Perishable Inventory: Meaning, Challenges and Best Practices


Perishable Inventory: Meaning, Challenges and Best Practices

Inventory management is an important process for any business. It becomes more crucial when the business deals with perishable inventory. Perishables present unique challenges in their supply chain management which need to be addressed diligently.

This article will give you an insight into what is perishable inventory and why inventory management for perishable goods is so critical. It will also discuss the challenges a business faces in managing perishable inventory and elaborate on the best practices for effective perishable inventory management.

What is Perishable Inventory?

First, let us understand what products and services perishable inventory encompasses. It includes products or services that spoil much sooner or lose their value after their expiration date. They have a finite lifespan and can quickly become unsafe for consumption or use. Perishable inventory also includes services that become unsellable or worthless over time.

Perishable inventory is sensitive to factors such as temperature, humidity, exposure to light, and time. Perishable inventory examples include food items such as milk, cheese, other dairy products, eggs, meat, and other produce.

However, perishable inventory is not limited to food items. It also includes non-tangible products such as tickets associated with any event which lose their value after the event is over. Some other examples of perishable inventory include:

  • Flowers and houseplants

  • Event tickets such as theatre tickets, concert passes, sporting events

  • Hotel rooms and accommodation

  • Train, flight, and other tickets

  • Pharmaceuticals such as antibiotics, vaccines, blood pressure medications

  • Newspapers and periodicals

  • Unsold commercial or advertising space in newspapers

Non-perishable products or services are in a usable condition for a much longer time or sometimes indefinitely. Non-perishable inventory examples include clothing, sports equipment, furniture, and food items such as grains, rice, condiments, tea bags, coffee powder, and canned food products.

Why is it Important to Manage Perishable Inventory?

Any kind of inventory management is of great significance but managing perishable inventory is especially critical and time-sensitive.

Perishable products and services have an expiration date so businesses have a very brief window to procure, stock, and sell goods. Perishable inventory that remains unsold is a huge loss to the business. Badly managed perishable inventory also leads to critical process problems.

Efficient perishable inventory management will enable the business to benefit from:

  • Better profitability - If the perishable inventory is managed properly, it will not spoil, expire, or deteriorate before it is sold.  This will save losses and lead to better profitability.

  • Quality products - Efficient management of perishable inventory will ensure that products are handled, stored, and delivered properly. This will lead to good quality products.

  • Fewer recalls - Better and quality products will have negligible or few complaints and so fewer recalls.

  • Customer satisfaction - The demand for perishable products and services is generally high and time-sensitive. Efficient perishable inventory management will enable to meet the demands in time leading to customer satisfaction.

What are the Challenges in Managing Perishable Inventory?

With increased traceability and enhanced transparency, consumers demand fresh products and timely delivery. This makes it complex and challenging for businesses and courier shipping companies to handle and move perishable inventory.

Let us discuss the challenges in managing the perishable inventory;

Shorter Shelf Life

The shelf life of perishable goods is shorter compared to non-perishable items. This is the biggest challenge for businesses and they need to streamline their storage, handling, and distribution promptly.

Maintaining the quality of perishable products

Perishable products can be damaged easily which can accelerate spoilage. They need to be handled with extreme care to prevent crushing, bruising, or any damage. Maintaining its quality in all stages from procurement to handling and delivery is challenging.

Managing Temperature Variations

It is essential to maintain the right temperature of perishable inventory throughout the supply chain. Even a slight deviation from the optimum temperature can result in spoilage, leading to huge losses and customer dissatisfaction. The businesses need to address this challenge steadfastly.

Volatility in Demand

Perishable goods are generally volatile in demand and are affected by factors such as consumer preferences, seasonality, and external events. It can be challenging for businesses to anticipate these factors correctly. This may lead to overstocking or understocking of inventory.

Planning Logistics

It is challenging for businesses to effectively plan logistics when dealing with perishable inventory. They need to devise efficient plans to ensure the safe transportation of perishables.

Some challenges businesses may face in planning logistics can be traffic conditions, weather conditions, and customer preferences. They need to remain agile to overcome these challenges.

