Every year, a staggering 88 million tons of food is discarded between farm and fork across Europe, at an estimated cost of €143 billion. Food waste is often symptomatic of developed countries’ consumerist lifestyles beyond immediate food safety standards, with shoppers typically expecting at least three to five days of shelf life beyond purchase.
A sizeable proportion of losses is incurred by retailers, whether through inappropriate quality control, overstocking or inaccurate forecasting. But in supply chains for perishable products, all partners should share the responsibility for minimising losses and getting high-quality products to the end consumer.
Preservation and packaging techniques to maximise shelf life are only one part of the equation; another is ensuring adequate warehouse management for perishables. That means adopting a strategy that takes into account both the rate of deterioration of a given product and the demand for it.
How a FEFO policy works
A ‘first expired first out’ or FEFO approach to inventory management takes into account the estimated remaining shelf life of a product and matches it to the requirements of the subsequent part of the handling chain. This enables manufacturers or distributors to help ensure retailers receive products well in advance of expiration to prevent premature obsolescence.
An expiration date is assigned to a batch, and the date remains associated with the batch number as products move through the supply chain. Expiration and batch information can be tracked within the inventory management system to indicate which items should be rotated out of inventory first.
This can be especially useful for businesses that receive products with expiry dates that are out of sequence with the receipt date. The use of FEFO can also be extended through the warehouse management system as a picking practice – workers are automatically directed to pick items closest to expiration first.
Overcoming the barriers
Given the changing retail landscape and consumers’ appetite for more information than ever about the products they buy, why haven’t more food processors, producers and distributors made the switch to FEFO already?The two major obstacles tend to be people- and system-related:
A FEFO strategy demands a change of mind-set, and people naturally tend to follow the path of least resistance. Space optimisation can become a problem if workers fail to put products in appropriate bins or support the proper rotation of products to customers. If an employee simply grabs the first product available, older products are at risk of expiring in the warehouse.
Best-in-class companies understand that warehouse management is a competitive advantage – for getting more out of their own inventory and for delivering longer-lived products to customers, which increases their profitability in turn. So education is required to communicate the wider benefits of a FEFO strategy and get buy-in from everyone on the shop floor.
Many inventory and warehouse management systems don’t support FEFO picking methodologies; only those systems capable of tracking batch numbers can do so. Because FEFO involves a greater level of complexity, the logistical controls need to react to shelf life differences in a more intelligent way to reduce product loss and out of stock levels.
That’s why FEFO is not a process that lends itself to manual workarounds – especially where food safety is concerned or where the cost of an erroneous shipment could be punitive.
What does a FEFO-ready solution look like?
Industry-focused warehouse management systems (WMS) can support a FEFO picking strategy by employing a rules engine to automatically generate a pick list based on the first product to expire.
The expiration date configuration and shelf life parameters of the product are stored in the material master record, and the WMS looks for the material with the oldest expiration date, regardless of the date of entry or acquisition.
Customers’ differing shelf life requirements for the same SKU can be configured against the item master data, taking into account delivery times helping to ensure service level agreements are met.
The pick list is then made available electronically to the operator via a mobile handheld device. The operator is directed to the appropriate warehouse bin location to pick against a specific batch and/or SSCC logistics unit.
For example, a retailer stipulates that a batch must have a shelf life of at least 20 days from the date of delivery. That means the batch with the nearest expiration date within sellable days should be first to go, while any batch that will have surpassed its expiration date should not be picked up. If the quantity required by the retailer exceeds that of a batch, the next batch with the next nearest expiration date should be picked.
Only with a single piece of software tying everything together does it become possible to allocate inventory automatically to sales and even production orders on a FEFO basis. A further advantage when building the business case for change is that this allows every aspect of the warehouse operation to be measured, such as waste and inventory levels, and purchasing habits adjusted accordingly.
Written by; Produmex