IN THE TRENCHES: Shrink affects every level of the produce industry
by Ron Pelger | April 21, 2009
What is your produce shrink rate? What is your dollar loss from shrink?
It's shocking that whenever I ask those questions, many people do not know the answers.
Even some upper-management executives have little or no knowledge of their shrink loss. Furthermore, there are companies operating without any type of preventative monitoring program at all.
Left unchecked, shrink can result in severe dollar losses.
There's a saying, "One bad apple spoils the barrel." So, if there is a bad apple in a five-pound bag, should you throw away the entire bag regardless of whether all the others are good? Would you do the same with a bag of potatoes? One bad potato and out with all? How about any other container having just one bad unit in it? Would you toss 98 percent of good, wholesome product in the garbage because of one bad piece? Yet, that's what is happening in many areas of the produce industry today. But, is it practical to accept the total shrink loss?
Just recently, I watched a produce clerk pull packaged tomatoes off a display and toss them straight in the can without batting an eye. The packages contained only one bad tomato out of eight. When asked why all the good tomatoes were discarded as well, he replied, "We don't mess with the good product. We just throw out everything."
Aside from decreasing sales, shrink is the most damaging area in profit loss to the bottom line of a company. Often, the contributing factors to produce shrink escape many operators. Many employees throughout the industry lack a true understanding of shrink and technical knowledge of the basic science of fresh fruits and vegetables.
Before delving into shrink, it is imperative to understand more about keeping produce fresh. Scientifically, merchandise in the produce department is quite different from the product on the grocery shelves and in the frozen-food cases. Fresh fruits and vegetables are living organisms that require special care to maintain their life until the final sale at the store level.
Why do you have a refrigerator in your home? You could save a lot of energy expense if you turned it off. All you have to do is eat all the fresh items you buy every day. However, that is not practical.
Most fresh fruits and vegetables on display in all retail food stores are living on borrowed time and require refrigeration in order to maintain their freshness. Aging and deterioration are continuous processes, but the rate of aging depends upon an item itself and the conditions under which it is held. Most fresh fruits and vegetables are near or at their prime when harvested. They continue to live even after they are separated from the parent plant or tree.
Their length of after-harvest life depends largely upon the temperature, moisture and care in physical handling of the product. Cooling generally slows aging and decay. Proper humidity helps in preventing loss of moisture that is essential to the living cell. Careful handling reduces unattractive bruises and broken skins that provide openings for decay organisms.
In simple terms, the nature of fresh produce is similar to the nature of other living plants and even living animals. Fresh fruits and vegetables require oxygen, give off carbon dioxide and "breath" as do humans.
According to various surveys, the national average for shrink among supermarkets is in the area of 2.5 percent, which includes all store departments.
Nevertheless, the shrink rate for produce is quite difficult to determine as a national average, since every company does not reveal the necessary data required to calculate an accurate number.
Shrink will always be a major concern in produce. Identifying it is one thing, but controlling and preventing it is another. There are countless causes that create shrink at every level of operations.
Shrink is not found just at the retail store level, but throughout every phase of the produce industry. It could occur when the product is processed, packed, loaded, shipped, transported, received, stored, displayed and even checked out at the register.
Maintaining the cold chain is critical to keep fruits and vegetables fresh. After harvest, produce continues to use oxygen, carbon, water and heat. Shrink sneaks into the act once the cold chain is broken anywhere along the line. It could be leaving inbound product on a warm dock, outside a store cooler or in poor temperature storage.
Retail stores are most susceptible to shrink, since it is the end of the line for fresh produce before being purchased by consumers. Retailers take many steps to keep the product alive until it is sold. The longer produce is in the store, the faster shrink sets in.
There are millions of dollars in shrink being lost in produce industry operations. If you don't have shrink data analysis information and are just guessing at a number, chances are it is far greater than you imagine. Remember: All of the shrink you identify and prevent will place that savings directly into your bottom line profit.
(Ron Pelger is the owner of RONPROCON, a consulting firm for the produce industry. He can be reached by phone at 775/853-7056, by e-mail at firstname.lastname@example.org, or check his web site at www.power- produce.com.)