FMCG and Perishables Require Special Inventory Management Practices

Single Period Inventory System

The single-period inventory system sees you purchasing enough goods for one period. Once the goods from your first order have been purchased, you will assess the state of your current supply and demand before making a second order. This system will limit the number of products that will go bad within a period.

Suppose you order 200 apples for a four-week period. If you sell all 200 apples by the third week, you will wait until after the fourth week to purchase more. By waiting to order further inventory until the next period, you would have less wastage.

Know your Stock, use Inventory Tracking

Inventory tracking provides businesses with a comprehensive understanding of the goods they own, the safety stock they possess and the goods they are looking to sell. Knowing how much or how little stock you have of something gives you the control to do something about it.

If you order 50 cases of a new apricot drink, but none of your customers chooses to buy it, then you might decide to cancel the second order before the next period. Maybe you procure a new stock of cherries from a different supplier, and they fly off the shelves. You could look at your inventory numbers and choose to stop buying from the older supplier and only obtain cherries from the new supplier, as they sell better.

Inventory tracking provides you with the information you need to make successful business decisions to increase the company’s bottom line.

Regular Inventory Auditing

Running an inventory audit means taking stock of your physical goods and cross-referencing the exact numbers of your perishable items with your business’s financial statements. Routine inventory auditing helps determine how much of a business’s inventory has been lost due to wastage, damage, obsolescence, and pilferage.

As perishable items are more prone to spoilage than nonperishable goods, regular audits can help offset these losses and curb wastage before it gets out of hand. Routine auditing also ensures your inventory and your books have corresponding information; this is especially important for the accounting of perishable inventory.

First-in, First-Out

One of the most popular methods of perishable inventory control is known as the FIFO method.

The first-in,first-out, or FIFO method is when the oldest inventory items are recorded as sold first. This does not mean that the oldest items must physically be sold, but that the costs associated with the perishable goods that are purchased first, is the cost expensed first.

Know your Suppliers

Your business is only as good as the quality of the product you sell. To obtain reliable products, you need dependable suppliers. Having a good business relationship with your suppliers could mean better deals and better goods.

Your perishable goods typically have a short shelf life, meaning you must ensure they arrive at your store in good condition and not already spoiled. Know who the right suppliers are, and only do business with the ones that provide you with high-quality perishables.

Share sales and product forecasts with vendors, and ask for precise lead times. Track suppliers’ service levels, such as the percentage of complete orders and fulfilment times. Communicate with vendors that need to improve, and explain the concrete actions required to meet your needs. Do contingency planning to identify alternative suppliers of your most important items in case your primary supplier cannot deliver.

Flex Your Ordering Muscles

Do everything you can to ensure you order the ideal amount of stock at the right time to satisfy demand and delight customers. This means setting data-backed levels for your safety and par stock, knowing to reorder thresholds, optimizing order sizes with economic order quantity (EOQ) and using the open-to-buy technique to plan purchases.

Crunch Your Numbers

Keep close tabs on your KPIs. Track which products are your best and worst performers using specifically the ABC analysis. Understand indicators of customer demand and seasonal fluctuations, and know your turnover rate and GMROI. Actively try to improve the quality of your customer demand and sales forecasts.

Maximize Efficiency and Prioritize Accuracy

Never stop trying to make every part of your inventory management more efficient. Arrange your store strategically, and keep it organized. Perform regular inventory audits and counts. Train staff in inventory management, and set goals for performance. Build a culture that prizes the pursuit of accuracy.

Have a Contingency Plan In Place

A good rule of thumb when dealing with any type of inventory- is always to have a backup plan in place. Being prepared for any outcome is a beneficial strategy for your business.

The storing of your perishable inventory is an essential part of the management process. What happens if your commercial freezer shuts down in the middle of the night and your frozen products are spoilt come morning? Should you have had a backup generator in place? Can you write off the spoiled goods? These are the questions you should ask yourself and the problems you should prepare for if the worst happens.