Shelf Life Matters: The Risks of Getting FEFO Wrong in Nutraceuticals
Effective inventory management requires skilled workers and advanced technology in order to prevent shipping errors, track inventory and shipments, and ensure accurate forecasting and item counts. Proper organization is also essential to create maximum efficiency and to balance customer demand with reasonable shipping times. For nutraceuticals brands, however, a number of additional considerations enter the equation, as any supplements or food-grade items are subject to additional quality control standards and protocols.
For these shippers, expiration management is uniquely important in order to protect against product degradation, prevent inventory waste and even allow for effective inventory and shipment tracking. These items also may be subject to retailer compliance criteria, making it even more critical to have the right partner in place to manage these complex supply chains.
In this blog, we assess the best inventory management practices of leading nutraceutical shippers, where mistakes most commonly occur and the importance of effective inventory management in reducing supply chain risk.
FEFO vs. FIFO
While most shippers utilize a “first in, first out” (FIFO) inventory management strategy, nutraceuticals brands often find greater benefit in a “first expired, first out” process. While FIFO management prioritizes shipping order based on the oldest or first received inventory, FEFO prioritizes shipping products with the nearest expiration date first. This is particularly beneficial for nutraceuticals shippers because products are often made in batches, with each batch holding a different expiration date.
When distributing to retail locations or e-commerce sites like Amazon, companies may also need to adhere to specific shelf life requirements. Developing a FEFO inventory management process and building an accurate demand forecasting strategy with these retailers can help to extend the shelf life of products and prevent unnecessary waste due to product expiration.
The Most Common FEFO Failures
Because supplements and other nutraceutical products must meet stringent requirements to comply with federal and state regulations, they have greater room for error and should be managed by experienced teams who understand the risks and nuances involved. These include:
• Mixed product lots in the same storage bin: Effective FEFO inventory management is dependent upon having clear visibility and control over expiration dates in order to know exactly which lot expires first. When lots are mixed together, this becomes much harder to track and opens the door to potential errors.
• Poor barcode scanning: Because barcodes typically incorporate lot number, expiration date and the product ID, missed scans or misreads can cause inventory to be recorded under the incorrect lot number or result in expiration dates being inaccurate. Without being able to rely on accurate data, FEFO inventory management cannot be performed effectively.
• Inaccurate expiration data: FEFO inventory management is based entirely on expiration data, and if that information is incorrect, the full system is flawed from the start. If older inventory isn’t prioritized and sits in storage longer than it should, a product could expire before it is shipped, resulting in wasted inventory. In addition, if employees notice that the system doesn’t reflect expiration dates accurately, they may resort to manual picking, which can also lead to errors.
• Manual tracking: FEFO inventory management relies on fast, consistently accurate data. When manual processes or spreadsheets are introduced, the potential for errors and delays increases. Manual tracking also leads to outdated information, which makes it difficult to get an accurate view of inventory or shipping status in real time.
• Disconnected systems: When systems (e.g., WMS, TMS, etc.) aren’t connected and do not share data in real time, it can be detrimental to FEFO inventory management, which depends on a single, accurate, real-time view of inventory. Without having a single source of truth, companies risk having inaccurate views of inventory and expiration dates, making it difficult to forecast demand or have visibility into inventory status.
Where Compliance Meets Performance
As a leading nutraceuticals brand experienced exponential growth, they sought warehousing, inventory management and reverse logistics support for their popular line of supplements and hair care products. Read the case study.
Effectively Operationalizing FEFO
For FEFO inventory management to work effectively, companies and their 3PL partners need to establish a single, reliable view of lot and expiration data. This requires all systems to be integrated, with real-time synchronization of data across all systems and locations. Standardized lot and expiration data formats and proper sorting and positioning of inventory are also critical to reduce the potential for errors and to create efficiency in the picking, packing and shipping processes. Having established and strictly enforced FEFO management rules across all sites can also help to ensure consistency across locations, reducing the potential for errors, waste and reputational damage for the brand.
When FEFO inventory management isn’t properly utilized, it can’t be trusted by teams and will often lead them to attempt to control the process manually, which creates more work for teams, reduces efficiency, increases the risk for errors and noncompliance, results in waste and leads to higher costs. However, when managed effectively, it can function as part of a company’s risk management strategy in addition to powering compliance and accuracy behind the scenes.
At the end of the day, FEFO inventory management will only be as effective as the people, processes, systems and discipline behind it. Any system breakdowns can quickly turn into liabilities, particularly for nutraceutical companies that need to adhere to specific requirements. Working with a 3PL that is experienced in applying FEFO principles and has the technology, standardized processes and operational expertise to enforce these requirements at scale can help to protect product quality, reduce waste, ensure compliance and protect the reputation of the brand.
NXTPoint Logistics excels in tailoring FEFO inventory management strategies for brands focused on nutraceuticals, supplements, pharmaceuticals, cosmetics, personal care and more. To discuss how we can customize a solution for your business, click here to consult our experts.
