Goods returned to the manufacturer due to damage incurred during shipping. Retailers forced to discard numerous “expired” or spoilt items. Consumers opting for another can at the back of the shelf rather than the ones in the front that appear dented or crushed…
Does all this sounds familiar to you?
Even as manufacturers and retailers seek to control costs and drive efficiency across their supply chains, controlling the financial impact of unsaleables remains a constant challenge. Simply put, unsaleables are consumer products that are removed from the supply chain because they have expired, or have been damaged, or discontinued. They are a bone of contention to manufacturers and retailers as they result in stockpiles of wasted resources. An interesting study conducted by Wipro Technologies in collaboration with Food Marketing Institute (FMI) and
Grocery Manufacturers Association (GMA) estimates that the potential cost impact of unsaleables is over $2 billion annually.
Which brings us to this question - why are unsaleables proving to be the proverbial thorn? What are the issues that manufactures and retailers face while trying to cut the cost of unsaleable products?
The report reveals that one of the major unsaleables challenges is managing open code dating. Open date coding are dates marked on food products to indicate the last day that the food can be sold in the store and sometimes indicates use by dates. Based on these open dates, retail establishments work towards maximizing shelf life by using stock rotation, whereby older products are brought to the front of the shelf, and new ones are pushed back. However the lack of standardized product date coding practices and the adoption of open code dating create confusion with regard to shelf life management, and result in accumulation of avoidable unsaleables.
Another key challenge is the issue of managing new product introductions and discontinued items. With multiple manufacturers and retailers forming the modern supply chain, seamless coordination between these parties to ensure optimal sales, balanced inventory and minimal unsaleables becomes a tough task. Additionally, it is crucial for manufacturers and retailers to capture and share relevant product master data to trading partners that in turn facilitates quick and informed decision-making. Enabling effective collaboration internally and externally is of paramount importance and a daunting challenge that the industry faces.
In the coming years, retailers and manufacturers will also have to cope with the challenges of ensuring proper accountability and incentives.Organizations that focus on unsaleables responsibility on a shared model between sales/merchandising and supply chain are more likely to incur a smoother path to building alignment.Furthermore, ensuring incentives structures are aligned with accountability across cross-functional areas can help organizations to address opportunities, gain an understanding of total cost, and ensure commitment to take action to reduce unsaleables.
Moving ahead, organizations have to develop proactive plans to manage and resolve the financial impact of unsaleables and work collaboratively to drive improvements and excellence across the supply chain. The question is - will they do it