Inventory Control Methods FEFO-FIFO for Food & Beverage Companies

1. Inventory Control Methods:
FEFO & FIFO… less spoilage and more safety!
Using technology to comply with the Food Safety Modernization Act…
Safely managing inventory in the food and beverage industry can be very
complex. CeleriTech’s software applications manage complex traceability
requirements, such as FEFO and FIFO, amongst others…

2. Inventory Control Methods: FEFO/FIFO
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To reach the benefits of reducing product loss, it is essential to know the precise shelf-life of
products throughout the distribution chain. FEFO (first expired, first out), is an inventory
management method that allows for products with the shortest shelf-life to be distributed
first.
This is a simple, highly effective
inventory management method that
prioritizes the handling and moving of
date sensitive inventory. The FEFO
method requires, regardless of the
date of entry or acquisition, that
inventory with the earliest expiration
date (or shortest shelf-life) to be
handled first.
The method of FEFO is most commonly
practiced in the food and beverage and
the pharmaceutical industries, where
expiration dates and shelf-life cycles
are of critical importance.
The FIFO (first in, first out) method is another commonly used inventory management
method. While the FIFO principle is not strictly guided by an expiration date or a specific
shelf-life cycle, it ensures that product that was received first into a warehouse leaves the
warehouse first.
Companies that normally practice the
FIFO principle usually have a policy of
displaying and selling older stock
before selling newly acquired stock.
Such policy makes sense when they
sell fresh food or seasonal products
that can go out of fashion. Grocery
stores, for example, often own
refrigerated storage that make it easy
to re-stock product from the back,
pushing older products forward
where shoppers are more likely to see
and buy them.
By rotating stock in this way, it's more
likely that there will be less inventory
waste; since food is more likely to be
purchased before it goes bad.
FEFO CONTROL
The E in FEFO defines the life-cycle of a product
and determines when products reach the end
of its safe life-cycle. Therefore, the E is of great
importance when planning the distribution
and commercialization life-cycle of a product.
With FEFO, the logistical controls react to
shelf-life differences in a smart way in order to
reduce product loss and out-stock-levels, while
increasing quality safety and customer
satisfaction.
FIFO CONTROL
The I in FIFO refers to the rotation order of
inventory based on the order it was received
into the warehouse. This principle assumes
the logic that the longer the product stays in
the warehouse, the higher the possibilities for
deterioration or obsolescence.
It is taken as the date of I the date when the
product entered the distribution network and
this logistical method usually takes
precedence over other date sensitive
inventory management techniques.

3. Inventory Control Methods: FEFO/FIFO
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Picking by FEFO or FIFO
FEFO and FIFO are inventory management methods that help control logistical processes, of
consumption or distribution of products, based on date driven factors. By practicing FEFO
and FIFO, companies can have very high standards for safety and quality of product.
The life cycle of a product and how you manage its shelf-life is the axis of your inventory
management practices in the warehouse. FEFO or FIFO, the logistical processes of the
operation depend on date driven
factors that determine how you
prioritize the distribution of your
inventory, let’s not forget that the cost
of an erroneous shipment can be very
high.
Distribution of product with
inappropriate shelf-life cycles can cause
a negative impact on sales and product
demand; expired food on the shelves of
a supermarket involves loss of brand
image, without going on to describe the
possible consequences of their
consumption.
Software automation and FEFO & FIFO
Leading ERP software applications, like SAP Business One, include advanced warehouse
functionality based on inventory management methods such as FEFO and FIFO.
Basic processes such as receiving inventory, managing inventory, order fulfillment and picking
and shipping orders, can be easily track with SAP Business One. More importantly, SAP
Business One can auto-calculate and track expiration dates to ensure that only the right
product lots are being picked and shipped.
In the food and beverage industry you need a system, like SAP Business One, to manage your
entire production, warehousing and/or distribution processes. There are many aspects and
processes that you need to manage, here are just a few that you could easily manage with
SAP Business One:
Manufacturing/Production Supply Chain
 Recipes and R&D
 Production yield
 Production waste
 Quality control
 Batch tracking
 FEFO & FIFO
 Full life-cycle
 Shelf-life cycles
 Expiration dates
 Full traceability
COSTS OF NOT PRACTICING FEFO or FIFO
 Expired stock on the shelf
 Premature obsolescence
 Customer returns
 Lost time looking for a product in stock
 Unmet demand
 Loss of brand image
 Potential lawsuit if product affects the
consumer

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Playing by the rules
Companies that do not deploy ERP systems, like SAP Business One, are going to have a very
hard time complying with strict safety mandates such as, lot control and traceability, both
forwards and backwards all the way down to a container level. Safety mandates also require
advanced practices, such FEFO and FIFO, amongst others…
Global food and beverage safety regulations are becoming stricter and coming from different
regulatory entities, nationally and internationally. The FDA, the Food Safety Modernization
Act, the PTI, the Bio-Terrorism Act, GFSI, HACCP and SQF are some of the organizations and
initiatives that have made food safety a top priority. As these new rules and regulation
become the industry standards, food and beverage manufactures and distributors can rely
on CeleriTech to comply with regulations such as two-way traceability, FEFO and FIFO
inventory management methods and robust labeling option, just to mention a few. All of
these just to avoid costly regulatory fines.
About CeleriTech
CeleriTech is a certified SAP Partner and focused on delivering integrated business
technology solutions for small and medium size companies. With over 125 consultants and
offices in Miami, Venezuela, Colombia and Peru, you can always count on local resources
to provide first-hand service and support.
Our flagship application, SAP Business One is the world’s leading business management
software for small and medium-sized companies. SAP Business One will enable real-time
information related to supplier verification, compliance and registration with the FDA, it will
improve your business performance by evaluating the standards use of critical tracking
events, core business processes and key data elements that range from product receipt,
ingredients, processing, packaging, storage, transfer and shipping and much more.
We can help you:
 Minimize risk for low quality control
 Avoid the risk of non-compliance with food regulations
 Enable effective traceability procedures
 Plan for systematic recall measures
 Monitor raw materials and finished product throughout the entire supply chain
We can help 786-331-1281