How the FEFO Method Reduces Waste, Ensures Freshness and Improves Profitability for Food and Beverage Businesses

Achieving profitability in the food and beverage industry can seem like a delicate dance, requiring nimble, informed decision-making while balancing priorities and responding to changing conditions. And with the competitive and dynamic nature of today’s marketplace, you can’t slip up or miss a beat if you want to maintain your relevance and reputation.

So, how do you boost the chances that your bottom line stays healthy and revenue growth continues to outpace today’s rapidly rising costs? At least part of the answer lies in effective inventory management, and more specifically, applying a first-expiry, first-out (FEFO) picking order for the use of your raw materials.

The truth is that this methodology can have positive impacts beyond simply increasing your organization’s earning potential. You can also reduce waste, maintain uncompromising product quality and operate more efficiently by implementing this model at your facilities.

Additionally, purpose-built technology like an industry-specific food enterprise resource planning (ERP) system can help you enforce the FEFO method with consistency, which can simplify an otherwise tedious process and help your brand boost profit margins without cutting corners.

Read on to learn more about the benefits of this practice.

Less Spoilage and Increased Sustainability

The 2021 edition of The State of Food Security and Nutrition in the World, published annually by the Food and Agriculture Organization of the United Nations, estimated the number of people who went hungry in 2020 between 720 and 811 million. That shocking statistic puts into perspective the importance of cutting food waste to an absolute minimum.

The FEFO method can help further your efforts towards this aim by prioritizing the use of the ingredient lot closest to the end of its window of viability. That way, you leverage the assets you have on-hand before they go bad while preserving the viability of those with longer remaining shelf life so that everything can be used before it spoils.

Also, by capitalizing on what you have before it becomes compromised, you’re doing right by the planet, even if on a small scale. With the UN’s Intergovernmental Panel on Climate Change attributing approximately one-third of global greenhouse emissions to the food and beverage industry, sustainability should be an imperative for all companies in the space, including yours.

Better Expiration Date Management and Fresh End Products

While picking the ingredients with the shortest remaining shelf life and maximizing quality may not seem at a glance to go hand-in-hand, the FEFO method actually does help ensure the freshness and quality of your finished goods. That’s because it improves your expiration date management, as freshness windows will dictate when ingredients are used.

Simply put, greater scrutiny on expiration dates decreases the chances that spoiled materials will be used in your end products. That’s something to avoid at all costs, as it would not only negatively affect the taste of your brand’s items and overall customer satisfaction but also pose a serious health risk to affected consumers.

To that last point, one can more fully understand how critical food safety is when you take into account that the World Health Organization estimates approximately 1 in 10 people in the world fall ill after eating unsafe food each year. Expired and spoiled food is only part of the cause—pathogens also play a large role in this problem—but your organization can be part of the solution by being vigilant in expiration management and FEFO picking.

More Profitable and Efficient Operations

The ingredients that you purchase with the intent to use in the processing and manufacture of your goods represent a significant financial outlay. Considering commodity prices are ballooning—Bloomberg’s general commodity price index grew by more than 20% in the first half of 2022—your resources dedicated to material procurement are no doubt trending the same way.

That puts the impetus on your organization to make the most out of what you buy. The FEFO method is particularly useful in pursuit of this goal, as it helps ensure that you reap the return on your investments and materials are consumed before they go bad to limit losses and sunk costs.

Meanwhile, you retain the value of those with longer windows for later use while still meeting your plan attainment. What’s more, your employees don’t have to conduct manual spot-checks on your inventory, nor do they need to spend time determining which lot to pick—they always know that the next to expire is the next up for use in production, helping them be more efficient in conducting their responsibilities.

Powering High Performance with ERP Technology

Hopefully now you see the logic behind implementing the FEFO method at your food and beverage processing and manufacturing facilities. It helps improve your outcomes in several different areas—not the least of which is your business’s financial results—but it also requires additional effort and a thorough approach for the collection of relevant data and enforcement of best practices.

That’s where ERP technology can help. These organization-wide, cross-functional platforms serve every aspect of your operations, including purchasing, inventory management, production and accounting, among others. They’re embraced as the gold standard when it comes to forming the foundation of a sound digital transformation.

Crucially important to the topic at hand is their ability to automate information collection through integration with barcode scanners and maintain records digitally, helping you nail expiration date management and FEFO picking procedures. When the system clearly indicates the ingredients to use on the next run, your employees will never have to wonder whether they’re grabbing the right box, carton or bag from the bin.

Our own industry-specific food and beverage solution, Aptean Food & Beverage ERP, is a cut above the competition, with a user-friendly interface and unique, industry-specific technology built on an underlying Microsoft Dynamics 365 Business Central platform. We also offer flexible cloud deployments on a software as a service (SaaS) model for reliable mobile accessibility, lower up-front equipment costs and dependable security and IT support.

Learn more about Aptean Food & Beverage ERP and how it can help your company employ the FEFO picking method by contacting us today. You can also schedule a personalized demo and see the software in action for yourself.