In its continuing struggle with unsaleables, the food industry finds itself winning some battles, but losing the war. As a result, renewed efforts to find solutions are underway.
Judging by the recent commitment and successes of major manufacturers and retailers, the war is far from over, but, for now, the situation is hardly encouraging. Since the first industry benchmarks were published in 1995, the average reported rate of unsaleables has grown from 0.75 percent to 1.06 percent in 2004.
"Despite the advances we have made in supply chain technologies and efficiencies, the cost of unsaleables continues to increase. To change this situation, manufacturers and retailers must work together to identify and correct the root causes of unsaleable products," says Karin Croft, senior director of industry affairs at the Grocery Manufacturing Association (GMA), based in Washington.
Last month, GMA and the Food Marketing Institute (FMI) issued recommendations for reducing unsaleable products. Developed by the Unsaleables Leadership Task Force, this new report outlines how trading partners should collaborate to fix the root causes of unsaleables and improve supply chain efficiencies. Recommendations include:
- Unsaleables should be processed through reclamation centers;
- Trading partners should use product condition data to better understand where and how damage occurs in the supply chain;
- Current data synchronization and registration initiatives should be expanded to help reduce unsaleable product volume.
In the big picture, "improvements are being made on all sides of the supply chain," reports Tom Marcellino, vice president of sales and client services at Carolina Logistics Services Inc., Winston-Salem, NC.
"One thing that we've noticed in recent years is that retailers, wholesalers and manufacturers are taking unsaleables to a level of visibility and attention within their companies," he says. "They're assigning director-level and above responsibility to the issue and they're also sharing accountability for the problem, not only among supply chain managers, but also pulling category managers and brand managers into the equation. So you're now getting sort of a broader view and certainly a broader perspective and ownership of the issue than what has been historically in place."
"But reducing the cost of unsaleables is not simple, guaranteed or enduring without a focused commitment to improvement and collaboration between the trading partners," says Croft of GMA.
Ron Romback, vice president of Genco, Pittsburgh, agrees. "Perhaps the single best outcome of dealing with unsaleables is improved collaboration between trading partners," he says. "The issues that arise while addressing unsaleables typically span the supply chain and therefore require both parties to come to the table and develop solutions. Supply chain changes and improvements are generally better accepted by all parties when they are developed together and help both companies work toward a common goal."
As a third party, Genco has experience with unsaleables and the problems they cause. There are obvious financial situations between trading partners that arise from dealing with unsaleables, but another major issue is the actual relationship between companies, Romback adds.
Genco strongly encourages its customers to participate in collaborative studies. These studies identify an unsaleables opportunity and Genco then serves as the moderator and supply chain management expert between the retailer and manufacturer. Through collaboration and in-depth analysis, Genco logisticians can then offer recommendations that reduce damages through the entire supply chain.
Leaders Recognized For Strides Made
At their Joint Industry Unsaleables Conference last year, GMA and FMI recognized four industry initiatives that had successfully addressed the challenge of reducing unsaleable costs. The recipients of the 2005 Innovation Awards were: