What are common mistakes to avoid when using ABC inventory classification for perishable goods?

1 Not considering shelf life

One of the biggest challenges of managing perishable goods is that they have a limited shelf life and can deteriorate over time. This means that you cannot apply the same ABC criteria for non-perishable goods, such as cost or demand, without taking into account the expiration date of your products. If you do, you might end up with a lot of A-class items that are expensive and high-demand, but also have a short shelf life and require frequent replenishment. This can lead to overstocking, high inventory carrying costs, and increased risk of spoilage. To avoid this mistake, you should consider the shelf life of your products as a factor in your ABC classification and assign a lower priority to items that have a shorter shelf life, regardless of their cost or demand.

2 Not using FIFO or FEFO methods

Another common mistake when using ABC inventory classification for perishable goods is not using the FIFO (first in, first out) or FEFO (first expired, first out) methods to rotate your stock. These methods ensure that you sell or use the oldest items first, before they expire or lose quality. This way, you can reduce waste, avoid customer complaints, and comply with health and safety regulations. To avoid this mistake, you should implement a FIFO or FEFO system in your warehouse or store and label your products with their arrival or expiration dates. You should also train your staff to follow the system and check the dates before picking or selling the products.

3 Not adjusting your ABC categories

A third common mistake when using ABC inventory classification for perishable goods is not adjusting your ABC categories according to changes in your market, customer preferences, or seasonality. For example, some perishable goods may have a higher demand or value during certain periods of the year, such as holidays, festivals, or seasons. This means that they may move from one ABC category to another, depending on the time of the year. If you do not update your ABC categories accordingly, you might miss out on sales opportunities, lose customers to competitors, or stock up on items that will not sell. To avoid this mistake, you should monitor your sales data, customer feedback, and market trends regularly and adjust your ABC categories based on the current demand and value of your products.

4 Not applying ABC analysis to other aspects of inventory management

A fourth common mistake when using ABC inventory classification for perishable goods is not applying ABC analysis to other aspects of inventory management, such as ordering, storing, and handling. For example, you may have different ordering policies, storage conditions, and handling procedures for different types of perishable goods, depending on their shelf life, sensitivity, and quality requirements. If you do not apply ABC analysis to these aspects, you might order too much or too little, store your products in inappropriate places or temperatures, or handle them in ways that can damage or contaminate them. To avoid this mistake, you should use ABC analysis to determine the optimal ordering frequency, reorder point, safety stock, storage location, temperature, humidity, and handling method for each ABC category of perishable goods.

5 Not communicating your ABC strategy to your suppliers and customers

A fifth common mistake when using ABC inventory classification for perishable goods is not communicating your ABC strategy to your suppliers and customers. For example, you may have different expectations, agreements, and standards for your suppliers and customers, depending on the ABC category of the products you buy or sell. If you do not communicate your ABC strategy to them, you might face issues such as delayed deliveries, incorrect orders, quality problems, or customer dissatisfaction. To avoid this mistake, you should inform your suppliers and customers about your ABC strategy and how it affects your ordering, delivery, payment, quality, and service terms. You should also seek their feedback and cooperation to ensure that your ABC strategy meets their needs and expectations.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?