Inventory Control Methods: FEFO & FIFO… less spoilage and more safety!

Using technology to comply with the Food Safety Modernization Act…

Safely managing inventory in the food and beverage industry can be very

complex. CeleriTech’s software applications manage complex traceability

requirements, such as FEFO and FIFO, amongst others…

Inventory Control Methods: FEFO/FIFO

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To reach the benefits of reducing product loss, it is essential to know the precise shelf-life of products throughout the distribution chain. FEFO (first expired, first out), is an inventory management method that allows for products with the shortest shelf-life to be distributed first.

This is a simple, highly effective inventory management method that prioritizes the handling and moving of date sensitive inventory. The FEFO method requires, regardless of the date of entry or acquisition, that

inventory with the earliest expiration date (or shortest shelf-life) to be handled first.

The method of FEFO is most commonly practiced in the food and beverage and the pharmaceutical industries, where expiration dates and shelf-life cycles are of critical importance.

The FIFO (first in, first out) method is another commonly used inventory management

method. While the FIFO principle is not strictly guided by an expiration date or a specific shelf-life cycle, it ensures that product that was received first into a warehouse leaves the warehouse first.

Companies that normally practice the FIFO principle usually have a policy of displaying and selling older stock before selling newly acquired stock. Such policy makes sense when they sell fresh food or seasonal products that can go out of fashion. Grocery stores, for example, often own

refrigerated storage that make it easy to re-stock product from the back, pushing older products forward where shoppers are more likely to see and buy them.

By rotating stock in this way, it's more likely that there will be less inventory waste; since food is more likely to be purchased before it goes bad.

FEFO CONTROL

The E in FEFO defines the life-cycle of a product

and determines when products reach the end

of its safe life-cycle. Therefore, the E is of great

importance when planning the distribution

and commercialization life-cycle of a product.

With FEFO, the logistical controls react to

shelf-life differences in a smart way in order to

reduce product loss and out-stock-levels, while

increasing quality safety and customer

satisfaction.

FIFO CONTROL

The I in FIFO refers to the rotation order of

inventory based on the order it was received

into the warehouse. This principle assumes

the logic that the longer the product stays in

the warehouse, the higher the possibilities for

deterioration or obsolescence.

It is taken as the date of I the date when the

product entered the distribution network and

this logistical method usually takes

precedence over other date sensitive

inventory management techniques.

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Picking by FEFO or FIFO

FEFO and FIFO are inventory management methods that help control logistical processes, of consumption or distribution of products, based on date driven factors. By practicing FEFO and FIFO, companies can have very high standards for safety and quality of product.

The life cycle of a product and how you manage its shelf-life is the axis of your inventory management practices in the warehouse. FEFO or FIFO, the logistical processes of the

operation depend on date driven factors that determine how you prioritize the distribution of your inventory, let’s not forget that the cost

of an erroneous shipment can be very high.

Distribution of product with inappropriate shelf-life cycles can cause a negative impact on sales and product demand; expired food on the shelves of a supermarket involves loss of brand image, without going on to describe the possible consequences of their consumption.

Software automation and FEFO & FIFO

Leading ERP software applications, like SAP Business One, include advanced warehouse functionality based on inventory management methods such as FEFO and FIFO.

Basic processes such as receiving inventory, managing inventory, order fulfillment and picking and shipping orders, can be easily track with SAP Business One. More importantly, SAP Business One can auto-calculate and track expiration dates to ensure that only the right product lots are being picked and shipped.

In the food and beverage industry you need a system, like SAP Business One, to manage your entire production, warehousing and/or distribution processes. There are many aspects and processes that you need to manage, here are just a few that you could easily manage with

SAP Business One:

Manufacturing/Production Supply Chain

Recipes and R&D

Production yield

Production waste

Quality control

Batch tracking

FEFO & FIFO

Full life-cycle

Shelf-life cycles

Expiration dates

Full traceability

COSTS OF NOT PRACTICING FEFO or FIFO

Expired stock on the shelf

Premature obsolescence

Customer returns

Lost time looking for a product in stock

Unmet demand

Loss of brand image

Potential lawsuit if product affects the

consumer

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Playing by the rules

Companies that do not deploy ERP systems, like SAP Business One, are going to have a very hard time complying with strict safety mandates such as, lot control and traceability, both forwards and backwards all the way down to a container level. Safety mandates also require advanced practices, such FEFO and FIFO, amongst others…

Global food and beverage safety regulations are becoming stricter and coming from different regulatory entities, nationally and internationally. The FDA, the Food Safety Modernization Act, the PTI, the Bio-Terrorism Act, GFSI, HACCP and SQF are some of the organizations and initiatives that have made food safety a top priority. As these new rules and regulation become the industry standards, food and beverage manufactures and distributors can rely

on CeleriTech to comply with regulations such as two-way traceability, FEFO and FIFO inventory management methods and robust labeling option, just to mention a few. All of these just to avoid costly regulatory fines.

About CeleriTech

CeleriTech is a certified SAP Partner and focused on delivering integrated business technology solutions for small and medium size companies. With over 125 consultants and offices in Miami, Venezuela, Colombia and Peru, you can always count on local resources to provide first-hand service and support.

Our flagship application, SAP Business One is the world’s leading business management software for small and medium-sized companies. SAP Business One will enable real-time information related to supplier verification, compliance and registration with the FDA, it will improve your business performance by evaluating the standards use of critical tracking events, core business processes and key data elements that range from product receipt, ingredients, processing, packaging, storage, transfer and shipping and much more.

We can help you:

Minimize risk for low quality control

Avoid the risk of non-compliance with food regulations

Enable effective traceability procedures

Plan for systematic recall measures

Monitor raw materials and finished product throughout the entire supply chain

We can help 786-331-1281