unsaleables 101
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Unsaleables 101. An Introduction to Unsaleables History, Opportunities, and Solutions. Agenda. A History of Unsaleables Gary Spinazze. Unsaleables Opportunities Ted Lechner Eugene Schachte. Unsaleables Solutions Rob Shifter. Legal Disclaimer. - PowerPoint PPT PresentationTRANSCRIPT
Unsaleables 101
An Introduction to Unsaleables History, Opportunities, and Solutions
Agenda
A History of UnsaleablesGary Spinazze
Unsaleables OpportunitiesTed Lechner
Eugene Schachte
Unsaleables SolutionsRob Shifter
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.
Unsaleables: A HistoryGary Spinazze
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:
Unsaleables Timeline
1985 20091990 1992 1995 1997 20082005
Reclamation Center Growth
JIR Published
JIULT Formed
Initial UnsaleablesBenchmark Study
InitialARP
Implemented
Updated JIR Published
2008 Joint Industry Unsaleables Report
Reclamation Centers• What is a Reclamation Center?
Central location for collection and processing of unsaleables product.
Can be owned by distributor or 3rd Party.• What is the purpose of a Reclamation Center?
To control disposition of unsaleable productAs a central return point for recallsTo ensure proper issuance of store credit
Joint Industry Report (JIR)
• Published in 1990
• This document became “the bible” for unsaleables in the Industry
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
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
FMIJIULT
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
Unsaleables Benchmark Reports
• In 1995, the JIULT began producing recurring Benchmark Reports– Survey Distributors and Manufacturers– Report overall rates– Report state of industry
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 3rd
party• 18-24 months to develop and
implement
In 1997 the first ARP was
introduced in the industry
60% of MarketShare iscurrently on ARP *
* 2008 Joint Industry Unsaleables Report
Joint Industry Report Update - 2005In 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 shouldn’t be included
• Continued Collaboration
JIULT
Unsaleables Benchmark Reports
• The 2008 version is available on the GMA website– www.gmabrands.org
What Are The Opportunities Today?
Tight Economy
ARP“GAPS” Sustainability
Exit Strategies
Inventory Management
Collaboration
Commitment
SKURationalization
ShelfLife
Unsaleables Opportunities
Ted Lechner - HEBDanielle Kowalkowski – Heinz North America
Unsaleables Opportunities: Part I
Recalls
Open Code Dating &Expired Seasonal &
New Items
Discontinued
Damage
Policy
Unsaleables
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
• 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
• 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
• 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
• 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
– What is the Right Policy• JIR or Swell• Benefits of Policy• JIR you see data, Swell you don’t
– 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
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
Don’t 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
Unsaleables Opportunities – Part II
Gene SchachteSr. Manager, Reverse Logistics
Unsaleables Opportunities: Part II
1. Expired Product– Open Code Dating– Product Rotation
2. Recalls and Withdrawals
3. Organizational Structure
• ‘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: http://www.gmaonline.org/publications/docs/2007/OpenDate.pdf
Open Code Dating Examples
• Month – Day – Year Format• Legible and easy to find• Use of Best By
• Month – Day – Year Format• Legible and easy to find• What does the date mean
• Use by, sell by, expires?
Good OK
Open Code Dating Examples
• Month – Day – Year Format• Legible and easy to find• Use of Best By• Correct Size
• Month – Day – Year Format• Too Small• Hard to find
• Bottom of case
Better OK
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
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
Opportunity: Product Rotation
Shelf ready trays Shelf rotation racks
Product Rotation: Challenges
1. Labor costs2. Other Priorities – shelving, pricing, new item etc.3. Variable Formats / Hard to Read code dates
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
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?
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 needed
Size Varies by company Average is manager and
analyst
Reporting Relationship Sales, Supply Chain,
Finance, Cross-functional
Structure varies based on: Size of company Culture Core competencies
Organizational Structure
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
Unsaleables Analyst Liquidation Analsyt
UnsaleablesM anager
FinanceSalesSupply Chain
Unsaleables Program Roadmap
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
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:CustomersFactoriesBrands
Warehouses
Where are we vs. our Peer Companies?
OpportunitySupport &Structure Resources
Tools• Develop enablers • Capability building tools
Unsaleables Program Roadmap
1. Internal reporting and tracking2. Customer reviews3. Internal root cause studies4. Customer collaboration studies5. Discontinued markdown programs6. Product rotation schedules
Levers and Enablers:
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
Unsaleables Solutions
Rob Shifter
• This applies to:– Vendor / Manufacturer– Wholesaler / Distributor– Retailer
Let’s work together
• Data• Audits (3rd party and internal)• Damage reduction• Inventory management• Current practices• Supporting policies• Policy assessment• Collaboration
Building blocks for success
Big opportunities
Unsaleables data – defined and consistent• Measured vs. sales volume & dollars
Total unsaleables by SKU Total profitability by SKU over time
Using data
• Who? Retailer/Distributor, Manufacturer, 3rd Party, Industry benchmark
• True and accurate• Complete
Does it represent the entire supply chain?• Representative sample size
Understand the data sources
Using data
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
Discussing Data• Be fact based
Removes emotion from discussion Confirm accuracy Cornerstone for solving problems
Using data
3rd party audits
Audit Planning• Have a mission statement and a goal• Frequency – One shot or ongoing• 3rd 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
3rd 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?
3rd 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
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
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
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
• 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
• 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
• 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
• 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
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
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
http://www.gmaonline.org/downloads/research-and-reports/AssessmentTool.xls
Collaboration
• New item introductions• Discontinued items• Seasonal items• Resets / Plan-o-gram changes• Recall management• Promotion planning
Activities that require collaboration
• 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
Collaboration
• The key is understanding of mutual supply chains• Create a cross functional team
Manufacturer:
Distributor/Retailer/Wholesaler
Effective collaboration in action
Sales Finance Logistics
Packaging Warehousing Customer Service
Unsaleables Management Supply Chain Leaders Marketing
Reclamation Category Management Finance
Supply Chain Logistics Warehousing
Inventory Control
Moving forward
1. It’s OK to disagree, but don’t 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:
Questions