Regulatory Compliance

Perishable goods are often subject to strict regulatory compliance. Industries like pharmaceuticals and the food industry are two such examples. If businesses fail to comply with the regulatory compliances, it may result in huge fines, product recalls, and damage to brand reputation.

Tracing and Tracking

It is critical to trace and track perishable inventory from its origin to destination. This is essential to ensure their freshness and quality.

It can be very challenging if businesses do not use a comprehensive tracking system.

8 Best Practices for Perishable Inventory Management

The challenges that businesses and manufacturers face in managing perishable inventory can be overcome by putting effective strategies and best practices in place.

Here are the best practices to consider for effective perishable inventory management.

1. Demand Forecasting

One of the best practices is to accurately forecast the demand. Based on historical data, market trends, external factors, and sales projections businesses can anticipate demand and plan their perishable inventory accordingly.

With experience and good data tracking, businesses can get better in demand forecasting. This will help in better resource allocation and reduce the risk of understocking or overstocking.

Demand forecasting is an invaluable tool for perishable categories especially in the food and beverage industry.

2. Inventory Segmentation

Perishable inventory has shorter shelf life but not all items have the same shelf life. Similarly, they also vary in terms of demand patterns, seasonality, and other external factors.

A good practice is to segment and classify the inventory based on these factors. It will enable businesses to tailor their management approach to each segment. For instance, highly perishable items will need to be dealt with stringent strategies while the ones with longer shelf life can be dealt with a relaxed approach.

3. Collaboration with Suppliers

Suppliers are among the most important partners for any business. The dependence becomes more critical when inventory is perishable. What a business sources from its suppliers has a lot of bearing on the quality and timely delivery of products.

Cordial and good working supplier relationship will ensure a lot of advantages and mutual trust.

The foremost advantage is high quality and better prices. There are other numerous indirect and intangible benefits too. A friendly supplier will be ready to make exceptions when required to help a business meet its requirements.

In times of uncertainty or adverse market conditions, a good relationship will go a long way. They can offer invaluable recommendations and offer flexibility to deal with the situation.

4. Technology Integration

Integrating technology with business processes provides definite and real-time benefits. When dealing with perishable inventory, technology integration can be done in various areas such as to:

  • Install Inventory management software to automate inventory processing and provide information on perishable inventory such as low stock alerts, date tracking, and supplier information.

  • Using IoT sensors to track humidity, temperature, and other critical metrics for perishable inventory

5. Effective storage practices

Storing perishable inventory is a very important aspect of its management. Storage facilities should be designed by keeping in mind that perishable inventory needs different temperature zones and specialised shelving systems.

For perishable inventory, FIFO and FEFO are among the most preferred inventory control systems and storage facilities can be organised accordingly.

The FIFO (First In, First Out) system ensures that the older inventory is first used from the storage. This minimises waste which can happen due to the expiration of older inventory.

FEFO (First Expired, First Out) is the strategy that uses the items with the earliest expiration date first. This method avoids holding on to expired or deteriorated goods which can lead to losses.

6. Efficient transportation

Moving perishable inventory in temperature-controlled transportation is very important to maintain its quality and minimise spoilage. Transportation routes and schedules also should be optimised to minimise the time spent in transit.

Partnering with an efficient and experienced Third-party logistics provider (3PL) is an essential practice. A good 3PL will ensure that the perishable products are stored and shipped at requisite temperatures and that an optimised route and schedule are followed.

7. Employee training

No matter how much automation is being done, employees will always remain pivotal. They play a significant role in maintaining the quality of perishable inventory.

In industries such as food and pharmaceuticals meeting hygiene and safety standards is of paramount importance. Training programs should be conducted regularly to train employees on aspects such as proper handling, storage procedures, and other compliance requirements.

8. Contingency plan

It is always a good practice to have a contingency plan in place. There can be many unforeseen events which can disrupt normal functioning. Perishable inventory is more susceptible and adversely affected by such events.

Contingency planning should be done which outlines alternative suppliers, storage facilities, transportation routes, and distribution methods in case of any exigency or disruption due to unforeseen conditions.

Concluding Thoughts

This article discusses the meaning of perishable inventory, the various challenges involved and outlines the best practices to overcome the challenges. By optimising these best practices, businesses can navigate the intricacies of perishable inventory management while maximising profits and minimising risks.  

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