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Many companies accept product and distribution losses which erode their profitability through standard industry practices which result in underestimating of these losses. Examples include: Losses within a shrinkage allowance are considered zero loss and, therefore, an accepted cost of doing business Can be as much as 3-5% of total gross sales. Small increase in packaging costs brings increased sales and reduced damage: $200,000 investment results in $1,700,000 profit improvement. Costs of damage replacement is often 5 times product cost Lost sales resulting from image erosion are rarely quantified. (Even by me) Profitability can be enhanced by a Systems Approach which refuses to accept unacceptable losses. This paper explains how each of the above occur, and offers suggestions to prevent their continuance and thereby improve the bottom line. Case histories and savings are included.
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