Jochen Sand/Photodisc/Getty Images
Stock rotation means you arrange stock in your store or warehouse so that the oldest items leave the shelves first. It's the reason that, for example, the oldest milk containers are at the front of the store's refrigerators. FIFO — first in, first out — is particularly important for any business that deals with food because if older food spoils, you'll have to throw it away.
TL;DR (Too Long; Didn't Read)
The key to rotating stock is to display the oldest items with looming expiration dates where customers will find them. If you place the old items on top of the pile or in the front of the shelf, customers will often seize them without checking the dates on anything further back.
Stock Rotation Training
Everyone working in your store or your restaurant should go through stock rotation training. Stock rotation ideas aren't rocket science, but many employees need training even on simple stuff. It's not that they're dumb; it's that in a rush of business, they may forget. Good training makes the basic principles of the stock rotation system template automatic.
- Check expiration dates whenever you get a food delivery or put something out on display.
- If the food has a short shelf life, put it at the front or the top of the display.
- Items that will last the longest should go at the back or bottom of the display. If that requires moving and rearranging stock that's already out, employees should go ahead and do it. It's worth the time.
- When cooking, choose the items with the closest expiration date.
- If an employee uses any food for cooking or prep, check that the expiration date hasn't passed.
- If employees find stock that's already expired, they need to dispose of it.
All of your stock rotation training should focus on getting the older items sold off first.
Display and Storage
Food stores typically have multiple displays, sections and cases. It's possible that efficient stock rotation means a different schedule in each of them. Stock in display cases should go through rotation, for instance, but even stock in storage needs rotation. When you need more stock up front, you want to enter storage and bring the oldest items out first.
If stock is close to its expiration date and not selling, it might be worth creating a special display offering the aged goods at a discount. If your customers have an eye for a bargain, that may get the items out the door before they have to go in the trash.
Work to Minimize Waste
If you don't want to waste food for which your business paid good money, you have to go beyond stock rotation guidelines. Good storage and cleanliness can go a long way toward keeping food usable as long as possible.
- When you get deliveries, store frozen foods first and then refrigerated foods. Dry and shelf-stable items can wait until last.
- Maintain the correct storage temperatures in your storage areas. Check the temperature at the beginning of each shift.
- Anywhere you store or serve food should be cleaned regularly. Pay particular attention to floors, walls, shelves, storage bins, carts and trays.
- Before using any food, confirm that it hasn't gone bad.
- Follow any local health code requirements for storing food and keeping your business clean.
Accounting for Inventory
Good stock rotation means first in, first out. Even if you and your team live by that rule, you don't have to keep the books that way. In accounting, it's acceptable to display your inventory for FIFO and report it on the books as LIFO, or last in, first out.
Suppose your grocery store bought 500 half gallons of milk at $2.50 each last week. This week, you bought 500, but because of a price hike, they're $3 each. If you sell 400 of the older, cheaper milks, under LIFO accounting, you report the sales as if they were the ones you bought for $3. This affects your cost of goods sold and can lead to lower taxes.
While the IRS allows you to FIFO inventory and report sales as LIFO, international financial standards won't permit this.
Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com