How to Prevent Perishable Shrinkage

Visit any large supermarket in the morning, the aroma in the air is always that of fresh baked bread. Customers will frequent a particular supermarket over others because of its perishable department. Therefore it is vital that the ‘fresh & friendly’ philosophy becomes the operational standard of any retail organisation that wants to remain profitable. A produce department accurately merchandised is a sight to behold; it is a symbol of beauty and magnificence. It conveys a message of freshness to customer that creates customer loyalty and develops a satisfying perception about your store.

It is the perishable department that distinguishes one supermarket from another.

Product availability, freshness and quality all contributes to the competitive edge one supermarket has over another.

Four essential facts about perishable department:

  • Fuels sales & profit
  • Stores lose 20% of available perishable profit to shrinkage
  • Reducing perishable shrinkage by 20% will increase total store profit by 33%
  • The perishable department contributes the highest income; ironically it is also responsible for the highest level of shrinkage.

Causes of Perishable Shrinkage

There are numerous causes of perishable shrinkage, but the main causes are

Product receiving and handling practices

Spoilage due to over stacking products

Mistakes that allow stock to overstay in the backroom

Theft by customers and employees

The ultimate challenge is to determine the amount required for maximum sales and minimum waste which at all times is a delicate balance.

How to Prevent Perishable Shrinkage

1. Order for Three days

In the perfect world, perishable goods will be delivered to the store each day and sold on that same day. Unfortunately, in the real world things do not operate in this manner, retailers should ideally ensure they order perishables within a three-day interval in anticipation of busy periods. Achieving this requires store managers using information on customer buying habits, seasonality and supply availability.

2. Order Smart

Ordering smart is the key to reducing perishable shrinkage. Department or store managers need to understand their own customers buying habits, stock on hand, order in progress and projected sales as a guide to the amount of stock they will need to order.

3. Coded Storage Cooler

A coded storage cooler will ensure that products are displayed on a first-in first-out basis. Department supervisors and managers must ensure that codes are adhered to on a daily basis. Perishable shrinkage needs to be on the checklist of store managers as they conduct their store tours throughout the day.

The turnover time has to be

  • 2 days for fresh seafood
  • 3 days for produce
  • 7 days for fresh meat and deli.

4. Smart Display Space Allocation

In an attempt to capture customer attention, many store managers prefer a large display of fresh produce. While this may seem a smart idea in the short-term, if not properly managed, it could lead to products expiring. Freshly displayed red peppers are attractive to look at and can be tempting to customer. However, piling new peppers on top of old products will shorten the shelf life of both new and old products. Managers therefore need to be able to strike the balance between wanting to entice customers whilst maximising their products shelf life. Creating an illusion of full shelf space requires managers to create an illusion of full boxes when in effect they are not.  Replenishing often but in small quantity is the way to minimise deterioration in product quality whilst still creating an effective display. Although this is one method, display space allocation philosophy differs dramatically from organisation to organisation.

5. Correct Handling

The vast majority of shrinkage in a perishable department is the result of incorrect product handling. The following are strategies for improving handling procedures:

  • Good receiving policies and procedures
  • Strict cooler and display rotation policy
  • Reduce price as soon as practically possible
  • Control controllable shrinkage

6. Refrigeration and storage

The majority of perishable goods should be stored in a temperature controlled environment. Refrigeration has to be checked on a daily basis to ensure that temperatures are maintained at an acceptable level. If temperature fluctuations are not identified and addressed, the shelf life of stored perishables will be shortened. Although refrigeration slows down the growth of food spoilage bacteria we must ensure that these storage areas are regularly cleaned and sanitised to kill any bacteria and to prevent cross contamination.

7. Sell rather than lose

It is virtually impossible to prevent the accumulation of perishable inventory. To minimise the losses it is better to apply the adage “Your first loss is your best loss.” and sell products at a discount rather than allow the products to perish.

8. Scan file Management

To reduce shrinkage related to cashier product ID and scan file Management, it is advisable to constantly monitor cashiers products knowledge and ensure products are correctly priced. It is also essential that product files are checked on a regular basis for seasonal products.

Even in the most efficient stores, there will be an acceptable amount of perishable shrinkage; however, good buying habits and handling can reduce perishable shrinkage considerably. The cardinal rule for reducing perishable shrinkage is to ‘sell what’s in stock fast’.

Perishable products lose freshness, weight, fluid and attract bacteria by the day. If they are not sold before their expiration dates in which case, the store may be forced to discount them to minimise any losses. It is imperative therefore to implement systems that ensure your perishables remain fresh and are sold for their full retail price.

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