This document discusses reducing costs associated with unsaleable products in the food industry, estimated at $15 billion annually. It outlines a solution developed 8 years ago that established structured return processes and business rules to identify products for return, donation, or destruction in a centralized and accountable manner. Key goals included improving order fill rates, return cycle times, and root cause analysis of issues. The program analyzed over 46 million pounds of food worth $62 million, with 46% donated to charities through Feeding America's nationwide network, reducing dumping fees and liability while benefiting food insecure Americans and building positive brand associations.

1. “Your Product has been Refused
Now What?!”

2. “..unsaleable products represent avoidable costs
that affect the entire value chain, estimated to be a
$15 billion annual cost to the industry…..root causes
of these costs are often misunderstood, leading to
incremental profit leakage” **
** According to a recent report published by GMA, FMI and Deloitte

3. 8 Years Ago Customers were seeking…
 Assistance in the quest for Perfect Order Fill Rates that were
measurable
 Tighter management of customer convenience returns
► overstocks; promotions; discontinued products
 Metrics for logistic related delivery exceptions
► order changes; order entry errors; mis-ships
 Control of OS&D events that was consistent & immediate
 Factor in the SKU value when determining to return product
 Root cause determination/action plans/execution
 Reduced cycle return times
 Single chain of control for all product exceptions
 Pre-established processes for production irregularities
 or withdrawals

4. Solution Design
 Apply structure
► Create a call center and introduce technology to give structure and
discipline to the return process so that best practices may be applied
consistently.
 Establish rules
► Establish business rule sets specific to each customer, product group
and temperature, customized by client that were consistently applied
to identify products for return, donation, or destruction. Thus,
eliminating non-value added transportation expenses.
 Centralized control and accountability for product
 Identify return cycle times
 Execute transportation
 Identify actionable events to continuously improve upon
 Return comprehensive and actionable program reporting

5. Stakeholders to the Value Proposition
 Manufacturers
► Measures ability to achieve Perfect Order Fulfillment
► Create organizational accountability within your own network
► Consistent, intentional handling of product exceptions to maintain a
preferred chain of control of the brand. This prevents branded
products ending up in unauthorized venues or becoming astray.
► Quantitative analysis determines the disposition result
► Evaluation of SKU value and restocking costs compared to
transportation cost to return product. No product returned if the cost
of returning is greater than the product value.

6. Stakeholders to the Value Proposition
 Manufacturer (cont.)
► Database of all donation locations is available to direct carriers to the
closest drop spot minimizing additional charges
► Donation certificates signed by the driver that product has been
donated to a specific authorized charitable entity
► Tracks inventory value
► Dramatically improves cycle return time to active inventory
► Database allows:
• Analysis of exceptions by warehouse, carrier, receiver or SKU
• quicker resolution of customer deductions
• Increases the efficiency of staff resolving deductions and credits

7. Stakeholders to the Value Proposition
 Charities
► Largest and quickest access to product nationwide
► High degree of product integrity
► Better access to longer shelf lives
 Carriers
► Timely resolution and communication to the carrier minimizes
detention and the unprofitable use of driver’s hours of service
► Database of all donation locations is available to direct carriers to the
closest spot to drop product and move on to the next load quickly
 Retailers
► Eliminates pressure to take in and hold unwanted product
► Gets carriers off the premise and on to their next load quickly

8. Mature Customer Event Trends 2005-2009
6,000
5,000
4,000
Events
3,000
2,000
1,000
0
1/1/2005
4/1/2005
7/1/2005
1/1/2006
4/1/2006
7/1/2006
1/1/2007
4/1/2007
7/1/2007
1/1/2008
4/1/2008
7/1/2008
1/1/2009
4/1/2009
7/1/2009
10/1/2005
10/1/2006
10/1/2007
10/1/2008
10/1/2009
What Changed?
Order Minimums, Return Policies, Quality Improvements,
Customer Service Error Reduction, Order communication improvements

9. Sample of 2009 Event Codes
 49% Customer Refusals
33% Customer no longer wants the product
15% Code date/shelf life
15% Not on PO or did not order
8% Customer ordered error
6% Order was cancelled
4% Duplicate order
12% 20+ other misc reasons
 15% Damage
 10% Carrier Issue
 9% Shortage
 8% Customer Convenience
 6% Overage
 <3% Withdrawals/Other

10. Sample of 2009 Event Disposition Codes
 Product Disposition Totals
► 46,000,000 lbs of food products
► 2,500,000 cases
► $62,000,000 in retail value
 Disposition Classification Summary by Product Value
► $40,000,000 returned
► $3,400,000 donated
► $3,400,000 destroyed
► $8,600,000 accepted or shorted
► $6,600,000 other including re-delivery, re-consignment, re-worked

11. Hunger in America
 Nearly 1 in 6 people in the United States do
not know where their next meal will come
from
 That’s 49.1 million Americans
► 16.7 million children (1 in 5)
► Nearly 40% of households served by Feeding
America have one working adult
► The number of individuals who were food
insecure increased 36% over 2007 and the
number of children increased 35% over 2007
 The need is growing: Demand for food
assistance is up 30% on average vs. YA
► Unemployment a key factor
* Household Food Security in the United States, 2008; 2009 Food Bank Survey

12. How Feeding America Works

13. Feeding America’s Network Scope
FEEDING AMERICA MEMBER
[NETWORK ALSO INCLUDES
MEMBERS IN AK, HI & PR]
AK HI PR

14. Liability Protection
Bill Emerson Good Samaritan Act
 Protects you from liability when you donate to a non-profit
organization
 Protects you from civil and criminal liability should the
product donated in good faith later cause harm to the needy
recipient
 Standardizes donor liability exposure. You or your legal
counsel no longer have to investigate liability laws in 50
states
 Sets a floor of "gross negligence" or "intentional misconduct"
for persons who donate grocery products
 http://www.usda.gov/news/pubs/gleaning/appc.htm

15. Benefits of Donating
 Security and integrity of brands
 Nationwide network of 501(c)(3) charities
 Savings in dumping fees: $4,000 per truckload
 91% of consumers have a more positive image of companies
that support a good cause
 86% of consumers are likely to switch brands when a product
is associated with a good cause
 67% of Food Shippers of America member companies have
donated to Feeding America in the past 12 months
Your Contacts:
Bill Thomas Feeding America - Vice President of Product Development
312-641-6611 bthomas@feedingamerica.org
Peg Collins-Sarinyamas Feeding America - Director of Transportation
312-641-6516 pcollinsarinyamas@feedingamerica.org

16. Feeding America
formerly named America’s Second Harvest