by Michael Falck/co-founder and U.S. president, RELEX Solutions
Special to The Shelby Report
According to a 2016 report by the U.S. Department of Agriculture, shrink loss in fresh fruit, vegetables and meat items continues to increase despite advances in food technologies. In the same report, the USDA found that in 2011-12, the average loss estimate was 12.6 percent for fresh fruit, 11.6 percent for fresh vegetables and 12.7 percent for fresh meat, poultry and seafood. Much of this loss can be attributed to the spoilage of these fresh foods.
However, by optimizing fresh food replenishment, grocers can significantly cut spoilage and reduce losses. What’s more, better replenishment of perishables means displays look better, customers go home with fresher goods and retailers sell more products. To begin optimizing fresh food replenishment and cutting spoilage, there are a few easy steps retailers can take.
1. Define your goals and priorities
Whether you are a fresh food wholesaler, small or large retailer, high-end or price-driven supermarket, convenience store or cash-and-carry, you need to define your goals and priorities around fresh before you can optimize replenishment. With fresh foods, retailers walk a tight rope between shelf presentation and spoilage costs so each retailer needs to find the right balance to complement their brand image and business priorities.
2. Never overlook product-level shelf life when ordering
All major retailers have contracts with suppliers to deliver minimum shelf-life availability. But this information isn’t always given sufficient importance in replenishment, as sell-by dates vary from delivery to delivery. However, one simple step retailers can take is to incorporate shelf-life expectation into ordering parameter management.
3. Incorporate forecasted spoilage
Spoilage forecasts can be used for parameter calculation, but they can also be used in replenishment calculation by factoring in future spoilage. For example, distribution center environments, such as fresh food wholesalers, can do this by introducing batch-level inventory balances with last sales day information. This helps maintain good service levels by replenishing produce before stock spoils, and also highlights goods that need to be sold quickly.
4. Treat all products individually
Shoppers are faced with a number of perishable items in each product category, and classification is key for better inventory turnover. Take fresh bread, for example: grocers can optimize bread replenishment by identifying “must-haves” in each sub category via basic store-level ABC classification. By categorizing replenishment displays next to basic categories (e.g. sliced white, wheat, multi-grain, etc.), products can become more appealing to customers. Classification such as this can drive sales margins and ultimately create better inventory turnover by simply appealing more to consumers.
5. Dive into your data
Like most business problems, no matter how big or small, data is key to finding solutions. In retail, big results can come from looking at the data and making small adjustments. To get the big figures right, good data at every level is essential for running any complex retail or wholesale business efficiently. In order to reduce spoilage, retailers need to begin by making sure their existing data is in tip-top shape so they can begin making decisions that optimize replenishment.
Despite the reports of rising loss in fresh foods, it’s not too late for retailers to turn things around. Just by making a few simple changes to replenishment practices, fresh foods retailers can easily begin cutting spoilage and their losses. Optimized replenishment will also help create more enticing displays for shoppers, which may ultimately lead to increased sales. Finally, by optimizing replenishment and cutting spoilage, fresh foods retailers can reduce their overall impact on food waste and the environment.