Stock Management Archives – unicommerce.com

Smart Inventory Control: How FIFO & FEFO Methods Minimize Stock Losses for Business

Team Unicommerce — Thu, 21 Jul 2022 08:00:13 +0000

Deadstock, obsolete inventory, and damaged stock are some of the terms that give us a threat in a jiffy. While these circumstances possess the power to increase operational costs for retailers, poor management can lead to a huge loss of both inventory and infrastructure.

Furthermore, the market witnessed accelerated sales in top categories, including FMCG, Fashion and Accessories, Health and Pharma, and Beauty and Personal care. So if you are retailing in these categories, then your stock rotation is a strong approach to negate the damage of stock losses.

This approach can enable retailers to streamline this pressing concern and control the movement of products in and out of their warehouses. In a nutshell, it’s all about managing the rotation of your inventory in the warehouse setup so that you don’t have to go through the losses.

Now the next question that comes to our mind is, how to actually resolve these challenges for the retailers? Let’s delve into two methods that can be employed to address this issue in detail!

FIFO & FEFO: A Brief Overview

In various industries, the concept of batching plays a crucial role in optimizing processes and maintaining efficiency. Batching refers to the practice of grouping items or tasks together based on specific criteria for processing or handling.

One common approach to batching is the use of FIFO (First-In-First-Out) and FEFO (First-Expiry-First-Out) methods. Let’s explore these two stock rotation methods commonly used in warehouses and retail businesses.

1. FIFO (First-In-First-Out)

In the FIFO method, you strive to sell the products that come into your warehouse first. By adopting this approach, you can effectively reduce the risk of products becoming obsolete over time. This way, you ensure that older inventory is sold before newer stock, maintaining a fresh and up-to-date product selection.

Check out how Upscalio implemented FIFO and successfully achieved an exceptional order fulfillment rate of over 99.99%.

[Must read: Overcome Inventory Challenges With FIFO Based Picking]

2. FEFO (First-Expired-First-Out)

As the name suggests, this pattern follows the selling of products that expire first. This method places significant emphasis on ensuring that items with earlier expiration dates are sold first. By following FEFO, you can guarantee the delivery of high-quality products to your customers, enhancing their satisfaction and trust in your business.

But what happens when you fail to follow these two methods?

Consequences of Failing to Follow FIFO or FEFO

Failing to adhere to the FIFO or FEFO methods can lead to several consequences, resulting in additional costs and challenges. Some of the potential negative outcomes include:

Increased stock expiration cost on the shelf
Premature obsolescence cost of inventory
Increased risk of product deterioration or pilferage
A surge in returns due to delivery of order returns
Additional labor and time required to locate products in the warehouse

Now that we are well aware of the costs you will have to suffer from if you don’t follow these stock rotation methods, let’s delve deeper into some of the most significant advantages that many leading businesses experienced after incorporating FIFO and FEFO methods into their daily warehouse operations.

Why Is Stock Rotation Best Practice in Inventory Management?

The stock rotation method is the practice of regularly replenishing and rearranging stock to optimize its efficiency and freshness. Here are four highly regarded advantages of implementing stock rotation methods:

1. Reduction of Obsolete Inventory

When the inventory becomes obsolete, it results in significant product losses and can adversely impact your business. By following FIFO and FEFO methods, you can mitigate the chance of exactly that and sell your products before they expire or become outdated.

2. Higher Rate of Customer Retention

If the stocks are rotated in the warehouse, the chance of customers getting low-quality products gets reduced. This improved the confidence within the organization, working efficiently towards achieving high profits and offering an enhanced post-purchase experience to customers.

3. Minimizing Inflation Impact

It’s very common for the inflation rate to go down and up in an economy. While following these two patterns will lead businesses to sell stocks that were produced earlier, contributing more toward business profitability.

4. Organized Warehouse Space

If the stock rotation methods are followed properly, warehouse operations become more streamlined. How? With two aisles to unload and load the stock, businesses can ensure that by following FIFO and FEFO, the redundant movement of inventory can be avoided appropriately.

