A View from Pallet to Pantry

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1 @InmarInc #PalletToPantry Unsaleables Data Trends A View from Pallet to Pantry Rob Small 2014 Inmar, Inc. Senior Director, Supply Chain Network Inmar

2 Speech Data 68 Total slides 2 Videos 2 3 Overt Inmar propaganda slides 1 References to Big Data 5 Obligatory quote by someone famous Pie charts OR heat maps 2

3 About Inmar 33 year old privately-held company with corporate headquarters in Winston-Salem, NC 4,000 employees 30+ supply chain facilities across North America Serving 1,600+ clients across 32 countries Award winning workplace and culture 3

4 Inmar in the everyday economy Promotion Supply Chain Healthcare When you use a coupon There is a high probability Inmar processes the redemption for the retailer, manufacturer or both When you return a product... There is a high probability Inmar processes your return for the retailer, manufacturer or both When you fill a prescription... There is a high probability Inmar processes the script claim for the pharmacy Inmar = Big Data We improve collaboration among retailers, manufacturers and their trading partners 4

5 As a Supply Chain Expert, Your World is Changing... 5

6 It s changing because your customer has become an omni-channel shopper Shoppers expect to see the same deals, data and inventory across all channels, seamlessly, when they want. And that includes their returns experience. 6

7 Your customers are making decisions at the store and home and they are sharing their experiences Stimulus Zero Moment of Truth First Moment of Truth Second Moment of Truth Ultimate Moment of Truth Awareness Social Discovery Consideration to Purchase Experience Shared Experience 7

8 Our topic is Pallet to Pantry where our discussions are centered on the product journey PRODUCT JOURNEY PALLET PANTRY on-time delivery * perfect product to the consumer * transportation purchase of raw materials * inventory to warehousing 8

9 However, there is a parallel consumer journey that needs to be considered PRODUCT JOURNEY PALLET CONSUMER JOURNEY PANTRY STORE: RETAIL SHELF 9

10 Marrying research from two journeys: Product and consumer Data is your key to understanding the root cause, making improvements and impacting your consumer s ultimate moment of truth Product Freshness Damaged 10

11 Our research includes: Inmar s unsaleables benchmark application Inmar s consumer survey Outside research 450,000,000+ returns units consumer units reviewed Consumers surveyed shippers assessed consumer units included in benchmark application unit loads analyzed retail distribution center studies retail store studies 11

12 Grocery Mass Merchandise Drug Dollar Pet Specialty Auto Convenience Channels represented in study 12

13 Consumer survey structure Inmar Consumer Insights conducted a survey of 500 consumers to understand opinions and attitudes about damaged and expired products 500 CONSUMERS Demographic and qualifying questions CONSUMER SURVEY Four shopping scenarios related to expired product Shopping and purchasing habits Shopping experiences Consumer reaction after purchasing damaged & expired product Experience with damaged & expired products Reactions to damaged & expired products 13

14 When something s not right in the product journey, it can mean enormous lost value Annually returns approaching $300 billion Supply Chain costs associated with reverse logistics as much as 10% of cost of goods. 14

15 But before it becomes an official return, it is an unsaleable You can determine the potential return by analyzing what you find at the DC and the retail shelf. Root cause can be determined and trends reversed. 15

16 Expired: the leading contributor to overall unsaleables 29% Damaged Damaged 14% 71% Expired 86% Near-expired /Expired Source: Inmar Supply Chain Data

17 Product Freshness Analysis 17

18 Shoppers / Consumers are Recent Shopper Research 1 on Freshness: Among some of the most profitable shopper segments, availability of high quality, fresh products is the #1 factor driving choice of a retailer 82% of shoppers always check freshness / expiration dates when they shop 67% of shoppers wish there was a better way to know if food is fresh Only 35% of shoppers believe that the freshness / expiration dates on products are always accurate Source: Inmar Consumer Study 18

19 Shoppers really do check date codes I consistently check for expiration or "best by" dates on these items that I purchase. 82% 69% 39% Grocery items Over-the-counter medicines Beauty or personal care products Source: Inmar Consumer Study 19

20 If you check the dates, how much shelf life must be remaining for you to purchase? 15 or more weeks (More than 3 months) weeks (approx three months) Snack food (like cookies, crackers, chips) 5-9 weeks (one to two months) Box of cereal 3-4 weeks 1-2 weeks Less than 1 week 60 day supply of vitamins 20 pound bag of pet food 0.00% 10.00% 20.00% 30.00% Source: Inmar Consumer Study 20

21 Product freshness is improving DC Expired 40% Retail Expired 20% Source: Inmar Supply Chain Data

22 % 0.15% 0.29% 1.18% 2.19% 3.63% 6.30% 9.24% 12.38% 21.60% 25.63% 17.39% Days Shelf Life Remaining: Dry Inbound to Retailer Days Days Days Days Days Days Days Days Days Days Days 361+ Days In Pick/Reserve Areas Expired 1-30 Days Days Days Days Days Days Days Days Days Days 300+ Days Retail Shelf Expired 1-30 Days Days Days Days Days Days Days Days Days Days 300+ Days Source: Inmar Supply Chain Data

