What does perishable mean?
Perishable goods are products that have a limited shelf life and must be consumed within a certain period. Items like milk, cheese, produce, and meat are all considered perishable because they spoil if not used in time.
The problem:
Managing inventory with perishable goods is challenging. Businesses must ensure products are sold before they expire to avoid financial losses. Since these goods have short shelf lives, there’s only a narrow window to purchase, stock, and sell them before they lose their value.
The strategies:
There are several known strategies to manage perishable inventory, but the most effective ones are “First In First Out” (FIFO) and “First Expired First Out” (FEFO).
- What is FIFO?
The FIFO method means selling products in the order they arrive. It focuses on rotating stock by placing older items at the front and newer ones in the back, making sure older inventory is sold first.
- What is FEFO?
FEFO prioritizes selling items based on their expiration dates. It ensures products with the earliest expiry are dispatched first, reducing the risk of selling expired items.
If you sell perishable goods such as food or beverages, the FEFO method is usually the better choice. FIFO, FEFO, and batch tracking can work together but can also be applied individually depending on your inventory needs.
Most organizations do not purchase all input materials at once, nor do they order one unit at a time. Instead, they place batch orders in lot sizes larger than customer demand. For example, a manufacturer needing 50,000 tons of steel per year may start by ordering 4,000 tons. The next order is placed as inventory levels run low. This practice leads to what’s called cycle inventory. Companies prefer batch ordering due to cost benefits and economies of scale.
The benefits:
- Reduced obsolete inventory
- Improved quality control
- Efficient recalls through batch tracking
- Better cash flow management
- Higher customer satisfaction
- More accurate inventory audits
What’s the best perishable goods inventory software?
To manage perishable goods effectively, look for inventory software that includes low stock alerts, batch tracking, expiry reports, date-based tracking, supplier-integrated purchase orders, and multi-location stock control — all in one platform.