Unsaleables Benchmarked

Discussion
Sep 13, 2005
George Anderson

By George Anderson

The 2005 Unsaleables Benchmark Report from the Grocery Manufacturers Association (GMA) and the Food Marketing Institute (FMI) has found that manufacturer costs associated
with returned product declined last year to 1.06 percent of gross sales.

The progress made on unsaleables has been near the top of grocery manufacturers agenda for years. The rate as reported represents the lowest since annual figures began being
calculated in 1996.

Distributors also saw their costs related to unsaleables decline. Between 2003 and 2004, the average cost as a percentage of sales went from 0.84 percent to 0.76 percent.

Total industry losses to unsaleables are $2.52 billion, according to GMA and FMI.

One retailer, profiled in the case study section of the report, has taken active steps to reduce unsaleables. To accomplish this, the unnamed company put one person at each store
in charge of managing and calculating product. Unsaleables are separated and sorted by out-of-date goods, damaged product and are batched and processed separately before being
sent to the reclamation center. 

Moderator’s Comment: How big a problem are unsaleables? What do you see as solutions to the problem from the manufacturer and distributor standpoint?

George Anderson – Moderator

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5 Comments on "Unsaleables Benchmarked"


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Mark Lilien
Guest
15 years 5 months ago

Page 5 of the survey shows that the manufacturer weighted average was .92% in 1996, rose to 1.02% in 1999, fell to .91% in 2000, rose to 1.02% in 2002 and now fell to .88% in 2004. The multi-year trend seems to be a repeating cycle of trouble, followed by improvement, then more trouble, followed by improvement. The 8-year “net” improvement is almost invisible (.92% in 1996 versus .88% in 2004). Is this difference statistically significant? The report seems to include returns of failed new product introductions. Is this a good idea?

Ed Dennis
Guest
Ed Dennis
15 years 5 months ago

I would suspect that much of this reduction has been due to negotiations between suppliers and retailers. My experience in the industry was that the majority of the “unsaleables” were the direct result of employee theft or employee mishandling of product. As suppliers are being pushed to hold the line on pricing or reduce pricing, I would expect that they have leveraged this position as the buyers “savior” to gain tougher standards for unsalable merchandise. Unsalable merchandise should apply only to product that is substandard when shipped from the manufacturer/supplier. Product that becomes unsalable because it was dropped, cut or sampled by store employees should be the responsibility of the retailer. I am seeing baskets of “closeout,” dented cans, packaging with missing or no labels, etc. in my grocer’s isles today. This never happened two years ago. Also, manufacturers have improved packaging which could be reducing the amount of damage.

German Algora
Guest
German Algora
15 years 5 months ago

Unsaleables are retailer specific. The onus has been placed on manufactures to merchandise product, thus taking care of the shelf space and stock rotation. Since retailers, in most cases, charge back spoilage, many retailers do not spend enough time looking at how old their product is on the shelf. The role of the stocker is more important than many realize. Other solutions such as RFID are also key to larger retailers, however, not one single method could be used to rely on reducing spoilage.

Karen Ribler
Guest
Karen Ribler
15 years 5 months ago

This is great news!

Just a quick thought regarding slashing the number even more…RFID Technology can play an important role in reducing unsaleables. Active tags can provide information regarding temperature and handling of perishable products with an eye to reducing spoilage. With keener shelf-life information the retailer will be more able to handle, merchandise and promote items with enhanced intelligence.

Passive tags can help the supply chain locate product more quickly and easily and have greater visibility regarding that product’s sell-by date, the results being better inventory control, better forecasting, and possibly better product handling.

Michael Richmond, Ph.D.
Guest
Michael Richmond, Ph.D.
15 years 5 months ago

$2B in unsaleables says it is still a problem. The move downward is good, we are seeing supply chain innovation taking a more collaborative approach to reduce waste and unsaleables. I also suspect the Third Party Logistics (3PL’s) are playing a more important role and are looking to reduce losses and turn them into bigger profits. In the old days CPG’s would just give an allowance of 2% or so for damaged goods and unsaleables, but times are changing and this is real money they are giving away. As RFID regains momentum over the next few years, we will see increased savings and reduced unsaleables as a result of finally understanding what goes on in the logistics and distribution of goods.

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