23 Days Shelf Life Remaining: Chilled Inbound to Retailer Expired 1-7 Days 8-15 Days Days Days Days 40+ Days In Pick/Reserve Areas 71.79% 0.70% 3.82% 9.09% 14.59% days days days days 55+ days Retail Shelf Days 8-15 Days Days Days Days 40+ Days Source: Inmar Supply Chain Data

24 % 0.00% 0.33% 3.08% 20.22% 3.62% 2.50% 0.57% 1.25% 1.89% 4.42% 62.06% Days Shelf Life Remaining: Frozen Inbound to Retailer Days Days Days Days Days Days Days Days Days Days Days 361+ Days In Pick/Reserve areas Expired 1-30 Days Days Days Days Days Days Days Days Days Days 300+ Days Retail Shelf Expired 1-30 Days Days Days Days Days Days Days Days Days Days 300+ Days Source: Inmar Supply Chain Data

25 Who do shoppers hold responsible for expired? Retailer / Store 77% Both Brand & Retailer 21% Brand / Manufacturer 2% Source: Inmar Consumer Study 25

26 0.27% 0.08% 0.46% 0.80% 0.49% 0.76% 1.31% 1.09% 1.28% 1.09% 1.16% 1.01% 1.67% 1.47% 1.93% 2.36% Expired Product: At Retail by Channel Club Convenience Dollar Drug Grocery Grocery Mass 26 Specialty Pet Source: Inmar Supply Chain Data

27 The Big Twist 27

28 The FDA says that stores can sell expired food products with some exceptions 28

29 States are regulating sale of expired products NO law forcing manufacturers to date their food at all, with the exception of baby formula FEW laws forcing stores to take outdated products off their shelves What regulation does exist occurs at the state/local level and all but nine states in the United States have food dating rules but these vary widely Source: 29

30 Shoppers are 16% more likely to lose loyalty to retail store than to brand Food / Non-food Agree-Strongly Agree Food Non-food 48% 55% 37% 41% I would be less likely to purchase a brand again if I discovered a food product that I purchased in the brand was expired. I would be less likely to purchase at a specific retail store again if I discovered that a food product that I purchased from that store was expired. Source: Inmar Consumer Study 30

31 The media has reinforced the message that the retailers are responsible by reporting the fines Source: 31

32 The public is confused and wasting food: What matters? Food quality or food safety? According to new analysis, words like "use by" and "sell by" are used so inconsistently that they contribute to widespread misinterpretation and waste by consumers. More than 90% of Americans throw out food prematurely, and 40% of the U.S. food supply is tossed every year because of food dating. tossed--unused--every year because of food dating. 32

33 Then you have extreme news reports Florida Public Health experts are warning shoppers about expired product Dr. Fruin warned Well, illness and, in the worst case, death. 33

34 Most consumers want a fresh version of the same product in the case of expired If you return a product to the store because it is expired, which of the following would you most like to receive from the retailer? 60.60% 27.80% 6.00% 4.40% 1.20% A Fresh Version Of The Same Product Cash Back For The Product Store Credit For The Product A Similar Item From Another Brand An Apology For The Inconvenience Source: Inmar Consumer Study 34

35 Some retailers even tried to get assistance from consumers by offering coupons for finding expired 35

36 Talk about a twist. Looks like it s becoming cool to sell those expired products. Really? 36

37 37

38 What are the drivers of expired product? 38

39 Forecast vs. SKU Proliferation Actual Promotional activity Store velocity Shelf management Inventory turns Pick methodologies Reorder Shelf life Pantry life New item performance quantities 39

40 Case Study CHALLENGE: Expired rates for a CPG manufacturer with high sku counts Drove nearly 95% of their unsaleables 40

41 Case Study CHALLENGE: Expired rates for a CPG manufacturer with high sku counts Drove nearly 95% of their unsaleables ACTION PLAN: COLLABORATED with retailers to determine root causes CONDUCTED data analysis through audits and POS data Adjusted PROMOTION STRATEGY RATIONIONALIZED SKU offering Increased shelf life where possible 41

42 Case Study CHALLENGE: Expired rates for a CPG manufacturer with high sku counts Drove nearly 95% of their unsaleables ACTION PLAN: COLLABORATED with retailers to determine root causes CONDUCTED data analysis through audits and POS data Adjusted PROMOTION STRATEGY RATIONIONALIZED SKU offering Increased shelf life where possible RESULTS: Sales within the specific categories increased 15% Overall expired reduced by 75% 42

43 Product Damage Analysis 43

44 Do shoppers care if packages are damaged? I select items from the shelf based on the condition of the packaging, even if it does not impact the quality of the product inside. Strongly Agree Agree Neither Agree nor Disagree Disagree Strongly Disagree 3.2% 10.4% 29.2% 18.4% 38.8% 68% Agree or Strongly Agree Source: Inmar Consumer Study 44

