INVENTORY MANAGEMENT   |   3 minute read

Inventory management techniques for the food and beverage industry

The food and beverage (F&B) industry can pose unique challenges for inventory management. Factors such as spoilage, seasonality and changing consumer demand all need to be considered before putting into place an F&B inventory management strategy that helps keep inventory holding costs low, while having enough stock on hand to meet demand.

With that in mind, we’ve put together some of the key food and beverage inventory management techniques you should consider if you’re in the F&B industry.

Batch and expiry tracking

Batch and expiry tracking is perhaps the most important inventory management technique for food and beverage businesses. Perishable products like fresh produce are particularly susceptible to spoilage, especially due to improper storage conditions. And, in the event of contamination or spoilage, you need to be ready to run a recall for the affected products.

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Batch and expiry tracking enables you to track incomings and outgoings of stock on a batch by batch basis, so you can use or sell older stock first – known as First in First Out (FIFO) logic – to avoid inventory spoilage

TradeGecko’s batch and expiry tracking feature allows you to trace a batch’s movement from the beginning to the end of its journey across the inventory system. From the dashboard, you bulk assign batch tracking to different batches, see which batches are expiring soon, and easily manage the product recall process. All this means you can avoid the costs of inventory loss without having to manually track batches in a spreadsheet, which is a significant timesaver.

Just in Time (JIT) inventory management

Also known as the Toyota Production System, Just in Time inventory management or JIT is a common inventory management technique and type of lean methodology designed to increase efficiency, cut costs and decrease waste by receiving goods only as they are needed. JIT was originally formed in Japan as a response to the country’s limited natural resources, leaving little room for wastage.

Today, Just in Time is used by many businesses in the food and beverage industry as finished F&B products have a typically short lifespan and the JIT inventory management technique focuses on minimizing wastage. Utilizing a Just in Time inventory management strategy can be hugely beneficial for F&B businesses in keeping inventory holding costs low and reducing loss. However, in order for it to be effective, having a reliable real-time inventory management system is critical – otherwise you risk out-of-stock problems.

ABC analysis

ABC inventory management is an inventory management technique that’s based on putting products into categories in order of importance, with A being the most valuable products and C being the least valuable. An ABC analysis of inventory assumes that not all products are of equal value and more attention should be paid to more popular products.

ABC_inventory_managementThe concept of ABC inventory management is derived from the 80/20 rule (also known as the Pareto principle), which, in a business context, states that 20% of activities generate 80% of a company’s profit/output.

Although there are no hard-and-fast rules for dividing products, categories typically look something like the following:

  • A items – 20% of products, which accounts for 70% to 80% of consumption value
  • B items – 30% of products, which accounts for 10% to 20% of consumption value
  • C items – 50% of products, which accounts for up to 10% of consumption value

Doing an ABC analysis allows for optimal stock ordering and helps allocate resources to the most “high value” products. This is especially important for F&B businesses as it allows you to give customers what they want, when they want it, without needing to keep excess or unnecessary stock on hand and risk wastage.

 

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