While both FIFO and FEFO have their respective benefits, one will surely matter more to you depending on the products you sell.
For inventory management best practices, stock rotation is right near the top. At its core, stock rotation is a strategy that helps you to ease the problem of stock loss. It’s about organizing your stock in a way that allows you to avoid loss through expiration or obsolescence.
There are two main stock rotation or inventory maintenance methods that are worth noting: First-In, First-Out (FIFO), and First-Expired, First-Out (FEFO). Let’s look at the core differences:
FIFO Stock Rotation Method
What is First-In, First-Out?
The FIFO method means you aim to sell the products that arrive first in your store. Slightly older products are placed at the front of the shelf, newer products near the back.
You would expect items in front will be the first items out. That’s especially true if customers are in a rush and want to grab the first product off the shelf.
A well displayed shelf goes a long way to persuading your shoppers that all of your products are worth buying.
What are the benefits of FIFO?
For one, it allows you to avoid the problem of dead stock.
By using a FIFO method, you avoid the problem by selling inventory that arrives first. As you arrange it accordingly on your shelf, you shouldn’t need to worry about facing dead stock.
Secondly, it reduces the impact of inflation.
FIFO reduces the impact because you’re selling your oldest items first. If you assume that inflation is constant, the purchase price of older inventory is lower than that of the stock you bring in later.
Who should use the FIFO method?
When choosing this method, one of the deciding factors is the type of products you sell. It works well if you stock seasonally items, fresh food or have a policy of displaying and selling older stock first.
It also works best if you stock products that have short demand cycles, such as clothes where styles can quickly become outdated.
FEFO Stock Rotation Method
What is First-Expired, First-Out?
While First-in, First-Out is the most common used stock rotation method, a second accepted method is First-Expired, First-Out (FEFO).
FEFO is an approach to dealing with perishable products or those with expiry dates that begin at your warehouse and ends at the store. It’s the expiry or sell-by date that triggers this process.
Instead of immediately putting products at the back of the shelf, you first check the expiry dates. Then place those items with the shortest shelf-life near to the front, if not directly at the front, so customers will tend to buy them first.
Assigning expiry dates to batches allows everyone in the supply chain know what’s happening right up to when your product reaches the shelf. With a robust inventory management system that tracks the information in place, you’ll know exactly when to push stock from your warehouse to the store effectively.
What are the benefits of the FEFO method?
One benefit of following FEFO is that it allows you to guarantee product quality, which leads to customer satisfaction and a boost in reputation.
For example, let’s say you sell Dairy products. Using the FEFO method will ensure that you sell these products either by their sell-by date or before. Your customers will know when they buy your products, they will receive products of high quality.
Similar to FIFO, following the FEFO method allows you to avoid dead stock. While FIFO refers to dead stock at store level, FEFO helps avoid obsolete inventory at a warehouse level.
A third benefit is cost reduction. By following it, you can reduce the cost of stock expiring on your shelf, plus the cost of collateral damage to the brand name.
Who should follow the FEFO method?
The ‘E’ in FEFO – Expired – gives its main purpose away. Therefor it’s best to use the FEFO method if you sell perishable goods, food and beverage industry, or a pharmacy where offering a product past its expiry date can have serious consequences.
Who Do You Trust to Manage Your Products Within The Supply Chain?
Transit inventory consists of goods that are still in transit between companies. When a transaction involves the shipping of large quantities, it can take days or even weeks to occur.
Transit inventory can also result in accounting and ownership issues for companies that don’t track shipments between locations.
Large firms use the services of freight consolidators to combine inventories from several locations into one shipping source to establish economies of scale and reduce the input cost per unit. Consolidating shipments increases the size of transit inventory as well as the transit time.
Some firms find themselves in volatile conditions, uncertainty in terms of product quality and delivery times from suppliers, and fluctuating demand.
To protect themselves against these conditions, companies keep buffer or safety inventory, which is stock at hand that exceeds demand.
When a firm runs out of existing inventory, it doesn’t have to backorder items, and as it can source them from buffer inventory.
Customer service is a crucial motivator to hold buffer inventory, as the firm is less likely to run out of stock and make the customer wait for the next order cycle. Buffer stock also mitigates the risk of customers switching to another supplier for their orders.
Anticipation inventory is stock that firms purchase in addition to their current need when they anticipate an increase in demand.
When there are anticipated events like seasonal increases in demand or labor strikes, firms ramp up their orders or production to be able to meet all orders.
Retailers typically stock anticipation inventory before demand increase for, for example, Christmas or the back-to-school season.
Manufacturers also maintain or increase production when demand is low, so they have stock available when demand rises again.
