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In the Trenches: Are you overlooking invisible shrink?

As a former director of produce operations, I wore many hats in being responsible for achieving a sales and profit budget. Besides sales and merchandising, another important function was “controlling shrink.”

Whenever a produce manager was questioned about his or her shrink, the response usually was, “I don’t know where our shrink is occurring. I have a good staff and we faithfully follow all the company shrink programs. The numbers have to be wrong.”

I’ve also heard produce managers often tell me that certain items didn’t hold up well and the loss was added to their shrink. During my earlier years as a produce manager, I often experienced similar developments as well. Therefore, the product that did not hold up before its normal shelf life expectancy simply resulted in excess shrink.

Why do some produce items break down too rapidly after being received in the store? Although the produce managers are on top of caring for their product, they are still skirmishing with high shrink challenges to this very day.

Over the years, I have given some deep serious thought as to what the produce managers were expressing about product not holding up once they received it in the store. Now, as an industry consultant, I have realized that there is more to where produce shrink occurs rather than only at the store level.

We were holding our produce managers accountable for all of the shrink figures based on the product shipped into the stores and in their handling operations after receiving it. In other words, the starting point in measuring shrink was at the produce-receiving door. After that, the clock started ticking until that product was sold. If it wasn’t, it turned into waste, which reflected in shrink numbers.

The produce industry is muddled in its means of arriving at where exactly shrink originates. We only know half of the answers today. The complete picture is too fuzzy.  Retail companies are still measuring produce shrink in the same store-level manner. We eyeball produce managers for shrink in the store while it also develops in other exterior areas. Meanwhile, a missing factor needs to be considered other than trying to control shrink only at the store level. We call it “invisible shrink.”

Mike Nicometo, cool-chain expert and president of EmpowerTech Inc. in Iron Mountain, MI, said, “There are literally amazing variations in produce shelf life due to differences in cut-to-cool time and inconsistency in pre-cooling.  Don’t discipline the produce manager for problems that they didn’t cause. Don’t blame the distribution center quality-control inspectors for accepting product that looks good, but later does not hold up to expectations. Advanced shelf life loss is simply not visible until much later in the supply chain. In order to manage shrink and quality, we need to measure the right areas. It is time for our industry to realize that putting product into the cool chain logistics process without knowing how much shelf life it has to start out, is like sending a fleet of planes to random destinations without knowing how much fuel they have at take-off.”

Before new technologies were introduced, retailers did not have push-button sophisticated programs to monitor shrink. Today we have the capability of diverse electronic tools from which to capture, record and analyze just about anything related to the produce business, including shrink. Product footprints can now be trailed from the beginning of planting to arrival at the distribution center and beyond.

Mr. Nicometo also added, “When comparing the temperature of each pallet on a load versus the commonly monitored ambient air of the trailer for thousands of pallets during three to five day trucking from Mexico to the U.S., I found over 30 percent of individual pallets were running very warm, causing high levels of advanced shelf life loss. Typically, the advanced shelf life loss was invisible at receiving QR inspections, resulting in product being considered equal. In reality, many pallets were over four days older in terms of shelf life than were the others. This appears to be due to ineffective pre-cooling, resulting in pallets with hot center product.”

In the past and still today, we use physical means to inspect product at the DC docks and only detect visible problems. Fortunately, new technology has been developed that provides low cost: reusable data loggers that can be read wirelessly throughout the logistics processes.

Software companies have developed solutions that use the time and temperature data to give our operational people just the information they need to make logistics that are more intelligent — automated alerts, smarter inventory rotation, and more desirable routing. Those benefits are in real time, increasing delivered freshness and quality to the consumer, while reducing related costs and losses. The benefits continue by using the data/metrics for business intelligence.

Using newer and better state-of-the-art technological methods to gather vital information takes the shrink conflict to the next level. No longer does part of shrink have to be invisible.

Ron Pelger is the owner of RONPROCON, a consulting firm for the produce industry, and a member of the FreshXperts consortium of produce professionals. He can be reached by phone at 775/853-7056, by e-mail at ron@power-produce.com, or check his web site at www.power-produce.com.