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Taking another look at invisible shrink

In my last article titled “Are you overlooking invisible shrink,” I discussed the fact that retailers measure shrink primarily at the store level. From the moment product arrives at the store until it is sold, management holds produce managers accountable for their shrink.

Meanwhile, with innovative technology programs we can now identify areas outside of the store where other shrink segments transpire in “invisible” ways and means. The problem is far more pronounced than we think. The cold chain has many links that could be broken between harvest and arrival at the retail stores.

There is a misconception that produce shrink is caused only by the stores. This is one of the main reasons modified programs have entered the picture. By expanding the search using innovative software programs, we can capture data to pinpoint exactly where shrink starts to occur.

As a result of new technology, the industry will be able to identify where the weak links are located and, more important, to manage and prevent the shrink from starting in the first place.

Byron Bellows, produce merchandiser for Coleman’s in Corner Brook, Newfoundland, told me, “In controlling shrink, the electronic loggers could be an invaluable tool for recognizing potential shrink before it becomes costly to the operation. However, we believed that a certain label or product is the freshest arriving at the back door only to learn the fresher product broke down first and ended up in the tank. We have all seen this from time to time at store level and wondered why, but never knew the path or any hiccups that occurred along the way from grower to the sales floor. We look forward to this technology becoming mainstream and getting an in-depth look at solving invisible shrink.”

The challenges lie deeper than we may think in trying to resolve all areas of waste in the produce industry, but applying technology to the system can easily solve many of the problems.

The most difficult hurdle growers, packers, shippers and retailers need to overcome is sanctioning the program cost. In order to overcome this roadblock, we need to focus on two main areas:

Educate the retailer

Retailers should not only rely on physical inspections at the distribution center docks, they also need to know what the invisible shrink is on a pallet-level basis. Retailers must earn the trust of suppliers. There are direct return on investment reasons for retailers to step up and pursue the further use of technology in areas other than only those in use now.

Educate the grower-packer-shipper

Suppliers must understand the value of technology to improve the way they manage product. Measuring cut-to-cool using new tech methods can prevent product from becoming a risk of shrink later in the supply chain. Sharing data with retailers will result in lower rejections and better scorecards. There are significant ROI reasons for suppliers to adopt the program within their own four walls even if they do not share data.

Scott Danner, chief operating officer at Liberty Fruit Co. Inc. in Kansas City, KS said, “The technology is here to better monitor inbound temperatures. However, a single recording device is not sufficient to accurately monitor a load such as strawberries. In order to better monitor temperature  and shrink issues, all facets of the supply chain need to bear the cost. This is where the issues arise. No one wants to increase his or her cost of goods even if it means less shrink. We hear repeatedly that the burden of these costs is on the distributor or grower. Unless all vendor partners can unite and attack the invisible shrink, this will continue to be an issue.”

In recent years, several programs have been put in place at the store level to reduce shrink. Regardless of all the corporate plans of attack, shrink problems are difficult to eradicate. This is partly due to a number of shrink areas intermittently taking place outside of the stores before the product reaches the merchandising displays.

Mike Nicometo, president of EmpowerTech Inc. in Iron Mountain, MI, explained, “While we all focus on our business relationships, ultimately, we collectively work for the consumer. Our longest supply chains are the biggest risk. In one analysis of invisible shrink risk, I roughly estimated that over two days the consumer had around 25 percent (less if they eat quickly). Retail stores about 24 percent.

“Retailer warehouses might see 3 percent shrink at receiving,” Mr. Nicometo continued. “Shippers mainly see good product, which is why they complain about rejections. Unhappy customers stop buying specific products or shop at different stores. Today, we have tools to greatly reduce shrink by matching variable shelf life to logistics. Intelligent logistics are important for longer supply chains.”

In order to combat invisible shrink, it is imperative that growers, packers, shippers and retailers work together in a relationship built on trust. All parties need to share information rather than be secretive. This may be a major shift in business relationships.

The software programs are available now and like anything else, everyone will eventually be jumping aboard. Updated advanced technology will benefit all companies and will defeat invisible shrink. It’s just a matter of time.

Ron Pelger is the president and CEO of RonProCon, a consulting firm for the produce industry, and the chairperson of FreshXperts LLC, a consortium of produce professionals. He can be reached by phone at 775/853-7056 or by email at ronprocon@gmail.com, or check his details on freshxperts.com for more information.