KPI of the Day – Retail: % Perishable items with past due date
Definition
Measures the percentage of perishable items in a store that is past the due date, from overall items in the store.
Purpose
To assess the efficiency of the inventory management process as well as the effectiveness of the prevailing product display method.
Recommendations
Closely related to # Stock rotations, % Perishable items with past due date is an indicator that is vital for effective inventory management, especially within the food and pharmaceuticals industry. Expired products are one of the biggest sources of loss for retailers.
In the case of products approaching their due date, several actions can be taken, such as applied discounts or promotional campaigns. In the case of expired food items, however, almost nothing can be done to diminish the financial loss.
Several options for the latter case include donating expired food products to food banks or selling them to salvage grocery stores. This is allowed in several countries since expiration dates are often merely an indicator of optimum quality as assessed by the manufacturer and food items may remain safe for consumption even if they passed their sell-by or expiration date. All things considered, the most desirable outcome implies the selling of items before their due date.
Best practices in this regard include the following:
- Adopting strategies and tools that consider both the product deterioration rate and the product demand as soon as the product enters the storage;
- Applying the FIFO method (first in – first out), whereby the first product registered in stock is the first product to be displayed at the front of the shelf;
- Applying the FEFO method (first expired – first out), whereby the product whose due date is the closest will be moved out of the warehouse first.
The lower the value of this KPI, the better for retailers, as it means they are able to sell their products without having to store them too long.
There are certain actions that can be taken for preventing the alteration of the products on shelves, such as marking them down and sell with a large discount, or in bulk at a lower price, and rotate the stock by moving the products with the earliest dates to the front of shelving units, which allows them to be sold first.
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Tags: KPI, Retail performance
