Throwing Away Hard Earned Inventory

by Cody Sheehy | Jan 4, 2017 12:00:00 AM

Working in the supermarket industry requires various checks and balances. It is tricky to operate a business where the shelf life of the inventory ranges from years to days. Unfortunately, time sensitive items get thrown away for a number of reasons. Additionally, goods that incur damages are thrown out and create loss. Both of these concerns are especially important to track, and often go unnoticed.

Tracking your products early and identifying problem areas allow you to stay aware of product loss and implement a strong loss prevention strategy. First, you need to ask yourself these questions:

1. Why are we throwing this product away?

We all know that the “First-in First-out” method is the cornerstone for monitoring perishable items. Dated products need to be a constant concern to effectively track inventory, which means you need to keep a log of approaching expiration dates. When a product is deemed “Out-of-Date” it is no longer saleable.

Common solutions:

  • Offer reduced prices on these products as they near their expiration dates.
  • Develop advertisements geared to move the products faster than they can expire.

The idea is that if you keep a detailed item log, you can be mindful of dates and determine how to position your products to move them before they are unsaleable. We want to move these goods in a timely fashion. It is expected to have goods that become unsaleable and is crucial to figure out if it can be prevented.

Another reason retailers throw away inventory is that it is damaged. Occasionally, the process of delivery will damage goods and makes them unattractive to consumers, which won’t sell. These goods are then thrown away and provide no value to the customer or retailer.

For instance, when an associate is moving a product with a pallet jack and tips over the case, it is important to have a detailed record of the incident to track loss. Damaged goods need to be measured to find out the amount of loss and how to prevent and manage the problem.

An additional aspect of monitoring damaged goods educating your staff on how to properly use their tools. For example, it is common for associates to use a box cutter to open product cases. If left unmanaged or unchecked, staff could be using box cutters that cut too deep, damaging the product. Tracking these damages will exploit the root cause and allow you to replace the box cutter with a more appropriately sized blade that will not cut into the items. This simple correction can fix 98% of the issues associated with boxcutters and improve your team’s awareness.

Which poses the next question:

2. Why is this product being thrown away at a higher rate than others?

The discontinuation of one product can directly relate to the loss for another. It is imperative to devise a plan to replace discontinued products shelf space with the appropriate item. If you do not have a concrete plan for replacing products, then employees are forced to make an “uneducated” decision to fill its place on the shelf. Often times these employees lack guidance and don’t know the impact of filling an empty space or having the improper number of faced products.

For example,

Let’s say you expect to throw away one case of yogurt a month. An employee sees that next to that yogurt there is an empty space, caused by a discontinuation, and decides to fill it with yogurt. You have now increased a two-faced item to a three-faced item. This increase multiplies how much you throw away by the expected waste of the replaced item. Now you are throwing away two cases a month because of a lack of tracking and information. At this point you are essentially throwing away products that would have sold, had they been stocked as originally intended.

The main issue is that if the yogurt continues to show a loss, it will also be discontinued and leaves you with more empty space. See the pattern?

3. What can we do to fix the problem?

It is important to have a well-developed plan for the replacement and disposal of unsaleable goods. Elaborating on the FIFO method and educating employees will substantially save on costs and make for a cleaner store environment.

Tracking goods from the beginning to the end of its life will provide usable metrics and expose the problem. Gathering data on all aspects of the products can tell you when, where, and how to sell. Tracking systems are the way of the future. They uncover the problem and present the best solution to prevent loss.

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