Producing anticipation inventory also eliminates the need to employ additional means of production in reaction to a demand increase.
MRO Goods Inventory
MRO goods are the maintenance, repair, and operating supplies that support production processes. Firms consume MRO goods during production, but they don’t form part of the finished product as raw materials or work-in-process inventory.
Examples of MRO goods include:
- Fuel, oils, lubricants, and coolants
- Janitorial supplies, protective clothing, and uniforms
- Packing materials and storage products
- Tools, screws, nuts, and bolts
Secondary supplies to support the production infrastructure can also fall under MRO goods, for example, stationery, paper, and toner.
Theoretical inventory is the average inventory at a given throughput while assuming an ideal situation where is inflow, processing, and outflow rates are equal. In other words, no work-in-process item has to wait for processing.
Firms determine theoretical inventory to calculate the minimum amount of stock that is necessary to maintain the given process throughput.
Theoretical inventory = Throughput x Theoretical Flow Time. Theoretical time includes the sum of all processing times for one unit and doesn’t include wait times.
Work-in-process inventory is equal to theoretical inventory when the actual process flow time is equal to theoretical flow time.
In case you missed it, check out Part 1 of this article here >>
What Can Be Measured Can Be Controlled – for Profit!
Most businesses that supply products carry inventory, which is a stock or store of goods. A company manages its inventory and keeps it at hand so it can meet demands or carry out its daily operations.
The types of managed inventory that a business has depends on the industry. For example, retailers have finished products in stock, and manufacturers use raw materials or work-in-process.
An organization must manage its inventory carefully to ensure that it can fulfill its reason for existence, especially in volatile conditions with fluctuating demand.
In this section, we’re looking at the different types of managed inventory.
Raw materials are a type of managed inventory that manufacturers use in the production of product components, subassemblies, or finished products.
Raw materials typically consist of commodities, extracted products, elements, or objects that the firm extracted or purchased.
Commodities that organizations implement in their production process as raw materials include things like minerals, ore, wood, steel, and chemicals.
Raw materials can also be finished products like nuts, bolts, wheels, and engines if the firm purchased the inventory to produce components.
Work-in-process is a type of managed inventory that:
- Is not a raw material,
- Is a component of a parent,
- Is processed or about to be processed in the production system
Work-in-process inventory includes materials, components, subassemblies, assemblies released for initial processing.
This inventory can also be fully processed materials that are awaiting inspection before inclusion in finished products.
Finished goods are completed products that underwent and passed final inspection and that are ready for order by wholesalers, retailers, or final users. This type of inventory does not have a parent in the production process.
However, the end-user may purchase a single unit to use as a component in another product, for example, car engines that are manufactured as finished goods and sold to wholesalers.
The machines in a production facility typically don’t have the same output rate. One station can take longer to process parts as the one before it in the production process.
Additionally, some machines may be removed from the production line for repairs or maintenance.
When looking at a functioning line, however, it may appear as if all the machines have a corresponding output and that the production process is flowing smoothly.
Production flows because of decoupling inventory or safety stock that ensures an indirect feed between devices and acts as shock absorbers in a production line.
Decoupling inventory prevents inventory from piling up at slow-moving stations in the production process, eliminating bottlenecks that can affect other stages in the process.
Ordering or producing large quantities, the ordering cost per unit decreases. However, ordering large quantities can increase carrying and holding costs.
Economic order quantity is a concept that businesses follow to balance carrying and holding costs with the costs related to orders or production.
When the costs related to holding and carrying costs are equal, the total cost per unit is at its lowest. Cycle inventory is the excess stock that the business order to achieve this minimization point.
Continue to the second part of this series: Types of Managed Inventory Part 2
Pharmaceuticals Help Keep Us Healthy, But How Do You Keep Pharmaceuticals Healthy?
More than 131 million people use prescription drugs, which is 66% of all adults in North America according to the Georgetown Health Policy Institute. Many people depend on these drugs to manage severe or chronic conditions and maintain a certain quality of life.
The supply chain of prescription drugs and other pharmaceutical products must meet specific requirements. If a drug loses its quality or potency at some point between production and consumption, it offers no medicinal value.
Warehousing is a crucial component of the pharmaceutical supply chain management that contributes significantly to the wellbeing of millions of people.
In Canada, pharmaceuticals are regulated by the Health Products and Food Branch (HPFD) of Health Canada. In the United Sates, the Food and Drug Administration (FDA) regulates pharmaceuticals.
There are numerous regulatory standards that apply to pharmaceutical warehousing, products, and processes through the Good Manufacturing Practice (GMF) standards.
