How Obsolete Inventory and Product Spoilage Can Hurt Your Business

By March 20, 2020Supply Chain Management

If your warehouse stores perishable goods and you are relying on manual inventory management processes, you are risking some very real pain for your business. Anytime you are working with items that have a rigid expiration date, it is essential to not only have an accurate count of items that are updated in real time, but also have accurate information that tracks the date the item came into the warehouse.

If you are not keeping track of these important inventory metrics associated with storing perishable goods or items that have a fixed expiration date you could end up having to deal with a lot of extra costs. Read on to learn how these costs can really add up.

how to avoid product spoilage

Costs of Product Spoilage and Obsolete Inventory

Cost of Spoiled Food and Lost Inventory

If you don’t have accurate information about your inventory, you could end up dealing with massive amounts of spoiled food that you can’t sell. The cost of those losses can add up fast when you need to throw out an entire shipment or a large percentage of your inventory because you weren’t tracking the expiration dates or when the items came into the warehouse. Automated warehouse management tools can allow for the easy tracking of dates and give you tools that will alert you when inventory items are getting close to the expirations dates so that you don’t end up with a lot of losses due to spoilage.

Cost of Replacing Obsolete Inventory

Piggybacking off the costs of product spoilage is the cost of paying for a new inventory of fresh foods to replace that food that was lost. If you need to replace a huge chunk of inventory that cost can be enormous and can be enough to really hurt your business, especially if happens more than once. That’s why relying on manual inventory counts just isn’t good enough when it comes to storing food. You need to have multiple layers of tracking in place to ensure that you don’t get stuck having to replace an entire warehouse of goods because the food spoiled or sat in the warehouse past its expiration date.

Lawsuits and Legal Costs

If you don’t have automated inventory management systems in place and expired food is sold to customers, you could be facing lawsuits and expensive legal costs trying to protect your business. Lawsuits from customers who become sick from eating spoiled food can end your business either because of the expenses of dealing with the lawsuit or because of the damage to your business reputation. Either way you need to avoid taking the huge risk of making a customer sick and that means upgrading your inventory management system.

Drastic Price Cuts

If your food is getting close to the expiration date and you haven’t been accurately tracking it then you might need to hold a massive sale in order to get whatever you can for the food and get it out the door before it expires. That might mean taking a big loss on that food and you may not make enough money on each sale to break even. That can decimate your profit since profit margins on food businesses are typically pretty thin. Investing in modern technology and an automated inventory management system can save you from the pains and costs of product spoilage.

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