“Winning the Expired Products Battle”

Ensuring Adequate Remaining Shelf Life to Maximize Sell Through and Avoid Product Expiry

– the Keys to Success

Presented by GENCO ATCJuly 20,2011

Topics for Today’s Discussion

• Size of the Issue• Complexity• Recommendations • Panel Discussion

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The Issue

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The Issue

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“Outdated items at XXXXXXXX upsets customers”

Chicago Tribune

“Expired Food—Is It on Your Grocer’s Shelves?”

Shelf Life Advice

“On Your Side: Expired food for sale”

ABC Channel 7 News“Expired groceries sold at Hampton Roads grocery stores”

ABC Channel 13 News

The Issue

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The Size of the Issue

• 2008 FMI/GMA Unsaleables Report – 20% of Total Unsaleables

• 2010 Discussions with Retailers – 35% of Total Unsaleables

• $3 - $5 Billion

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The Complexity of the Issue

• 21 Factors Identified that Affect Delivery of Sufficient Shelf Life at Shipment

• Collaboration is a Key Element for Success

• Ultimate Goal is to Delight the Consumer

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The Complexity of the IssueManufacturer Research & Development Team establishing the product shelf life

Receiving and rotation philosophy/process at retailer/wholesalerDC

Production planning for manufacturing Inventory level at retail store

Demand planning and forecasting for manufacturing Rotation process at retail store

Lead time, availability and shelf life for raw materials and ingredients used in manufacturing

Product case pack and inner pack quantities

Manufacturer efficient inventory management to meet requirements to achieve customer service standards and requirements related to order fill rate

Consumer penchant for purchasing the freshest product on the shelf

Manufacturing capacity constraints Promotional activity and the resulting inventory “push and pull”

Climatic factors that impact product and package quality degradation

Category management / SKU rationalization philosophy

Total shelf life remaining at the time of delivery to retailer/wholesaler by manufacturer

Supply Chain complexity

Retailer/wholesaler ordering patterns Diversion

Inventory turns rate by category/SKU/store segment/class-of-trade/geography, etc.

Pantry life

Inventory level at DC (managed through buying and distribution strategy)

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The Complexity of the Issue

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The Manufacturer’s View

Sales

Demand Planning / Distribution

R&D and Quality

Plants

Want maximum days

Want minimum days

Want customer requirements

Want maximum days10

The Retailer/Wholesaler’s View

Retail Stores

Distribution

Centers

Manufacturer

Consumer

Want maximum days

Want minimum guaranteed days

Want maximum days

Want maximum days11

Recommendations for Joint Adoption

• Understand the Challenges• Collaborate with Trading Partners• Rationalized Stock Assortment• Speak a Common Language• Embrace and Commit to Continuous Improvement• Top Management Sponsorship and Commitment

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Recommendations for Joint Adoption

• Speak a Common Language

MCRSL > [A x (B+C)] + D MCRSL – Minimum Customer Remaining Shelf Life (days)A – Safety Factor (whole number based on category experience)B – Average Retail Sales Velocity (days)C – Warehouse Inventory (days of supply)D – Consumer Pantry Life (days)

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Recommendations for Manufacturer Adoption

• Create a “Customer Remaining Shelf Life” Internal Team to Manage the Process

• Audit Performance• Continually Improve the Process and Adjust

Standards• Incorporate Sales Considerations into the Process

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Recommendations for Retailer/Wholesaler Adoption

• Work with Manufacturers to Establish Achievable Standards and Continually Improve the Process and Adjust Standards

• Request Open Lot Codes• Manage Inventory to Consumption• Incorporate ASN Technology for Inbound Shipments• Incorporate the Ability to Capture Expiration Dates

into the WMS• Monitor Operations Processes for Improvement

Opportunities

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Panel Discussion

• Oscar Fussenegger, Corporate Reclamation Manager, The Kroger Company

• Don LaChance, Senior Director, Inbound Quality Logistics & Reclamation, C&S Wholesale Grocers

• Gary Piwko, Director, Remarketing and Returns, The Kellogg Company

• Jace Swartzendruber, Unsaleables Manager, Supply Chain, ConAgra Foods

• George Thrower, Manager of Unsaleables, Harris Teeter

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