Included are several pharmaceutical warehousing requirements in the GMF standards:
- Warehouses must store drugs in a manner to prevent contamination, and that allows for thorough inspection and cleaning of the area.
- Each drug lot must have a unique and traceable code to allow for lot identification and lot status identification (approved, quarantined, rejected.)
- Each drug in the warehouse must have written procedures that describe the processes for distribution and recalls.
- The written procedures of each drug must describe appropriate storage conditions.
Appropriate storage requirements present unique challenges to pharmaceutical warehouses. Each drug has individual storage requirements in terms of temperature, lighting, and humidity. The warehouse must follow the drug manufacturer’s storage requirements to the letter.
Meeting storage requirements often involves setting and monitoring the environmental parameters of a storage section’s temperature- and climate control.
Temperature control involves controlling and monitoring the temperature of the facility.
Climate control refers to the regulation of a storage unit’s temperature and humidity.
What to Look for in a Warehouse Partner
A pharmaceutical warehousing provider should not only meet GMF standards, but the facility should also meet the following requirements:
- The warehouse should be sterile with enough space for storage, maintenance, and inspection.
- The facility should have sufficient ventilation and lighting.
- The facility should have a dedicated quarantine area for drugs that are no longer usable.
- The warehouse should have indoor and outdoor security systems in place to prevent unauthorized entry and theft.
- The warehouse should be able to store drugs without specific storage requirements at room temperature.
- The warehouse partner should be able to provide the client with written documentation of policies, distribution, inventory, and procedures.
Brimich Logistics for Pharmaceutical Warehousing
Brimich Logistics in Ontario provides a wide range of warehousing and value-added services. Our facilities are HACCP-compliant, and SQF certified. The benefits of Brimich Logistics include:
- Real-time data on inventory
- Efficient warehouse staff
- Facilities to store pharmaceutical drugs according to manufacturer instructions
- Industry-standard safeguarding against drug contamination
Brimich Logistics provides pharmaceutical clients in Ontario with responsive and reliable warehousing solutions. We are ready to assist you with your pharmaceutical warehousing solutions today. To learn more about our warehousing, logistics, value-added, and transportation services, contact us today.
Is It Time to Move Your Business in a Different Way?
You have a business, big or small, and it’s doing great. Your products are moving, and your orders keep growing—but as usual, you wonder, could we do more? The answer is yes, and warehouse logistics can help you expand.
What is a Logistics Warehouse?
Logistics refers to elaborate planning, organizing, and management of materials and products, as well as the implementation of various complex operations. Within several industries, such as warehousing, logistics also extends to define the flow of goods, both physical and informational.
Warehouse logistics encompasses all the details of product and information flow within a warehouse. Some of these details include shipment and receiving of parcels, management of the physical inventory, and the movement of more abstract goods such as time and information.
What is the Difference Between a Warehouse and Warehousing?
Beyond the definition of a logistics warehouse, one separates a warehouse from storage by the external use of each factor. A warehouse, for instance, serves as a commercial building that stores goods and is often used by business people.
Warehouses come in various forms; some can be temperature controlled while others have specialized designs to receive different kinds of goods.
Warehousing describes the function and actions required to ease the storing of goods. The intricate process of logistics within the business chain comes from efficient warehousing.
What are the Objectives of Warehousing?
The main goals of warehousing are:
- Essential storage-warehousing should result in a safe, central location to store your materials and product
- Accessibility -that location should be accessible and suitable for your product
- Better inventory management-increase turnover and decrease shrinkage by tracking your inventory more efficiently
- Shorter lead times-accessible, well-managed storage facilitates shorter lead times, which increases customer satisfaction
- Reduce cost-efficiency in the warehousing process should result in reduced costs
Why is Warehousing Required?
The benefits of warehousing are far-reaching, both in the short-term and long-term. Here are some benefits that are proven from businesses who have consistently adopted a warehouse logistics model and a clear argument of why warehousing is required.
- The inventory counts are real-time and accurate all the time. In a unified system, the warehousing process will calculate the inventory available at any given time, their specific locations, and their use.
- The accuracy of the inventory also means a decrease in return items. In most cases, the goods get checked before being sent.
- The inventory details also mean the stock will always be available. In most cases, the stock levels operate with a required minimum, which, when hit, will trigger the purchase of more stock.
- Warehouse logistics also ensure that space is utilized effectively.
What is Warehousing in Supply Chain Management?
Warehousing forms an integral aspect of the logistics and supply chain management pattern. Put simply, warehousing is the process that makes a warehouse or storage area run smoothly within the supply chain.
The success and expansion of any business largely depend on its ability to perform well in warehousing logistics.
