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
• 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 History
Gary Spinazze
What are Unsaleables?
Unsaleables is defined as:
“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 Timeline
JIR Published
Reclamation
Center Growth
1985
1990
Initial
Unsaleables
Benchmark
Study
Initial
ARP
Implemented
JIULT
Formed
1992
Updated JIR
Published
1995
1997
2005
2008 Joint
Industry
Unsaleables
Report
2008
2009
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 product
 As a central return point for recalls
 To 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)
• Study provided
guidelines for:
–
–
–
–
–
Applicable products
Reimbursement
Disposition
Reclaim process
Shared
responsibility
– Costs
• Guidelines still used today
for policy development and
implementation.
– Referred to as JIR Policies
– Reimbursement based on
list cost
Joint Industry Unsaleables
Leadership Team
• The JIULT was Formed in 1992
• Deliverables:
– Benchmarking Report
– The Unsaleables
Conference
– Projects based on the JIULT
mission statement.
FPA
Dist.
GMA
JIULT
FMI
Mfg.
FPA
Dist.
GMA
JIULT
FMI
The mission of the JIULT is to:
Mfg.
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
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)
In 1997 the first
ARP was
introduced
in the industry
WHAT IS IT?
• Rate based policy
• Assessments
of supply chain
60% of
damage & root cause
Market
• Requires
substantial resources &
investment
Share is
• Requires use of independent 3rd
currently
party
• 18-24
onmonths to develop and
implement
ARP *
* 2008 Joint Industry Unsaleables
Report
Joint Industry Report Update - 2005
In 2005, a “New” JIR was published
FPA
Dist.
GMA
JIULT
FMI
Mfg.
• 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
Unsaleables Benchmark Reports
• The 2008 version is
available on the GMA
website
– www.gmabrands.org
What Are The Opportunities Today?
Commitment
Tight
Economy
Inventory
Management
ARP
“GAPS”
Collaboration
Exit
Strategies
Sustainability
Shelf
Life
SKU
Rationalization
Unsaleables Opportunities
Ted Lechner - HEB
Danielle Kowalkowski – Heinz North America
Unsaleables Opportunities: Part I
Policy
Recalls
Damage
Unsaleables
Open Code
Dating &
Expired
Discontinued
Seasonal &
New Items
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
Unsaleables- Discontinued
• 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,
UnsaleablesSeasonal & New items
• 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?
UnsaleablesOpen Code Dating & Expired Product
• 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-Recalls
• 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- Policy
– 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
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
Reverse Supply Chain Improvement Project Work Groups
• 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
Unsaleables Opportunities –
Part II
Gene Schachte
Sr. Manager, Reverse Logistics
Unsaleables Opportunities: Part II
1. Expired Product
– Open Code Dating
– Product Rotation
2. Recalls and Withdrawals
3. Organizational Structure
What Is Open Code Dating?
• ‘Best if used by’, ‘Sell by’, or ‘Expires on’ format
• Freshest possible product
• Primary and secondary packaging
• Bill of Lading
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/O
penDate.pdf
Open Code Dating Examples
Good
OK
• Month – Day – Year Format
• Month – Day – Year Format
• Legible and easy to find
• What does the date mean
•Use by, sell by, expires?
• Legible and easy to find
• Use of Best By
Open Code Dating Examples
Better
• Month – Day – Year Format
• Legible and easy to find
• Use of Best By
• Correct Size
OK
• Month – Day – Year Format
• Too Small
• Hard to find
• Bottom of case
Open Code Dating Challenge
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
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 costs
2. 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
Executive support needed

Resources

Company focus and priority

Corporate culture

Performance measurement

Long term program stability

Customer relationships
Organizational Structure
 Structure varies based on:
 Size of company
 Culture
 Core competencies
 Reporting Relationship
 Sales, Supply Chain, Finance,
Cross-functional
 Size


Varies by company
Average is manager and
analyst
Unsaleables Program Roadmap
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
Supply
Chain
Sales
Finance
U n sa le ab les
M a na g er
U n s ale a b le s Ana lyst
L iq u id a tion An a ls yt
Unsaleables Program Roadmap
• Executive Support
Support &
Structure
• Organizational Structure
• A versatile skill set
Resources

