What Is FEFO?
The purpose of First Expire First Out (FEFO) is to guarantee that the product with the earliest expiration date is released onto the market. This enables the reduction of waste-related expenses in addition to the extra labor and costs related to returns. It also aids in making sure that items have a long enough shelf life when they reach their intended consumers.
Significance of FEFO in E-commerce Logistics
The FEFO system facilitates the management of inventory, specifically its organization. Furthermore, it keeps track of all the product-related information, which helps the business run more smoothly.
The benefits of FEFO are –
- Fresh Product Cycle – The FEFO approach aids in ensuring that products are used far in advance of their expiration dates and hence, no expired goods are sold to customers.
- Reduced Inventory Loss – Inventory incurs big losses if not properly controlled. Using FEFO, an inventory can be sold at a discount to customers before it expires.
- Reduced Labor Costs – Regular physical inventory inspections can be time- and labor-intensive. The FEFO approach reduces labor expenditures and guarantees that employees are concentrating on output rather than checking expiration dates.
- Avoid Dead Stock – FEFO helps prevent dead stock accumulation since products are shipped before they expire or become useless.
Prerequisites to Calculate FEFO and How It Works?
FEFO is a storage method that relies on certain pre-requisites like –
- Date of Production
- Expiry Date / Use by Date
- Proposed Shelf Life
- Quality of Products
- Robust warehouse management software
To use FEFO, businesses assign expiration dates to various batches of their products. These expiration dates are easily tracked by the manufacturer using product barcodes. This information can be retrieved by warehouse management software, which will subsequently pick and ship the products nearing their expiry dates.
In the absence of barcoding or warehouse management software, laborers can manually sort and ship products that are closer to their expiry dates.
Use Case With FEFO
The word ‘Expired’ in the acronym FEFO serves as a clear indication of its principal objective. For instance, if a business is selling pharmaceuticals, they would employ the FEFO approach to ensure they sell their goods by their expiry dates or well before. In this way, the company will avoid inventory loss and dead stock and will also be able to prove its reliability among its customers.