Reduce Wastage in FMCG using AI
Wastage refers to any loss or inefficiency that occurs during the storage, handling, or distribution of goods. Wastage reduction is a crucial metric for FMCGs mainly due to low shelf of their products. Here are some common reasons behind wastage in the FMCG supply chain within warehouses:
- Expired Products: FMCG products often have limited shelf lives, especially perishable items like food, beverages, and certain personal care products. If products are not sold before their expiration dates while sitting in the warehouse, they become unsellable and are considered wastage.
- Damaged Goods: Goods can get damaged due to mishandling during transportation or within the warehouse itself. This includes products with broken packaging, dented cans, crushed boxes, or items that have leaked or spilled. Damaged goods are often unsuitable for sale and contribute to wastage.
- Overstocking: Poor inventory management leading to holding excessive inventory levels beyond what is necessary for demand can lead to overstocking. This ties up working capital, increases storage costs, and raises the risk of products becoming obsolete or expired before they are sold, resulting in wastage.
- Product Discontinuation: FMCG companies frequently introduce new products or reformulate existing ones to meet changing consumer preferences. This can lead to older products becoming obsolete or discontinued, resulting in wastage if they are not sold before being replaced by newer versions.
Reducing wastage in warehouse operations is crucial for FMCG companies to improve operational efficiency, minimize costs, and ensure the availability of high-quality products for consumers. This can be achieved by inventory optimization, optimizing warehouse processes, improving handling practices, and implementing pricing or liquidation strategies.
Optimizing wastage in FMCG brands, particularly through inventory management strategies like First In, First Out (FIFO) and First Expiry First Out (FEFO), can significantly enhance operational efficiency and reduce costs.
- FIFO (First In, First Out): FIFO ensures that the oldest inventory items are sold or used first, meaning that the goods purchased or produced earliest are the ones consumed first.
- FEFO (First Expired, First Out): FEFO prioritizes the use or sale of inventory items based on their expiration dates, with the earliest expiring items being consumed or sold first.
At TrueGradient, we generate accurate forecasts at the most granular level and employ FEFO to provide inventory strategies at batch level to ensure minimum wastage from the warehouse side.
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