George Thrower Harris Teeter

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Managing Unsaleables in an Open Coded World

• George Thrower - Harris Teeter
• Gary Piwko - Kellogg

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Harris Teeter Past four years . . .
Sales
Controllable Reclaim
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Harris Teeter In-house Analysis

• Damaged Products - same or less
• Discontinued - not sent to reclaim
• Saleable products - some as always -
  insignificant
• Expired Products - boxes and boxes - all
  categories

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Industry Benchmark Report

• 2001 Expired was 13 of all returns
• 2003 Expired was 22 of all returnsObviously
  growing, but why? - poor rotation?
  - lack of execution at store level?

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Harris Teeter Action Steps

• Established rotation audits - all stores
• Mandatory monthly category rotation schedules
• Began a process to identify expired products by
  UPC and store

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Six months later . . .
Expired products are 32 of dry unsaleable
returns and growing!!
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Background

• Pre-2000
• Today
• Tomorrow

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What does Shelf Life Mean?
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Ship Life
Shelf Life
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Ship Life
Shelf Life
Retailer Shelf Life
Consumable Life
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Ship Life
Shelf Life
Retailer Shelf Life
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Remaining shelf life
Impact on retailer/distributor
Inventory On Hand
Store Shelf Inventory
Backroom Inventory
Distribution Inventory

• Number of DCs
• Bracket buying
• Truckload orders
• No rotation FIFO

• Excess promo inv
• Ordering logistics

• Shelf size
• Pkg size
• Facings
• Location

• Quantities to sell
• Liabilities?

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Required shelf life
Sales Velocity
Inventory On Hand
Product Sold
Required Shelf Life
Increase sales velocity less shelf life required
Low sales velocity more shelf life required
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Required shelf life model
Expired Product
Inventory On Hand
Product Sold
Remaing shelf life
When remaining shelf life falls less than
required shelf life expired products.
Rotation will not prevent this!
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Product Distribution Flow
Customer DC
Third Party DC
Mfg DC
Consumer
Manufacturing
Retail

• Environmental Factors
• Time
• Temperature
• Humidity

• Physical Stresses
• Handling Equipment
• Stack Height
• Unloading variation
• Racking variation
• Transportation variation

• Costs
• Operational
• Material
• Transportation
• Storage

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Product A Example
Ship Life
Shelf Life
Quantity
2
6
4
8
10
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Age on Shelf (Months)
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Product A Example
Ship Life
Shelf Life
Quantity
2
6
4
8
10
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Age on Shelf (Months)
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Sampled Product Age Report
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Effect of Sales Velocity
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Example Snack Item

• 180 day shelf life / 60 days remaining shelf life
• Impulse item
• Seasonality
• Small packaging
• 24 units - case pack
• Stocked on center store gondolas

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Snack Item - 180 day shelf life / 60 day
remaining shelf life
Units Sold
Units Returned
Sold
Returned
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Example - New Item

• 180 day shelf life / 90 day remaining shelf life
• Seasonality
• Line extension
• Adjustable rate unsaleable policy

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New Items 180 Day Shelf Life/90 Day RSL
Salad Dressing
Units Sold
Units Returned
Sold
Returned
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Expired Products Minimization Steps

• Rotation
• Audits / SKU Optimization
• Consumer testing
• Shelf life
• Remaining Shelf Life for Customer

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Examples of Dating Terminology
1. Better if used before 2. Best
before 3. Best when used by 4. Best when
purchased by date on label 5. Use by 6. Best
by 7. Better if used by 8. Use by 7days after
this date 9. EXP. 05/05 10. Expiration
date 11. 16/Jul/05 12. Purchase and use by this
date
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Next Steps

• Industry challenges
• Standardized terminology
• Standardized open code dating on shipping cases
• Remaining shelf life at receipt agreements
• SKU optimization by channel
• Evaluate performance
• New categories - shorter shelf lives

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Open Code Dating Best Practices

• Manufacturer
• Acceptable shelf life
• Acceptable ship life
• Open date on case
• Channel understanding
• Evaluate performance

• Customer
• Dont overbuy
• Rotate (DC Retail)
• Ensure dating at receipt
• Evaluate performance

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Closing Remarks
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Questions?