When an employee starts an entry-level job in the retail sector, one of the first things they are taught is where to put damaged products. Usually, damaged items are placed in an unused corner of a stockroom until the store manager can ship them back to the distribution center for a credit or exchange. The routine nature of this practice indicates how common product damage really is. Product damage in manufacturing can cost as much as $1.90 per pallet annually, while product damage during transportation costs up to $0.48 per pallet, and product losses in warehouses and distribution centers cost as much as $3.20 per pallet per year. These losses in the supply chain can add up to substantial lost profits over the course of time.
Finding effective ways to reduce product losses in the supply chain should be a priority for every company. Improvements in packaging, shipping materials, and logistics data collection make it possible to reduce product losses by at least a few fractions of a percentage point, which can make a surprising difference in a company’s bottom line.