over that time, various solutions have emerged.

"But it continues to be a soaring problem, and it always will be by the very nature of change," says Tom Conoscenti, executive vice president and COO, Damage Recovery Systems Inc., a Pottstown, PA-based provider of returned good management services for food and consumer packaged goods manufacturers.

"There have been changes in products, in their packaging, in materials handling, in distribution methodology and in the shelf presentation. As long as there are going to be changes every step along the way, there will be damages that will become returned goods," he adds.

Don Rombach, vice president of the damage research team at Genco Supply Chain Solutions, Pittsburgh, says changes in personnel also hamper any real progress on reducing unsaleables.

"There's no single person who's responsible for the overall unsaleables initiative within organizations," he says. "Unsaleables cuts across the many different functional areas within a company. People change positions and people change companies. When that happens, you tend to lose some of the momentum that a company has developed in unsaleables initiatives."

In the last two years, however, Rombach and other executives have noticed a major increase in cooperation between trading partners to prevent damages. A big part of the reason is the Adjustable Rate Unsaleables Policy, which is a means of reimbursement between the manufacturer and the retailer. Manufacturers analyze the supply chain to quantify what levels of damage occur at each touch point. They then reimburse their customers based on a percentage that studies have uncovered.

"For manufacturers to come up with that reimbursement rate, they need to have a very clear understanding of the supply chain––their own as well as all the way down to the retail shelf," explains Rombach. "That has forced manufacturers and retailers to work together to get to that rate."

He points to a white paper on unsaleables published last year by the Grocery Manufacturers of America (GMA), Washington. It contained recommendations on how to develop the Adjustable Rate Unsaleables Policy.

While there are still differences of opinion between trading partners when it comes to unsaleables, Mark Doughton, president of Carolina Logistics Inc., Winston-Salem, NC, recognizes a more collaborative spirit in the last several years. Whenever there are differences of opinion, they are typically driven by different perspectives on the amount of unsaleables as well as who owns the process within the supply chain where the unsaleables occur.

"Many trading partners have worked to collaborate on supply chain studies to understand the drivers and to determine the point at which the unsaleable occurs within the supply chain. This allows them to not only assign appropriate responsibility, but also allows both partners to find ways to prevent the unsaleable in the future," says Doughton, whose company and its affiliate, Carolina Supply Chain Services, provide supply chain audits and facilitate discussions between trading partners.

Conoscenti of Damage Recovery Systems points out that the parties generally agree on "best practices" to control unsaleables. The emphasis seems to be on "controlling" damage in handling and product returns which can never be totally eliminated.

"Both parties shine the bright light of day on it and invest a lot of resources. They're able to measure, and therefore manage and control, the problem," he says.

Four Areas To Watch Out For

The obvious cause of unsaleables relate to product handling. But what are the less obvious problems? Leading experts in the field of unsaleables control point to the following:

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