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The inventory advisor

Nov 18, 2019


How to minimize your inventory loss as a result of damaged, spoiled, and expired inventory.

In our previous article, we looked at inventory loss as a result of theft. We provided some tips on how to lessen your risk. In this article, we’re going to look at reducing risk on damaged, spoiled, and expired inventory — and we’ll discuss tips on how to prevent goods from becoming spoiled in the first place.

Spoilage is a result of production units that are fully or partially completed or that do not meet the intended specifications of the customer. These items are either discarded or sold at reduced prices. Spoilage is also synonymous with the spoiling of food and other perishable goods.

What is considered as ‘normal’ spoilage for a fruit producer will be a lot different from normal spoilage for a chocolate manufacturer as an example. Business owners can determine the average percentage of their ‘normal’ and write that into the cost of goods sold.

Spoilage that goes beyond the acceptable limit is known as abnormal spoilage. Abnormal spoilage could be due to things such as defective machines, incompetent machine operators, or low-quality materials. Abnormal spoilage costs are charged as an expense incurred or as a separate cost that is not recoverable.

An excellent place to start when looking to minimize your spoilage is at your packaging and distribution processes. This area in the chain is under your immediate control and an area where changes can be made quickly. Packaging products and methods have evolved over the years. Materials used are designed to keep the product fresh as it makes its way from the farm to the wholesaler or processor. Look at packaging that is retail ready, as this reduces handling to a minimum, and products will last longer.

ONCE THE GOODS ARE IN THE WAREHOUSE, TAKE CARE TO:

  • Install sensors that trigger alerts when temperatures drop to an unstable level as this will ensure your refrigeration levels are always correct. 
  • Check expiration dates, and if they are nearing the end of life, you could sell them at a discounted price or donate them to a charity rather than throwing them out.
  • Ensure your pallets are in good working order, and there are no broken or faulty parts.
  • Staff should be trained on how to load and wrap the pallets without causing product damage.
  • Avoid errors in packing, picking, and product handling by making sure that the lighting in your warehouse is good and bright.
  • Your warehouse should be clean and uncluttered, and there must be plenty of space for your forklifts to move around without bumping into inventory and causing damage.
  • Ensure that your shelves aren’t overloaded. Know what the shelf capacities are and post this on the shelf unit.
  • Make sure you have the necessary safety equipment. Rack netting, for example, will prevent boxes from falling and breaking open while also preventing staff injuries.
  • Workstations should be set to the correct height so that your employees don’t have to operate at angles that cause discomfort. This will avoid products being dropped, crushed, or spilled. If needed, install hoists or lifts to reduce physical stress further.

Loss due to damage and spoilage is, unfortunately, an inevitable reality. Some of the tips provided may not pertain to your type of business. Still, if you monitor your product damage by collecting and analyzing the data, you will be able to determine the most frequent cause and put measures in place to reduce this.