Inmar Supply Chain Consulting Group is pleased to announce the release of the Supply Chain Damage and Expired Rate Benchmarking Report. The report provides the consumer goods industry with data to effectively benchmark their damaged and expired rates at key points along the supply chain. The study results are based on a total of 5,551,282 items sampled; the largest database in the industry.

The full report will include additional analysis on the following categories:

1. Platform Data – Comparison of platform characteristics, by manufacturer and category, including type, condition and fit.
2. Shipper/Case Data – Shipper performance within the Customer DC. Includes conditions by manufacturer and by pallet type, as well as potential impact of platform condition(s) to overall shipper performance.
3. Consumer Unit (DC) – Comparison of consumer unit package performance, by manufacturer and category. Trended data of defects/damages identified and product age.
4. Consumer Unit (Retail Shelf) – Same as Consumer Unit (DC)

Future reports will include further detail/drill-down (i.e. segregation by Channel, regions, etc), based on customer feedback. Share your thoughts with us.

This damaging formula is one that should be both feared and respected. Unfortunately the reality is that it is often ignored.   When the probability of an event is low, the risk of not analyzing or focusing on the severity of the consequences increases. This line of thinking leaves companies vulnerable when the unfortunate event happens to them. One can argue that being vulnerable in a low probability, severe consequences scenario can be one of the most disastrous situations a company will ever face. This is exactly what can happen if a recall strikes.

So how can you prepare for this type of situation? Can you really plan for risk? Yossi Sheffi, Professor of Engineering, MIT, spoke to this at the RILA (Retail Industry Leaders Association) annual logistics conference in a presentation titled The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage.  He says that it’s possible for a company to be resilient, but only through both redundancy and flexibility.

But isn’t that a little tough? How would you establish redundancy with a recall scenario? Especially when it doesn’t happen that often if ever, and if it does, it typically is never the same product. Flexibility offers more opportunity to be prepared, but can only be effective if the company has a culture of flexibility. With a recall, you have to be able to react fast, really, really fast. Even the best-in-class forward supply chains have trouble operating at a rapid speed….in reverse. Remember a recall travels through the reverse supply chain, not the forward.

To become a resilient organization and reduce the vulnerability when faced with a recall, what can you do?

One way to accomplish this is to work with CLS MedTurn, a third-party reverse logistics supplier. By the nature of our business model, we are positioned to help companies be resilient through both redundancy and flexibility. Redundancy comes into play because of the amount and variety of recalls that are handled on an on-going basis. In a twelve month period, CLS has handled more than forty recalls of various sizes, product types and risk levels. That type of knowledge benefits a company that has very little experience in dealing with recalls.

Flexibility is also a component of our business model. The key is that the model’s flexibility is in reverse. This translates into processes and procedures experienced in dealing with the rapid implementation and notification, product retrieval, and individual item returns as well as full cases. These are all steps that are reverse-oriented and different than the flow of a forward operation.

Successfully handling a recall plays a vital role in the brand’s survival. Don’t be complacent. Plan accordingly for the low probability, severe consequences scenario. You’re right. It may never happen to you. But if it does, wouldn’t you rather be prepared?

Share your thoughts with us by leaving your comments on our blog or contact us at cls.solutions@inmar.com. �

Whether you are experiencing a product recall or seeking to minimize your recall risk, following these best practices can be helpful from planning through execution. These best practices are a  combination of industry recommendations and the lessons we’ve learned firsthand managing many of the highest profile, highest volume and highest risk recalls of recent years. This experience is imbedded within our processes to ensure every stage of every recall is executed in a manner that minimizes negative impact on your customers and your brand equity.

