Bad Packaging, Poor Handling Seen Driving High Unsaleables

GENCO study of frozen food manufacturers sees benefits of using folding cartonboard to reduce damaged goods, returns

GENCO study of frozen food manufacturers sees benefits of using folding cartonboard to reduce damaged goods, returns

Pittsburgh, PA — February 28, 2005 — Bad packaging, poor handling and substandard shipping and receiving practices account for more than half the returns in the supermarket industry, and the use of folding cartonboard could significantly reduce unsaleables in the industry, according to a new study.

GENCO, a supply chain management consultancy, conducted to the research for the study to determine the impact that MeadWestvaco's Coated Natural Kraft (CNK) folding cartonboard can have on reducing unsaleables (damaged, crushed or destroyed merchandise due to mishandling) for frozen food manufacturers.

MeadWestvaco contracted GENCO to address a growing issue in the manufacturing industry, which in the past has been seen only as the "cost of doing business." The real cost to the consumer packaged goods industry alone for unsaleables reached $2.57 billion in 2004, GENCO said.

44 Percent Reduction in Unsaleables

Mike Ghassali, senior vice president with GENCO Damage Research, said the research showed that CNK folding cartonboard can help frozen food manufacturers reduce unsaleables by 44 percent.

"More than half the returns in the supermarket industry — 57 percent — are due to damage coming from substandard packaging, mishandling, shipping practices, receiving and stocking practices," Ghassali said. "Therefore, it is our job to determine where the damage takes place in the supply chain, where the product is challenged, and make a significant reduction in that damage so that both the retailer and manufacturer profit."

MeadWestvaco approached GENCO Damage Research in August of 2003. GENCO was asked to test whether CNK, the company's toughest cartonboard packaging, protected frozen food content and carton integrity better than that of other paper boards. "We needed to know what percentage of damage reduction would motivate a food manufacturer to change vendors for cartonboard selection," explained Dr. T.J. Green, Six Sigma expert and product development manager for MeadWestvaco.

Three Month Study

GENCO has experience in unsaleables management through the study of distribution, shipping, pallet configurations and other factors contributing to product integrity and profit for the manufacturer. GENCO's Damage Research group researches root cause of damage and, working with a broad base of manufacturing categories from grocery to consumer electronics, GENCO develops strategies to tighten up supply chains, improve retailer/manufacturer relationships, reduce damage and maximize profit.

Over a three-month period, GENCO studied 12 items for MeadWestvaco, tracking 3,500 cases from manufacturer through distribution pallet breakdown to delivery of 6,500 units into store inventory. At every step, GENCO tested environmental temperatures of plants, facilities and trucks as well as the condition of the packages.

Once following product through to retailer handling, the results showed that of the 10,700 products packaged in CNK cartonboard, only 166 were damaged, which equates to a 1.55 percent damage rate. In comparison, the alternative packaging material produced a 2.77 percent damage rate.

"The results substantiated that when CNK is used to create the frozen food carton, the package more effectively protects against crushing, denting and tearing and reduces the overall unsaleable rate of product by approximately 44 percent," concluded Ghassali.