Without a doubt, expiring inventory mistakes can get expensive. However, with some adjustments to inventory management, food industry businesses can keep stock flowing into and out of the warehouse. Here are some inventory slipups to avoid.
1. Focusing on expiration dates alone
One mistake that warehouses make is focusing on the product’s expiration date versus evaluating stock at its peak performance mark.
When ingredients arrive at the warehouse, they typically have a good shelf life. The crew puts the new inventory into the system and on the shelf.
Whether the warehouse uses the FIFO or FEFO picking system, expiration dates typically guide stock optimization.
However, if businesses pay attention to a product’s peak performance mark (not just the expiration date), they can minimize getting stuck with non-usable foods. For example, inventory with a two-year shelf life, such as granular sugar and nonfat dried milk, may actually reach peak performance around one year prior to expiration.
At that time, it’s critical to evaluate the inventory. Has an ingredient’s demand slowed in the last year, making it vulnerable to expiring on the shelf? What’s the likelihood of the product moving in the next days, weeks or months?
A peak-performance-date assessment will help ingredient owners determine the best course of action to take—while the ingredient is in prime condition.
2. Overlooking creeping value erosion
The moment an ingredient lands in the warehouse, the value-erosion clock starts ticking.
For example, a warehouse managing complex bakery inventory (in the 200-300 items range) faces the challenge of the ingredients losing value. The sooner they can identify problem inventory and begin the process of offloading the products, the better.
To illustrate, a bakery buys cinnamon, chocolate drops and macadamia nuts. Soon after delivery, its buyer cancels a baked-goods order. Now, the bakery is stuck with the ingredients.
However, if they salvage the still-new ingredient immediately, they may recoup around 70-80 percent of the product’s original value.
Alternatively, as the product nears six months before expiration, the product’s value erosion increases rapidly. By the time a product that has 4 to 6 weeks of shelf life left, its value is minimal.
Once the ingredient hits or passes expiration, the product owners are looking at $0.10 on the dollar—sometimes much less.
3. Underestimating time needed to process expiring ingredients
Even with well-optimized inventory, ingredients expire or become unusable. When a business finds itself stuck with inventory it can no longer use, working with a third-party vendor to process the ingredients can be a good option.
The vendor will put the product into the market to help rescue as much of the inventory cost as possible.
This is where monitoring a product’s peak performance and value erosion helps the most: the sooner an expiring product can be processed, the better.
Staying ahead of the expiring inventory clock
Many factors determine how much a business can get back on expiring ingredients. Obviously, ingredients with over six months of shelf life will capture a better return than products close to expiration.
A twelve-week-plus shelflife is ideal, allowing the vendor to navigate the supply chain and recover a greater portion of the original investment.
At Ingredient Exchange, we can take expiring inventory off your hands (including pick up) and turn it into cash. Got unusable ingredients you’d like salvage — while there’s still time? Give us a call today: 314-872-8850