Discover how Unicommerce’s agile expiry management propelled The Urban Company to achieve 8X growth.

Now, you might be wondering about the deciding factors in choosing between FIFO and FEFO.

FIFO vs. FEFO – Which Method Is Best Suited for Your Business?

When it comes to managing your inventory, selecting the appropriate method can significantly impact the efficiency of your business. Understanding the industry preferences of each method can help you make an informed decision for your specific business needs.

FIFO Method:

If your business involves dealing with FMCG, fashion products, or consumer electronics, FIFO is the recommended method for you. This method works particularly well for items that are stocked seasonally or have a limited shelf life. Moreover, it also works best with products having short demand cycles like fashion.

FEFO Method:

Similar to FIFO, the FEFO method is commonly used for businesses handling food items, medicines, cosmetics, or any other products with limited expiration dates. With FEFO, the focus shifts from the order of arrival to the earliest expiration date. This method ensures that items with the closest expiration dates are used or sold first, reducing the risk of products becoming obsolete or unsellable.

Discover how stock rotation methods like FIFO and FEFO facilitated The Man Company in achieving seamless batch-level traceability.

Take Action to Minimize Stock Losses Today!

To conclude the same, now you know how important it is to implement FIFO and FEFO methods if you actually want to reduce stock losses and streamline your entire supply chain. Using a robust and stable inventory management software and warehouse management system, you will be able to do exactly that. While it will allow you to follow the methods aggressively, the efficiency of automation will enable you to reduce any further discrepancies while making batches and sorting them.

Additionally, you also get to enjoy plug-and-play e-commerce integrations across multiple sales channels, managing crucial business tasks, such as returns management and cycle counts. With a comprehensive solution in place, you can mitigate stock losses while enhancing the efficiency and accuracy of your supply chain management.

Related read:

Discover Unicommerce’s Success Story with Leading Brands –

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How is Batch Management Critical in Warehouse Operations?

Team Unicommerce — Wed, 06 Jul 2022 12:29:03 +0000

Table of Contents:

What is Batch Management?
Top 6 Operational Challenges Faced by Organizations
Importance of Batch Management Systems
How to Use Batch Management in Warehouse Operations?

What is Batch Management?

The batch management system enables an organization to monitor its inventory efficiently and effectively while keeping track of its internal or external operations. Batch management helps the company split the produced goods into several batches depending upon the date, time, and quantity of production, ensuring that the right batch is shipped first, lowering wastage.

Batch management is helpful for any business, product manufacturer, or service provider, ranging from clothing, medical and pharmaceutical, food industry, FMCG, etc.
Let us look at the challenges organizations face in their warehouse operations and how a batch management system provides an efficient approach to this problem.

Operational Challenges Faced by Organizations

Some of the typical inventory management challenges if proper batch management is not used are:

1. Changing customer demand

The consumers’ demand in the marketsis also essential. fluctuates continuously, which is impossible to predict. Therefore, keeping too much stock could increase your liability wherein it is difficult to sell, thus incurring losses. On the other hand, holding too little can lead to the consumer’s demand not being fulfilled. This situation can be controlled and managed efficiently using batch management.

2. Irregularities due to physical paper documentation

It is not easy and feasible to manage all the inventory physically, which is time-consuming, costly, and inaccurate.

3. Lack of skilled inventory personnel

It is not always possible to find qualified personnel who can manage inventory strategy single-handedly and are up-to-date with the latest technology in batch management. Only upgrading the inventory management platform is not enough; capable management is also essential.

4. Complexities in managing warehouse space

Managing space in a warehouse is a very tedious business; keeping track of available space is necessary so new inventory can be ordered and stocked accordingly. A batch management system can help plan new stock delivery as per available space.

5. Perishable, fragile stock

Perishable, fragile, and low-shelf life goods need special care and management for storage. They require particular inventory controls and a damage prevention strategy provided by a batch management system.

