WASHINGTON -- In an effort to get to the heart of the $4 billion dollar unsalables problem in the supermarket industry, retailers and manufacturers will conduct a collaborative study in hopes of creating a blueprint to reduce costs related to these products.
Four project teams, which include manufacturers such as The Clorox Company, Oakland, Calif.; General Mills, Minneapolis; and Kraft Foods, Northfield, Ill., will look at packaging, case design, pallet conditions, handling practices, unit loads, production and warehousing equipment, database billing errors and reimbursement practices.
Hannaford Bros., Scarborough, Maine, and Wakefern Food Corp., Elizabeth, N.J., will also be taking part in the study, which will also examine local sales office sites, manufacturers' warehouses, distributors' warehouses, the stores and the reclamation centers.
The study is being led by the Grocery Manufacturers of America's Sales Committee and Food Marketing Institute's Industry Relations Committee here. The study's findings are expected to be published in spring 1999.
"We're concerned that unsalables will continue to plague the industry if we don't reach some common ground on factors contributing to the problem," Hugh Farrington, president and chief executive officer for Hannaford Bros., said in a statement.
"By the end of this process, we'll have a solid road map developed for manufacturers and distributors to develop partnerships to reduce the burdensome cost of unsalables," he added. Unsalables are product that cannot be sold through retail channels due to being damaged or outdated.
Although Hannaford is participating in the joint effort, the retailer said it has not seen any significant increase in its own unsalable numbers.
"We're not going up," said Mike Gadbois, manager of product recovery centers and corporate inventory control at Hannaford. "We're in the middle to lower end of the spectrum. However, there is an opportunity for improvement." Since 1995 the annual cost for unsalables has risen $1.9 billion dollars, according a source familiar with the situation. The source also noted that within three years, that cost has risen from 0.75% of gross sales to 0.96%.
According to Gadbois, the teams will examine different ways to handle product from the manufacturer to the distribution center and then to the retailer.
How product is put into pallets and packaged at the manufacturer is an issue with unsalables, Gadbois told SN. If there is overhang on the pallet, or if it's not wrapped properly there is an increased chance for damage.
The source also told SN that manufacturers need to examine exactly how the product was damaged. "Was it crushed horizontally or vertically? Almost 70% of unsalables can be affected by the manufacturer," he added. "The manufacturer most directly sees the dollar impact [of unsalables]."
Gadbois said, however, that not all unsalable issues occur at the manufacturer's level.
Over ordering on the retailer's part can lead to overcrowded back rooms, and clutter can lead to damage. Customer handling also contributes to a retailer's unsalables, Gadbois said.