This document discusses reducing costs associated with unsaleable products in the food industry, estimated at $15 billion annually. It outlines a solution developed 8 years ago that established structured return processes and business rules to identify products for return, donation, or destruction in a centralized and accountable manner. Key goals included improving order fill rates, return cycle times, and root cause analysis of issues. The program analyzed over 46 million pounds of food worth $62 million, with 46% donated to charities through Feeding America's nationwide network, reducing dumping fees and liability while benefiting food insecure Americans and building positive brand associations.
2. “..unsaleable products represent avoidable costs
that affect the entire value chain, estimated to be a
$15 billion annual cost to the industry…..root causes
of these costs are often misunderstood, leading to
incremental profit leakage” **
** According to a recent report published by GMA, FMI and Deloitte
3. 8 Years Ago Customers were seeking…
Assistance in the quest for Perfect Order Fill Rates that were
measurable
Tighter management of customer convenience returns
► overstocks; promotions; discontinued products
Metrics for logistic related delivery exceptions
► order changes; order entry errors; mis-ships
Control of OS&D events that was consistent & immediate
Factor in the SKU value when determining to return product
Root cause determination/action plans/execution
Reduced cycle return times
Single chain of control for all product exceptions
Pre-established processes for production irregularities
or withdrawals
4. Solution Design
Apply structure
► Create a call center and introduce technology to give structure and
discipline to the return process so that best practices may be applied
consistently.
Establish rules
► Establish business rule sets specific to each customer, product group
and temperature, customized by client that were consistently applied
to identify products for return, donation, or destruction. Thus,
eliminating non-value added transportation expenses.
Centralized control and accountability for product
Identify return cycle times
Execute transportation
Identify actionable events to continuously improve upon
Return comprehensive and actionable program reporting
5. Stakeholders to the Value Proposition
Manufacturers
► Measures ability to achieve Perfect Order Fulfillment
► Create organizational accountability within your own network
► Consistent, intentional handling of product exceptions to maintain a
preferred chain of control of the brand. This prevents branded
products ending up in unauthorized venues or becoming astray.
► Quantitative analysis determines the disposition result
► Evaluation of SKU value and restocking costs compared to
transportation cost to return product. No product returned if the cost
of returning is greater than the product value.
6. Stakeholders to the Value Proposition
Manufacturer (cont.)
► Database of all donation locations is available to direct carriers to the
closest drop spot minimizing additional charges
► Donation certificates signed by the driver that product has been
donated to a specific authorized charitable entity
► Tracks inventory value
► Dramatically improves cycle return time to active inventory
► Database allows:
• Analysis of exceptions by warehouse, carrier, receiver or SKU
• quicker resolution of customer deductions
• Increases the efficiency of staff resolving deductions and credits
7. Stakeholders to the Value Proposition
Charities
► Largest and quickest access to product nationwide
► High degree of product integrity
► Better access to longer shelf lives
Carriers
► Timely resolution and communication to the carrier minimizes
detention and the unprofitable use of driver’s hours of service
► Database of all donation locations is available to direct carriers to the
closest spot to drop product and move on to the next load quickly
Retailers
► Eliminates pressure to take in and hold unwanted product
► Gets carriers off the premise and on to their next load quickly
8. Mature Customer Event Trends 2005-2009
6,000
5,000
4,000
Events
3,000
2,000
1,000
0
1/1/2005
4/1/2005
7/1/2005
1/1/2006
4/1/2006
7/1/2006
1/1/2007
4/1/2007
7/1/2007
1/1/2008
4/1/2008
7/1/2008
1/1/2009
4/1/2009
7/1/2009
10/1/2005
10/1/2006
10/1/2007
10/1/2008
10/1/2009
What Changed?
Order Minimums, Return Policies, Quality Improvements,
Customer Service Error Reduction, Order communication improvements
9. Sample of 2009 Event Codes
49% Customer Refusals
33% Customer no longer wants the product
15% Code date/shelf life
15% Not on PO or did not order
8% Customer ordered error
6% Order was cancelled
4% Duplicate order
12% 20+ other misc reasons
15% Damage
10% Carrier Issue
9% Shortage
8% Customer Convenience
6% Overage
<3% Withdrawals/Other
10. Sample of 2009 Event Disposition Codes
Product Disposition Totals
► 46,000,000 lbs of food products
► 2,500,000 cases
► $62,000,000 in retail value
Disposition Classification Summary by Product Value
► $40,000,000 returned
► $3,400,000 donated
► $3,400,000 destroyed
► $8,600,000 accepted or shorted
► $6,600,000 other including re-delivery, re-consignment, re-worked
11. Hunger in America
Nearly 1 in 6 people in the United States do
not know where their next meal will come
from
That’s 49.1 million Americans
► 16.7 million children (1 in 5)
► Nearly 40% of households served by Feeding
America have one working adult
► The number of individuals who were food
insecure increased 36% over 2007 and the
number of children increased 35% over 2007
The need is growing: Demand for food
assistance is up 30% on average vs. YA
► Unemployment a key factor
* Household Food Security in the United States, 2008; 2009 Food Bank Survey
13. Feeding America’s Network Scope
FEEDING AMERICA MEMBER
[NETWORK ALSO INCLUDES
MEMBERS IN AK, HI & PR]
AK HI PR
14. Liability Protection
Bill Emerson Good Samaritan Act
Protects you from liability when you donate to a non-profit
organization
Protects you from civil and criminal liability should the
product donated in good faith later cause harm to the needy
recipient
Standardizes donor liability exposure. You or your legal
counsel no longer have to investigate liability laws in 50
states
Sets a floor of "gross negligence" or "intentional misconduct"
for persons who donate grocery products
http://www.usda.gov/news/pubs/gleaning/appc.htm
15. Benefits of Donating
Security and integrity of brands
Nationwide network of 501(c)(3) charities
Savings in dumping fees: $4,000 per truckload
91% of consumers have a more positive image of companies
that support a good cause
86% of consumers are likely to switch brands when a product
is associated with a good cause
67% of Food Shippers of America member companies have
donated to Feeding America in the past 12 months
Your Contacts:
Bill Thomas Feeding America - Vice President of Product Development
312-641-6611 bthomas@feedingamerica.org
Peg Collins-Sarinyamas Feeding America - Director of Transportation
312-641-6516 pcollinsarinyamas@feedingamerica.org