6. Inefficient actions and procedures

Using the process of manual inventory management along with a simple technology is easy if there is one warehouse to manage and if the inventory is small. However, as your business starts growing from shipping a few hundred orders a day to multiples of 1000 to 10,000+ daily, it becomes mandatory to use reliable batch management and inventory systems in warehouse operations.
A batch management system helps control the inventory by tracking the movement of products which automatically helps in smooth inventory functioning and end-to-end inventory development.

Importance of Batch Management System

Using a batch management system for warehouse processes makes the overall operations efficient. Some of the benefits include:

1. Control over quality – Batching management in a warehouse helps trace a defective product, reducing the chances of delivering faulty or low-quality goods. It helps stop the delivery of a batch that is faulty.

2. Tracking a batch quickly and accurately – A serial number given to a specific batch can be tracked easily. It helps improve logistical processes as a product can be easily tracked using the serial number and one can help optimize storage, delivery, and recall processes.

3. Reduced chances of human error – Keeping track of inventory in a physical form with human intervention will sometimes cause errors, mistakes, theft, and negligence, leading to loss, increased expenses, and inventory shortage. Thus, maintaining a barcode system with scanning machines is important.

How to Use Batch Management in Warehouse Operations?

For any modern enterprise that has to manage a large inventory of products, a Warehouse Management Software (WMS) is widely used to streamline logistics and improve profitability. The organization can track the expiry of products and analyze customer questions and the return process for specific batches using batch tracking. To implement batching in your operations, you can start by:

1. Using batch numbers

Having a batch number for each consignment enables the organization to easily track each product and manage the additional process. Each batch can have its own unique number, including relevant information like purchase price, purchase date, and expiry date. Using this batch number, the warehouse can essentially get end-to-end traceability of goods, which include:

Planning efficient distribution of products
Understanding shortage or high quantities of particular products in the supply chain
Identifying goods ready for delivery
Managing product returns and recalls

2. Implementing an intelligent WMS to centralize operations

In today’s digital age, the intelligent warehouse management system (WMS) is all about creating an ecosystem of machinery and digital tools that interact with each other via the internet. Called the Internet of Things (IoT), this new technology enables your warehouse operations to be streamlined and is useful for tracking, finding, and storing particular products. Using this batch management system in warehouse operations, you can essentially gain the benefits of:

Streamlining data related to your warehouse or warehouses in a single platform
Reducing workflow challenges and addressing any gaps that you can find
Using predictive analytics to make data-driven decisions using batching processes
Reducing the cost and resources required to manage warehousing processes

3. Automating stock management and distribution

A great way to improve overall warehouse management is automating the warehouse processes. While warehouses rely only on batch management for efficient shipping and distribution, it can also help improve stock management as it enables the WMS software to accurately keep track of key decisions like:

Which products are understocked?
Which needs to be replenished soon or will be out-of-stock?
Does the warehouse already have enough products in your batch to satisfy the sales orders?

This will improve your inventory management and help you account for the spike in sales, understand product movement for each batch, and make data-driven decisions on placing orders for a fresh batch.

The Final Word

With increasing demand and complexity in warehouse management and supply chain logistics, having an efficient batch management system for your inventory can help streamline your organizational workflow and even help reduce time, cost, and resource requirements for managing warehouse operations.

In most cases, the FIFO (First In First Out) model works ideally and is efficient when the goods do not have a shelf life. So for electronic goods, home appliances, and mobile and car accessories, warehouses can rely on the FIFO model and deliver their orders accordingly.

However, when it comes to goods with a shelf life, such as FMCG, packaged food, fruits, vegetables, baby care products, etc., the FEFO (First Expired First Out) method needs to be applied. This ensures that goods expiring soon are picked first and shipped when an order is placed.

Since managing these processes with vast volumes of goods is extremely difficult and strenuous, a warehouse management system is an ideal option. Technology can help track and raise alerts on goods depending on their expiry, purchase date, and other criteria. With the help of batch management software, this entire operation is made much more efficient, ensuring that processes work optimally and enabling the WMS to fetch coherent information.

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