Loss Prevention: Unsaleables Causes and Solutions, Part 1
According to GENCO, unsaleables are products that are removed from the primary distribution channel. Although each has unique characteristics, unsaleable products can include customer returns, expired products, OS&D (over, shorts & damages), spoils, outdates, exceptions, warehouse damages, and deductions.
In this article, we will look at contributing factors to unsaleable products such as logistical problems, shelf life management, and the disconnect between manufacturers and retailers.
The Impact of Sales and Procurement on Reverse Logistics Management
A portion of unsaleable products is created when inventory doesn’t sell and eventually passes its expiration date, leaving retailers with stock that cannot be sold. Recently, new research has led to new insights into the impact of both sales and procurement processes on the volume of unsaleables.
By changing practices on both the sales and procurement sides of product expiration, retailers can reduce their reverse logistics expenses by minimizing their overall volume of unsaleable goods. Better shelf life management practices, as well as improving coordination between sales and procurement, can drastically help retailers and manufacturers manage and plan their inventory to reduce waste through more efficient processes.
Improving Shelf Life Management: Reducing Expired & Unsaleable Items
In a recent study from GMA, the Food Marketing Institute, and Wipro, it was found that about one-third of the cost of unsaleables in the study group was attributable to expired or out of code products. This directly resulted in total cost of $700 million, putting the industry-wide expense into the billions.
For both retailers and manufacturers, reducing the volume of expired products is a matter of significant concern. Although the solutions are unsophisticated, it is evident that better management of product shelf life can help reduce the total amount of unsaleable items, thus eliminating a significant amount of waste and expense.
Ascertaining Remaining Shelf Life: The Disconnect Between Manufacturers and Retailers
Retailers report that, in some cases, manufacturers are shipping products that do not have sufficient shelf lives remaining in order to ensure that they will sell before the expiration date. One potential solution is to implement software solutions designed to improve shelf life management. Manufacturers can designate shelf life parameters for groups or categories of products, and monitor shipping to ensure that all outgoing shipments are within these parameters. Retailers, in turn, can specify their desired parameters and reject items outside of them.
A portion of the disconnection between retailers and manufacturers stems from process failures or differences in definitions. Manufacturers often use average product life as a measurement, while for retailers, specific dates are used for detailed inventory planning. Leveraging technology to improve communication and coordination between retailers and manufacturers can help both parties reduce expenses from unsaleable products.