Even with improvements in packaging, shipping practices, warehouse design, and software, reducing the cost of unsaleable products is the constant challenge for those in the grocery industry. According to the June 2005 issue of Occupational Health, the Food Marketing Institute estimated that the grocery industry sustains nearly $20 billion a year in damaged merchandise.
For Mead/Westvaco Coated Board in Stanford, Connecticut, the challenge is to develop packaging material that better protects frozen foods. Both Mead-Westvaco and Genco in Pittsburgh, Pennsylvania, conducted a study to trace frozen food products from the point of manufacture to the supermarket shelf. When evaluating the strength of the cardboard, the study concluded that a higher compressive strength of the cardboard would be better. The study also revealed that most package damage occurs after the product reaches store loading docks.
The HJ Heinz company identified that product damage begins even when the forklift handles a product. Companies looking to reduce damaged goods must assess every stop a product makes in the supply chain. And because companies like Mead/Westvasco determine that a larger box will increase protection, they must also ensure that the elevator can still accommodate the box from the factory to the warehouse. Businesses should also look at how product is handled at customer locations, as stores use different types of equipment to move product. Retailers are also unaware that the size of the box has been enlarged for better protection and could damage the product when placed on a shelf.
Moving to a cross-docking facility with separate picking and receiving areas has reduced much of the internal damage to Dunkin Donuts products. The new, more spacious facility reduced congested traffic flow, which also reduced product damage. Dedicated picking and storage aisles that separate forklift traffic from picking traffic. Product is stored above ground on pallet flow rails, away from forklift traffic. In an effort to track expired products and available shelf life, the company also uses a barcode warehouse management system. The software verifies that the selected items have an adequate shelf life when they are received at the store.
Mitchell Grocery in Albertville, Alabama, is a wholesale grocery distribution center serving more than 250 independent supermarkets in the Southeast. It distributes more than 20,000 items, including fresh meat, produce, dairy, ice cream, and bakery items, to name a few.
Depending on your volume, the cost of products not salable at Mitchell’s can be significant. Every day, Mitchell Grocery ships 80 truckloads and delivers 500,000 boxes per week. About half of the outgoing product is perishable. A quarter to a half percent of sales goes back to the manufacturer.
The company was able to reduce its unsaleable cost by installing Voxware’s VoiceLogistics, a voice-enabled logistics operation. Technology has allowed the company to reduce its selection errors from four per thousand to two per thousand. The system confirms the location and item, dramatically reducing inaccuracies.
When it comes to reducing the cost of damaged assets, some challenges don’t require high-tech systems or in-depth study. Of the $20 billion lost annually in the grocery industry alone, 30 percent was caused by careless case cutting. Product damage from box cutters translates to unsaleable goods, and the high costs associated with product returns is an issue faced by industries as well, including the fulfillment, catalog, and pharmaceutical industries.
Because many workers never report minor injuries from inappropriate knife use, estimates of injuries are not available. However, companies that have instituted safety knife programs in their stores and warehouses report huge annual savings. According to the same June 2005 Occupational Health article, a 300-store retail chain can save between $5 and $10 million per year with these types of programs. The savings come in the form of reduced injury claims and fewer stock damage incidents.
The use of safety procedures and the correct tools are inherent in the program focused on reducing unsaleable. While there is no substitute for well-trained workers, there is also no substitute for safety knives that have been developed with safety features that can be used by even untrained workers.