When we talk about inventory methods we can find several options that adapt to the type of business and its needs, in a previous post we talked about the FiFo or PePs method, now it is time to talk about the First Expired-First Out or better known as FeFo.
What is FeFo?
FeFo stands for "First to Expire, First Out" and is an inventory valuation method and warehouse management strategy based on a very simple principle: products with the earliest expiration date are the first to be sold or used.
Imagine you have a grocery store. You place the new yogurts (with later expiration dates) behind the older yogurts (with earlier expiration dates). This way, you ensure that customers grab the yogurts that are about to expire first, minimizing waste. That's FEFO in action!
FeFo Objective
The main objective of FEFO is to minimize losses due to product obsolescence or expiration. In other words, it seeks to prevent products from spoiling or becoming unusable before they are sold or used. This is achieved through the following points:
- Waste Reduction: By ensuring that the products closest to their expiration date go out first, the amount of products that end up in the trash because they have expired is significantly reduced.
- Quality Improvement: FEFO guarantees that customers receive products in the best possible condition, as priority is given to those products that have been stored the longest.
- Storage Space Optimization: Having a clear outbound flow facilitates warehouse organization and avoids the accumulation of obsolete products that take up valuable space.
- Regulatory Compliance: In some industries, such as food and pharmaceuticals, FEFO is not only a best practice, but a legal requirement. Regulations require that products closest to expiration are sold first to ensure safety and quality.
- Better inventory turnover: By having a logic that the first thing to expire is the first thing to leave the warehouse, products do not stagnate and are in continuous movement.
With the rise of ecommerce, picking has become more strategic. Warehouses process hundreds or thousands of orders per day, so an inefficient picking system can lead to delays, errors and increased costs. That's why many companies are investing in automated systems, tracking technology and advanced techniques to optimize this task.
In which industries is the FEFO method crucial?
While FEFO is beneficial in many areas, it is essential in industries where products have a limited shelf life and where freshness or efficiency is critical. Some key examples are:
1. Perishable Products or Products with Expiration Date:
- The main reason: FEFO is essential when products have a limited shelf life, either by their nature (such as food) or by regulations (such as drugs).
- Concrete examples:
- Food and beveragesFresh produce (meat, fish, fruits, vegetables), dairy, bakery, processed foods with expiration date.
- Pharmaceuticals: Medicines, vaccines, supplements, laboratory reagents.
- Cosmetics and personal care: Makeup, creams, lotions, hair products (some have expiration dates, others may lose effectiveness).
- Chemicals: Some chemicals may degrade, become unstable or lose their effectiveness over time.
- Critical importance: In these cases, not using FEFO can lead to significant economic losses (products to be discarded), health risks (consumption of expired products) and legal problems (non-compliance with regulations).
2. Products at Risk of Obsolescence (even if they do not have a strict expiration date). strict):
- Technological obsolescence: Although they do not "expire" in the traditional sense, electronic components, software, and certain technological products can quickly become obsolete. FEFO, in an adapted sense, helps manage the exit of older models before they lose value. For example, a cell phone retailer would use FEFO to sell older models first, even if they still technically work.
- Fashion products: Clothing, accessories and other fashion items can also have a short "shelf life" due to changing trends. FEFO can help prioritize the sale of older collections before they go out of style.
- Promotional materials: Brochures, posters and other marketing materials with specific event dates or promotions should be used before they lose their relevance.
- Goods with reduced shelf life: Products such as batteries, batteries, even certain types of glues and sealants, which, although they do not have a visible expiration date printed on them, do lose their properties over time.
3. Regulatory Compliance and Best Practices:
- Industry regulations: In sectors such as food and pharmaceuticals, the use of FEFO (or an equivalent system) is often a legal requirement to ensure consumer safety. Audits and inspections can verify compliance with these regulations.
- Good storage practices: Even in the absence of strict regulation, FEFO is a recommended practice for any warehouse seeking to optimize inventory turnover, minimize waste and maintain product quality.
- Quality certifications: Some quality certifications (such as ISO 9001) may require or recommend inventory management practices that are consistent with FEFO principles.
4. Warehouse Management Systems (WMS):
- Automation: Modern warehouse management systems (WMS) typically have built-in functionality to manage inventory according to FEFO. The software can track expiration dates, generate alerts and suggest the optimal placement of products to facilitate the removal of older products.
- Process optimization: The use of a WMS with FEFO allows automating a large part of the process, reducing human errors and improving efficiency.
5. Company strategy:
- Focus on quality: If a company's priority is to offer fresh, high-quality products, FEFO is an essential tool to support that strategy.
- Cost reduction: In the long term, FEFO implementation can generate significant savings by reducing waste and losses due to obsolescence.
- Brand image: The use of FEFO can improve brand perception by consumers, who value the freshness and quality of the products.
How to apply it?
Imagine a pharmacy. They receive a new batch of a flu medication with an expiration date of December 2025. They already have the same drug in stock, but with an expiration date of June 2025. Applying FEFO, pharmacists will place the June 2025 lot at the front, ensuring that it is sold before it expires. The December 2025 batch will be placed at the back.
Key difference with other methods (such as PEPS/FIFO):
It is crucial to differentiate FEFO from PEPS (First In, First Out) or FIFO ("First In, First Out"). Although often confused, there is a vital distinction:
- PEPS/FIFO: This is based on the order of arrival at the warehouse. The product that entered first is the one that leaves first, regardless of its expiration date.
- FEFO: It is based on the expiration date. The product that expires first is the one that goes out first, regardless of when it arrived in the warehouse.
In industries with perishable products, FEFO is much more suitable than PEPS/FIFO. If you were to use EPS/FIFO in a grocery store, you might end up selling a yogurt that arrived a week ago but expires in a month, rather than a yogurt that arrived yesterday but expires tomorrow. That would be a disaster!
As we have seen, the FEFO method is a powerful tool for managing inventories efficiently, reducing waste, ensuring product quality and complying with regulations. It is especially important for any business that handles products with expiration dates. By understanding and applying this method, companies can optimize their operations and improve their profitability.
At ABC Logistics we implement various methods of inventory control adapting to the needs of your business to add value to your customers.
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