Warehouse Automation, it’s Benefits and the Future of Logistics
If you work in the warehouse or logistics business, then chances are you have heard of the changes that warehouse automation is already bringing to the industry.
There are two sides to the coin, however, with some people saying that warehouse automation leads to loss of jobs, and others being happy that warehouse automation will lead to a new world of increased productivity, efficiency, and accuracy.
The truth is, however, that warehouse automation will not completely take away human jobs. There are so many things that people still must do in the warehouse that machines cannot. To form an educated opinion on this topic, let’s investigate warehouse automation a bit further.
- How do warehouses work? A warehouse is basically a place where goods are stored while awaiting distribution to the customer. However, with 3PLs, warehousingnow has incorporated so many other services and solutions. It is possible for a company to outsource all of its supply chain management duties to a 3PL.
In the warehouse, goods are received, inventory movement takes place, goods are stored, and shipped. At the receiving dock, a clerk receives the entire inventory and all the documents pertaining to it are collected.
A receiving log is made to ensure that all expected inventory of the day is received. The inventory is then moved to the space it has been assigned by the warehouse’s certified and licensed movers. When the time comes, the warehouse also ships the products to the final destination.
- What is an automated warehouse? Warehouse automation can help make the warehouse processes much easier, faster and more accurate. For instance, conveyor belts can be used to move products from one part of the warehouse to another. Automated storage and retrieval systems (AS/RS) is another commonly used automation technique. Automatic data capturing, automated vehicles, bar code scanners and readers, back office automation, and inventory automation are all processes that can be done in a warehouse to ensure that efficiency is enhanced. All of these processes also require use of specialized software for the capturing and storing of data.
- What is warehouse process? Not all warehouses are the same, but most of them have a basic process that occurs for goods that are coming in and going out. This process is as follows: Receiving, put-away, picking, packing, dispatching, returns, and value addition.
An automated warehouse is one in which part of its day-to-day processes are carried out by machines and systems. It is difficult to automate all of a warehouse’s processes, because people are better at carrying out certain processes.
Warehouse automation can bring many benefits. It improves efficiency and accuracy in the warehouse, and can also help save money by reducing the number of employees needed to carry out warehouse processes.
And, with warehouse automation, space utilization is dramatically improved, as well as shipping costs; denser pallet cubes can be created, leading to more tightly packed trucks, and efficiency in shipping. This can reduce costs by up to 10%.
If You Thought Packaging was Just Packaging, Think Again
Packaging can have different applications, dependent on the stage of distribution that the product is in; the product has to go from the producer to the retailer, and from the retailer to the consumer.
Through its long journey, a product might require specialized packaging, so that it gets to its destination in perfect condition. But what that destination is will determine which type of packaging it will need. Here, we will explore the difference between consumer and industrial packaging.
Before understanding the difference between consumer and industrial packaging, however, it is important to know what roles the packaging serves in the product’s journey from the manufacturer to the consumer. Here are some of the functions of packaging;
- Market the product
- Provide information about the product
- Protect the product against damage and unsanitary conditions
- Contain the product, especially liquids
- Simplify transportation
What is industrial packaging and consumer packaging?
So what is the difference between industrial packaging and consumer packaging? Industrial packaging is typically used to deliver goods from the manufacturer to the retailer.
There are instances when the industrial packaging is also the consumer packaging. Take for instance animal feeds that come in sacks. The sacks are loaded to trucks from the manufacturer directly to the retailer, and arrive the same way to the consumer.
Consumer packaging, on the other hand, is the packaging that the product gets to the consumer in. This packaging goes from the manufacturer to the retail outlet, and finally to the consumer.
For example, a package of cookies that leaves the manufacturer arrives at the retail store exactly as it will be sold to the consumer.
Another vital difference between consumer and industrial packaging is labeling; they have different labeling requirements, such as in declaration of quantity, responsibility, and identity.
What are the three levels of packaging?
There are three levels of packaging:
- Primary packaging: Wraps the product directly, which arrives to the consumer as is. The main purpose for primary packaging is to preserve and protect the product.
- Secondary packaging: Used in addition to, or on top of, the primary package. This level of packaging markets the product, and also gathers the products for easy handling and sales. It can also be used to group the product.
- Tertiary packaging: Typically used in the transportation of the products from the producer to the retailer; it is also used to define the sales unit that the manufacturer uses to sell to the consumer. For instance, a crate or corrugated carton containing a certain number of units of the product within.
What is the difference between CPG and FMCG?
Consumer packaged goods (CPG) and fast-moving consumer goods (FMCG) are often used interchangeably, but the two terms mean different things.
