H-E-B, AWI Target Unsaleables

Ted Lechner, H-E-B’s reverse logistics manager

SAN ANTONIO — For H.E. Butt Grocery Co. here, nothing less than a “perfect pallet” — damage-free, at the lowest cost — will do.

That is the standard the chain tries to follow in shipping products from its warehouses to its 337 stores — part of its program to prevent products from being damaged and rendered unsaleable. “It seems simple, but it’s challenging,” said Ted Lechner, H-E-B’s reverse logistics manager.

H-E-B is part of the Damaged Products Work Group in the Reverse Supply Chain Improvement Project, an industry unsaleables initiative sponsored by the Food Marketing Institute. At the FMI/GMA Supply Chain Conference in January, Lechner described best practices employed by H-E-B that will be part of a soon-to-be-released report on the project.

To create a perfect pallet, H-E-B has taken a number of steps, such as improving training for order selectors and loaders at its distribution centers; rewarding suppliers that deliver quality pallets; delivering the most cost-efficient shipping platform to stores; and selecting the most efficient flow path for products. Pallets should be stacked properly without overhang, wrapped top-to-bottom and labeled properly, and employ slip sheets for bagged product.

Last year, H-E-B created a company campaign to address unsaleables called “Damagemania 2011.” The program identified 10 to 12 high-shrink categories (such as snacks and chips) and developed a cross-functional team to limit product damage in warehouses, stores and transportation.

H-E-B also instituted a policy to make its stores accountable for the products that become unsaleable at the store level. Stores are instructed that “if a product is shipped to you damage-free and you damage it within your four walls, or you don’t rotate it or it goes out of date, there’s some accountability,” said Lechner. Under the program, stores are given a certain allowance for unsaleables, but if they exceed that, “it financially impacts the store,” Lechner said. “So they’re incentivized to do a better job and reduce damage.”

This store policy is communicated to new hires and store employees “so everyone understands the impact of unsaleables,” said Lechner. “It’s part of the culture.”

H-E-B also started a banana box program whereby overnight stockers place damaged products in the box but Center Store managers audit the boxes “to make sure the products are really unsaleable before they leave the store,” Lechner said. Damaged paper towels and toilet paper may be repurposed as in-store supplies.

Limiting Expirations

While damaged products represent 45% of unsale ables recovered at reclamation centers, expired products make up another third, according to Inmar, Winston-Salem, N.C. About 1% of products expire at stores before they are sold.

To limit product expiration, retailers should look at products in terms of days available before a product expires, not the percentage of time left, said Robert Rippley, executive vice president, logistics for Associated Wholesalers Inc., Robesonia, Pa., who also spoke at the Supply Chain Conference. Associated is one of the companies in the Expired Products Work Group in the Reverse Supply Chain Improvement Project.

Manufacturers, who set the shelf life of products, “need to be realistic” about the number of days of shelf life they give to a product, Rippley said, noting that they sometimes put a shorter expiration date to make the product appear to have fewer preservatives or to spur repeat purchases. Trading partners, he added, should strive to minimize the time a product spends in a manufacturer and retailer distribution center to increase the number of days remaining for consumers to purchase it.

Pete Bannochie, vice president, DRS Products Returns, Reading, Pa., who also spoke at the conference, advocated “open communication” by manufacturers on dating information. “Manufacturers know what the shelf life should be,” he said.

At the DC level, Rippley suggested the following to reduce the incidence of expired products:

At the store level, Rippley pointed out that the variety of verbiage applied to expiration date tends to confuse shoppers. Bannochie recommended using the term “best if used by.”

New Unsaleables Report Near

The Food Marketing Institute here is soon expected to release the second part of a major two-part report on reducing unsaleables in the supply chain that encompasses multiple retailers and manufacturers.

The new report, produced by the Reverse Supply Chain Improvement Project, “should be finalized soon,” said Dan Raftery, president of Raftery Resources Network, Antioch, Ill., who served as a consultant on the project. The project, launched in April 2010, is sponsored by FMI with support from the Grocery Manufacturers Association and the
National Association of Chain Drug Stores.

The project’s initial report, to which 58 companies contributed, focused on “defining the current state” of unsaleables, said Raftery. The report was released last July. The new report will offer best practices in the five main areas of unsaleables: damages, expiration, recalls, retailer/wholesaler discontinueds and manufacturer discontinued. Among the 41 companies contributing to the new report are: Associated Wholesalers Inc., Bozzuto’s, C&S Wholesale Grocers, Delhaize America, Harris Teeter, H.E. Butt Grocery Co., Kroger, Nash Finch, Spartan Stores, Wakefern Food Corp. and Winn-Dixie Stores.