Gone but Not Forgotten

Unsaleables are almost always a touchy subject, but the mood was cordial this morning as representatives from trading Winn-Dixie and Heinz broached the topic at GMA's MSM show.

Apparently dented cans of beans, expired meat and stolen infant formula aren't the only unsaleables that retailers and manufacturers have to contend with. As supermarkets more frequently swap out underperforming product for new or proven items, unsold discontinued items can carry a pretty hefty price tag.

When Gary Regina joined Winn-Dixie in 2000, the process for getting rid of the old product went something like this: Discontinued items were shipped back to the manufacturer who was on the hook for a price equal to about 130% of the list price. Ouch.

Luckily Regina had a simple but brilliant idea to help minimize the manufacturer's burden while salvaging some profit. He suggested that manufacturers could fund a 50% price reduction on the discontinued product for a four week period leading up to the new items' introduction. Product was sold off and manufacturers only had to fund the discount, so it paid 50% of the list price rather than 130%. Winn-Dixie's end of the bargain was a promise that it wouldn't send any product that was left over at the end of the promotional period, back. Everyone wins.

Today the process is even more efficient since inventories are adjusted eight weeks in advance of the switch meaning that fewer products have to be discounted during the four week period. So what happens if Winn-Dixie drops the ball and doesn't let its supplier know about its plans far enough in advance? It's trade funds are at stake.

But planning stages aren't the only time the plan can falter. Heinz's senior manager of reverse logistics, Gene Schachte said that a few weeks ago shelf tags designed to draw attention to the 50% off discount weren't applied to the shelf. As a result, what should have cost Heinz $10,000 ended up costing it $100,000. It's unclear whether Winn-Dixie was the retailer or if its trade funds were affected.