2008 Joint Industry Unsaleables Report: The Real Causes and Actionable 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.
Tags: Unsaleables