Supplier Leadership Award 2012 Winner for Unsaleables Reduction: Mead Johnson Nutrition

SN has awarded Mead Johnson's efforts to reduce unsaleables with the Supplier Leadership Award for Unsaleables Reduction.

• Mead Johnson Nutrition extended the shelf life of products via reformulation or stability testing.
• The supplier collaborated with retailers on understanding expiration dates.
• It reassessed whether products should be sold in certain outlets.

In their never-ending quest to maintain products in sellable form — thereby preventing them from entering the product purgatory known as “unsaleables” — manufacturers and retailers often focus a great deal of attention on reducing dents, tears and other damages to packaging.

Mead Johnson Nutrition, Evansville, Ind., maker and global distributor of the well-known Enfamil infant formula among other brands, also endeavors to keep its containers in pristine condition. But it turns out that in Mead Johnson’s case, a bigger contributor to unsaleables is expiration — that is, products that have exceeded their expiration date, though that can be 12 months from the date of manufacture.

“The majority of our returns are due to expiration dates,” said Jeff Martin, manager, retail customer operations for Mead Johnson, who added that many people, including Mead’s own salespeople, are surprised when they hear that.

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Consequently, in the past year, Mead Johnson’s U.S. division has been actively seeking more ways to extend the shelf life of its products without compromising product integrity, and to ensure that the products are sold in retail outlets best suited to selling infant formula. For these efforts the company was selected to receive SN’s Supplier Leadership award in the unsaleables reduction category.

Two ways to extend shelf life is to reformulate the product or determine through “stability testing” that the expiration date of an existing formula could be extended without reformulation. Martin is working closely with the Mead Johnson’s research and development department to explore those opportunities.

“I met with the R&D group earlier this year to help them understand the impact of expiration dates on unsaleables,” he said. “It was a real eye-opener for them.”

Tinkering with a product’s formula, of course, has to be done without altering taste or quality, especially for a product targeting children. “That’s part of the challenge,” Martin acknowledged.

Improving Shelf Life

While the company is looking at all of its products, it is targeting between five and 10 that were the best candidates, based on product-returns data, for improved shelf life. In particular, Mead is focusing on its main product lines — both liquids and powders — including Enfamil and Enfamil Premium Infant, its flagship brand that is responsible for the majority of its sales.

Mead is also collaborating with its retailers to help them “understand why shelf lives are set as they are so we have the highest quality product,” Martin said. Retailers are required to follow strict guidelines on the removal of expired products from shelves and returning them to Mead, which destroys all returns so that they don’t fall into the wrong hands. Infant formula is one of the consumer products most coveted by organized retail crime rings.

Mead Johnson Nutrition is working on extending the shelf life of some of its best-selling Enfamil products.

Mead is still waiting for more returns data to understand the effect of its product changes or tests on the unsaleables rate, though for some products it has already increased shelf life, said Martin. In one case, a product’s shelf life was extended from 12 to 15 months (he did not name the product). “We’re intuitively confident that we will reduce returns,” he said.

Martin pointed out that a product’s lifespan begins with its date of manufacture, not the date it is stocked on a store shelf, which depends on inventory and transportation time as it makes its way through the supply chain. The average time between manufacturing and shelf-stocking for Mead products is two to three months.

Read about SN's DSD Logistics winner: Coca-Cola Refreshment [4]

Mead is also taking a closer look at where its products are distributed and reassessing whether they should be sold in certain outlets where returns tend to be high, or whether allotments there should at least be curtailed. “If we can use data to find pockets where there is no need to distribute, that’s a win-win for us and for retailers,” Martin said.

Demographics — particularly the presence of mothers with young children — help guide Mead on distribution decisions. The company also looks at whether purchases of infant formula are routinely made at a particular channel of trade. “If not, there may be too many products in a store and some will sit there and not move,” he said. Mead fashions a different strategy for the different retail channels it supplies, including grocery, drug, mass and club.

With all of its emphasis on expiration dates as a hedge against unsaleables, Mead has also taken some steps recently to improve packaging. For example, the company increased the strength of the cardboard in its cases to help products survive the distribution chain unscathed. “We’ll visit retail distribution centers to see where the damage points are — in handling or whether products need better packaging,” Martin said.

Read more about SN's Supplier Leadership Award winners. [5]

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