Communication: oral + written

Aggressive + An Influencer

Detail Oriented + Strategic

Focused + Flexible

Broad cross functional skills
Unsaleables Program Roadmap
Support &
Structure
Resources
Opportunity
• Executive support
• Organizational structure
• A versatile skill set
• Reporting tracking and measuring
Can we rank our:
Customers
Do are
We
know
ourPeer
Where
we
vs. our
Factories
Companies?
Unsaleables
Expense?
Brands
Warehouses
Unsaleables Program Roadmap
Support &
Structure
Resources
Opportunity
• Develop enablers
Tools
• Capability building tools
Levers and Enablers:
1.
2.
3.
4.
5.
6.
Internal reporting and tracking
Customer reviews
Internal root cause studies
Customer collaboration studies
Discontinued markdown programs
Product rotation schedules
Unsaleables Program Roadmap
Support &
Structure
• Executive support
• Organizational structure
Resources
• A versatile skill set
Opportunity
• Reporting tracking and measuring
Tools
Strategy
• Develop enablers
• Capability building tools
• Customer relationships
• Policies and procedures
• Long term plan
Unsaleables Solutions
Rob Shifter
Let’s work together
• This applies to:
– Vendor / Manufacturer
– Wholesaler / Distributor
– Retailer
Big opportunities
Building blocks for success
• Data
• Audits (3rd party and internal)
• Damage reduction
• Inventory management
• Current practices
• Supporting policies
• Policy assessment
• Collaboration
Using data
Unsaleables data – defined and consistent
• Measured vs. sales volume & dollars
 Total unsaleables by SKU
 Total profitability by SKU over time
Using data
Understand the data sources
• Who?
 Retailer/Distributor, Manufacturer, 3rd Party, Industry benchmark
• True and accurate
• Complete
 Does it represent the entire supply chain?
• Representative sample size
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
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
Summarize, Analyze Data, Process Improvement
• 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
Damage reduction
Manufacturing/packaging improvements
• Corrugate strength
• Pallet configuration
• Shipping container design (headroom, etc.)
• Adhesives
• Date code printers
Distribution improvements
• Stretch wrap application
• Load configuration
• Dunnage
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
Additional Inventory Impact Activity
• 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
Inventory management
Code Dating
• We are in an open code date environment
• Are we using this as an effective tool to prevent unsaleables?
Product Rotation
• 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
Inventory management
Product Discontinuations
• Drivers for discontinuations
 Package/Size change
 Product changes
 SKU rationalization
 Category management
 Seasonal items
 Brand ownership changes
 Slow movement
 Store redesigns
Inventory management
Product Discontinuations
• 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
Inventory management
Exit Strategies and Collaboration
• 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
Practices Review
Current practices
• 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
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.
Customer Initiated Return Policy
• Address hidden damage cases in warehouses.
• Minimize excess and aged inventory.
• One option for disposition on discontinued/seasonal items.
Policy assessment
Unsaleables Policy Assessment Tool
• 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:
http://www.gmaonline.org/downloads/research-and-reports/AssessmentTool.xls
Collaboration
Activities that require collaboration
•
•
•
•
•
New item introductions
Discontinued items
Seasonal items
Resets / Plan-o-gram changes
Recall management
•
Promotion planning
Collaboration
Working together
• 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
Collaboration
Effective collaboration in action
• The key is understanding of mutual supply chains
• Create a cross functional team
 Manufacturer:
Sales
Finance
Logistics
Packaging
Warehousing
Customer Service
Unsaleables
Management
Supply Chain Leaders
Marketing
 Distributor/Retailer/Wholesaler
Reclamation
Category Management
Finance
Supply Chain
Logistics
Warehousing
Inventory Control
Moving forward
As We Move Forward, We Should Remember:
1.
2.
3.
4.
5.
It’s OK to disagree, but don’t let that stop the process.
Avoid data paralysis.
Use the data to move toward collaboration.
Go after low-hanging fruit first, then stretch.
Work with a goal of improving trends.
Questions