FMCG are those goods that are used on a daily basis in a household, like soap, detergent, deodorant, and shampoo. CPG are items used less frequently in the household, like canned foods, spices, etc.
Which Warehousing Option is Right for You?
Most people know that a warehouse is a place where goods are stored, or where a manufacturer places their goods for accumulation. It’s an important aspect of production and distribution of goods to the consumer. But did you know that there are different types of warehousing?
There are basically two different types of warehousing that a manufacturer or retailer can use, both of which will be discussed in this article.
What are the two basic types of warehouses?
Before understanding the different types of warehousing, it is important to know what the two basic types of warehouses actually are.
- Private warehouses: Owned and operated by the channel suppliers and manufacturers for their own activities. Usually these warehouses are owned by big manufacturers, due to the huge capital required to construct a warehouse.
- Public warehouses are owned by business establishments who provide warehousing—for a fee—to companies that do not have their own. They can also be operated by cooperatives. A public warehouse requires a license from the government to operate in accordance with the rules and regulations set out for such a business.
What is warehousing, and what are its functions?
Warehousing is more than just storage; it also includes other functions, such as receiving, identifying, holding, assembling, and packaging of products. Warehouses also assume responsibility for the goods until they have been collected.
Regardless of the type of warehousing you choose, here are the functions of warehousing;
- Storage: This is the basic function of any type of warehousing. It means simply storing surplus goods and awaiting the distribution process to the customer.
- Price stabilization: Warehousing creates time. This means that, if prices have fallen, the manufacturer can wait until they’ve stabilized to put their product back out on the market.
- Risk minimization: Most warehouses are constructed in such a way to avoid theft, damage, and deterioration to the products within. Many also have features, such as climate control and high security, to further protect products.
- Grading and packing: Many warehouses also now provide packing and grading services for products. The specifications are given by the manufacturer, and the warehouse provides these services as the goods await distribution.
- Regular production: Manufacturers can continue producing their product, even when they are unable to store the product themselves.
What is the difference between warehousing and logistics?
Warehousing and logistics are different aspects with similar functions in the supply chain. All types of warehousing involve safe storage of the goods and inventory.
Logistics, on the other hand, is a complicated process that involves the management of the entire flow of goods, from the manufacturer to the end consumer. It involves aspects such as material handling, production, packaging, warehousing, transportation, inventory, security, and flow of information.
Logistics, which can be further categorized as inbound and outbound logistics, is a critical component of supply chain management.
Cross-docking is one of the more unusual aspects of the supply chain that many businesses are not taking advantage of nearly as much as they should. It might be because many companies don’t even know what cross-docking is. This article will provide information and insight to answer the question, “What is cross-docking?”, as well as the benefits this model can bring to your business.
So, what exactly is cross-docking? It involves delivering products from a manufacturing plant directly to the consumer or retail store without a lot of handling in between, or storage time.
Here is an explanation of what cross-docking is in simple terms: Goods come in to the receiving dock of the cross-dock terminal. They are then screened and sorted before being loaded to trucks on the outbound side of the cross-dock terminal. There is minimal handling of the goods or storage in between the time they come in, and when they leave to be shipped to the retailer or customer.
Here is an example of cross-docking:
Retail store A has ordered 10 fridges, and retail store B ordered 20 fridges from the same manufacturer. A truck arrives at the docking station carrying 30 fridges.
The items are sorted on the cross-dock terminal; there are two trucks waiting on the receiving end of the dock terminal. One truck is heading to retail shop A, and the other is heading to retail shop B. Truck A is loaded with 10 fridges, and truck B is loaded with 20 fridges.
Why is cross-docking used? Now that you know what cross-docking is, let’s move on to the reasons why is it used. Cross- docking is utilized for three reasons:
- To combine different products into one method of transport, as in the example above, to save on time and transportation costs.
- To provide a central site where goods can be sorted and combined so they are easy to deliver to multiple destinations quickly and effectively.
- To break down large products so they are small enough to be transported to the consumer.
What are the benefits of cross-docking? Cross-docking offers the following benefits:
- Reduces delivery time significantly, as goods are not stored.
- Reduces shipping costs, since there is no storage or other warehouse services involved.
- Builds a strong shipping relationship for your business with one company.
- Reduces risk of damage to the product, as it is being handled less.
How does cross-docking affect warehouse design? For cross-docking to be effective, the warehouse must be designed to facilitate this process. It should have different inbound and outbound dock doors, so that trucks can dock accordingly, to either deliver or receive goods.
The warehouse size, shape and layout should be considered when setting up across-docking warehouse. Also, the technology used to move the goods is an important consideration in determining the layout of the warehouse.