45 Crushed: Horizontal Crease Flaps Torn Open Body Dent Torn Crushed: Vertical Crease Appearance: Package Missing Expiration Date Closure: Other Label: Missing or Misapplied Crushed: Corner 3.74% 3.46% 3.30% 9.48% 8.97% 7.67% 6.72% 6.28% 6.25% 12.24% Leading Defects: Retail Source: Inmar Supply Chain Data

46 Who do you hold responsible for damaged products encountered at the retail store shelf? Retailer / Store 59.60% Both Brand & Retailer 37.00% Brand / Manufacturer 3.40% Source: Inmar Consumer Study 46

47 Who do you hold responsible for damaged products on the encountered at the retail store shelf? Blame Retailer Blame Both Retailer and Manufacturer Blame Manufacturer Dollar Store Expired Products 75% 22% 3% Dollar Store Damaged Products 53% 43% 3% Grocery Expired Products 79% 19% 2% Grocery Damaged Products 60% 37% 3% Source: Inmar Consumer Study 47

48 A lot of the issues with damage happens after the product is home as a result of WRAP RAGE! 48

49 49

50 What consumers want: The right product in the best possible state If you return a product to the store because it is damaged, which of the following would you most like to receive from the retailer? 60.60% 24.60% 8.20% 4.40% 2.20% A Fresh Version Of The Same Product Cash Back For The Product Store Credit For The Product A Similar Item From Another Brand An Apology For The Inconvenience Source: Inmar Consumer Study 50

51 What are the drivers of DAMAGE? 51

52 Material Manufacturing Shelf fixtures handling practices Store traffic Pick operations Climate conditions Case packaging Consumer unit packaging Pilferage Shipment quality Unit load construction 52

53 Shipper and consumer unit damage rates at DC Shipper Damage DOWN Consumer Unit Damage DOWN 56% 40% Source: Inmar Supply Chain Data

54 Rate of failed pallets at DC 5% 4% Poor Platforms Shipper Damage 3% 2% 1% 0% YTD2013 Source: Inmar Supply Chain Data

55 Platform fit: DC 2.01% Shipper Damage Rate 1.20% 0.98% 0.80% OVERHANG UNDERHANG FIT SHIFTED Consumer Unit Damage Rate 0.18% 0.16% 0.11% 0.11% OVERHANG UNDERHANG FIT SHIFTED Source: Inmar Supply Chain Data

56 Crushed: Vertical Crease Crushed: Horizontal Crease Torn Appearance: Package (MFG) Missing Expiration Date Body Dent Seam Splits Illegible Expiration Date Ding Closure: Other 6.52% 5.40% 4.67% 4.14% 4.03% 3.61% 3.10% 2.77% 19.55% 17.62% Damage conditions: DC Source: Inmar Supply Chain Data

57 Dry temperature: DC Source: Inmar Supply Chain Data

58 CONSUMER UNIT damage rates at the retail shelf 30% Source: Inmar Supply Chain Data

59 Consumer Unit Damage Rate at Retail: Continues to go down 0.56% 0.50% 0.43% 0.40% 0.36% YTD2013 Source: Inmar Supply Chain Data

60 Case Study CHALLENGE: CPG manufacturer showing missing date code as leading defect and overall damage at > 2x benchmark 60

61 Case Study CHALLENGE: CPG manufacturer showing missing date code as leading defect and overall damage at > 2x benchmark ACTION PLAN: AUDIT to identify: the specific products manufacturing sites by production code RAISE AWARENESS by sharing results within organization REFOCUS on printer maintenance programs, both components and frequency 61

62 Case Study CHALLENGE: CPG manufacturer showing missing date code as leading defect and overall damage at > 2x benchmark ACTION PLAN: AUDIT to identify: the specific products manufacturing sites by production code RAISE AWARENESS by sharing results within organization REFOCUS on printer maintenance programs, both components and frequency RESULTS: Missing code issue improved by 95% Overall damage decreased 75% 62

63 Using Big Data as a competitive differentiator High performance supply chain organizations are using analytics as a secret weapon that links an increasingly dynamic environment with supply chain execution. - Aberdeen Increased sales, reduced costs Better shopper engagement Reduced returns, new product success 63

64 With data from just two locations types, significant improvements have been made Manufacturer Locations Retailer Locations Supplier Plant RDC RDC Store Returns Center Product Quality Process Compliance Waste Reduction Policy Development 64

65 Retail Shelf Trends from Rates of Damage Rates of Expired Source: Inmar Supply Chain Data

66 Converge the product journey with the consumer journey to achieve results PRODUCT JOURNEY PALLET CONSUMER JOURNEY PANTRY STORE: RETAIL SHELF 66

67 Additional focus areas for 2014 Product availability at shelf Monitoring new item launches The impact of haz management on unsaleables policies Promotions compliance measurement Package type comparisons GS-1 package measurement standardization Sustainability and damage The shopper experience and the impact to unsaleables Watch for upcoming surveys, blogs and webinars on these topics and more! 67

68 Rob Small

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