1. A detailed Recall Management Plan or Protocol, which includes Mock Recalls, will ensure that an actual recall event is handled with the best interests of your customers and your company in mind.
2. A Recall ‘Point Person’ and Recall Team should be established prior to the recall event.  Cell phone numbers and back-up personnel should be included in the Recall Team Roster.
3. Notification to customers and consumers must be clear and concise and should communicate the seriousness of the recall.  Industry notification should occur simultaneously to all distribution channels. Notification templates can help speed the notification process.
4. Business Reply Cards are a highly effective means of documenting receipt of notification.
5. Call Center staff must be trained quickly to field inquiries appropriately from customers and consumers.
6. Product retrieval should be executed in a manner that has minimal impact on stores, Distribution Centers and consumers.  Dedicated resources should be used if product is being removed from store shelves.  In most cases, use of a third-party rather than broker network ensures the most expedient execution. 
7. Payment/credit should be issued quickly and accurately.  (Establish upfront whether the payment/credit will be based upon claims or actual product received.)
8. Replacement product must be available to customers immediately.  Often, a coupon for free or reduced-cost product helps retain customer loyalty/confidence.
9. Product disposition should be managed by a reverse logistics facility equipped with an automated processing system.  Product destruction must be handled in a cost effective and regulatory compliant manner.
10. Reporting must be accessible and updated on a daily basis, preferably Web-based. 

Share your thoughts with us by leaving your comments on our blog or contact us at cls.solutions@inmar.com  for more information about our recall management solutions.

The 2008 Joint Industry Unsaleables Report: The Real Causes and Actionable Solutions was jointly developed between the GMA/FMI and Deloitte Consulting. This report identifies and measures unsaleables costs and provides insight to opportunities that have a direct impact on the bottom line. “Estimated to be a $15 billion annual cost to the industry (or 1 percent to 2 percent of gross sales on average), this requires the industry’s attention not only because it is largely avoidable, but also because the root causes of these costs are often misunderstood leading to incremental profit leakage. Given that unsaleables products represent avoidable costs that affect the entire value chain, the study challenged the industry with a call to action.The study reported key findings on the state of unsaleables management that set the stage for the call to action. Key findings from the study include:

Finding 1: Root causes driven by the same fundamentals
While at first glance it appears as though retailers and manufacturers are experiencing vastly different issues, a deeper look reveals that root causes are common across trading partners.

Leading Causes Chart

Finding 2: Damages are only half the problem
Non-damaged items such as expired and discontinued items have become the greatest and fastest growing contributors to industry unsaleables. Focusing on the root causes driving these conditions is the key to creating a competitive advantage.

Finding 3: It’s time to bring planning to unsaleables management
Improved planning (e.g., collaboration on product discontinuation and launch, inventory planning, trade promotions management and SKU rationalization) will have the most positive impact on unsaleables. With the emergence of new industry trends and diversity of causes driving unsaleables at different points in the value chain, companies must develop a mature foundation of business planning capabilities rather than invest in reactive “quick fixes”. Investing in the right unsaleables management practices is the key to realizing your bottom line.

Finding 4: Unsaleables reduction requires balanced incentives
Construct and enforce policies that provide incentives to both trading partners to collaborate on solving unsaleables root causes. Transition the relationship from debate over reimbursement rates to collaborative decision making among trading partners.

Finding 5: Unsaleables is now a “C” level agenda item
Provide your company’s unsaleables champion support from executive leadership and invest in information management to enable unsaleables analyses. Improving organizational awareness by gaining leadership buy-in and encouraging involvement of key departments can be associated with significant reduction in your unsaleables rate.”

The study goes into more detail on each of the findings.For more details, the entire study can be downloaded from the GMA website by clicking here.

Twenty-four manufacturers participated in a discontinued policy survey. Below are a few charts from the survey specifically related to markdowns.

During the Advisory Board Meeting, much discussion was held on how markdowns are becoming a more common way to deal with moving discontinued products. However, most everyone agreed that given the increased discontinued product volumes, having a store full of marked down products and markdown baskets is not ideal for either store image or profit margins.

Are Markdown Funds Typically Made Available?

What is the Length of the Markdown Period?

Some key points made during the discontinued/markdown discussion included:

• There appears to be a gap of information on the sales/broker discontinued items because the process is fragmented rather than corporate wide. The result is a weakened corporate brand because no one knows the total locations where the product was discontinued.
• Rather than markdowns, it was suggested that retailers and manufacturers work together to redeploy items that aren’t selling well in some stores to stores where the products seem to be moving. This provides opportunity to rebalance store inventory.