So many words come to mind when describing retail produce operations.
Included in the list are quality, freshness, variety, selection, price and service. This list goes on. These are at the core of measuring a successful department.
But what's one area that makes me wince a bit when walking a produce department? The markdown rack.
That's because this is a little section of the produce aisle that gets walked by dozens of times a day and is rarely spoken of actually tells a lot about how a produce department is managed.
Too much marked down product placed on the rack, perhaps even surrounded by carts of additional marked down produce, says something has gone wrong. Perhaps the orders were too much for the anticipated business. It could also mean that items upon arrival were sub-quality.
More likely, the markdown section was full of all the misses. You know, as in mis-handled, mis-rotated or mis-ordered — all mistakes.
Yet, a produce operation is an imperfect business. Even with the best management, you can count on having anywhere from 5% to 10% shrink depending on the business volume, the time of year, whether the crew is trained properly and how the department is merchandised.
I remember calling on a store that had a high shrink report. The store manager and I walked past the sparse markdown rack. He said of his produce manager, “Jim doesn't mark down enough produce and lets his crew toss out too much. That's why his gross profit is low and his shrink is high.”
I looked around the department. The store had a long record of good profit and low shrink. I advised the store manager, “Looking at a markdown rack as an issue is like saying a car's malfunctioning issue is the smoking tailpipe, when any mechanic knows the belching tailpipe is likely a symptom, not the actual cause.”
The markdown rack is indeed akin to the tailpipe of the produce department.
The components of running an efficient, profitable and low-shrink produce department are simple enough yet are a challenge to master. Even the most seasoned managers must remain on constant vigilance for the critical control points of shrink. Included in these points are:
- Careful ordering — Order only enough fresh produce to last until your next delivery, with only the barest of safety stock to see you through. This is fine-tuned with experience, but always give yourself plenty of time to order. Contributing factors to consider include quality, ad merchandise and inventory on displays, as well as what's in the stockroom. Other important order considerations include holidays, anticipated calendar events and even adverse weather.
- Rotation — Ensure that every produce employee receives and code-dates items, with proper handling and preparation, rotating all produce upon arrival, as well as following through with constant rotation during stocking.
- Culling — Train your produce crew to carefully cull product, removing any damaged, short-dated or unsightly produce from the display.
- Accounting — A lot of paper shrink occurs. Prevent this by checking off the order upon receiving, reporting any shortages, charge discrepancies or pack errors immediately for timely credit. Ensure pricing is correct on signs and in your store computer system. Train your cashiers to be on the lookout for organic versus conventional mis-rings, as well as new items, and offer to give frequent produce tests to help prevent like-item identification mistakes.
Shrink is inevitable, but by following the critical control points, you can keep that smoking exhaust of a shrink machine in check so that it is a barely visible wisp of smoke.