Shelf Life Economics: Managing Perishability and Preventing Waste

A batch of jam costs $50 to make. If 10% expires before selling, you've lost $5 in profit. Multiply by 12 months and poor inventory management costs $60+ annually. This guide teaches you to manage perishability and reduce waste.

Calculating True Cost of Perishability

Expected waste rate: Track % of product lost to expiration over 3-6 months

Adjust pricing: Cost per sold unit = Production cost ÷ (1 - Waste %)

Example: Jam costs $2/jar. Expected waste: 8%. Adjusted cost = $2 ÷ 0.92 = $2.17/jar

This adjustment compensates for inevitable waste while protecting margins.

Waste Reduction Strategies

FIFO Inventory Rotation: First In, First Out. Older products sell before newer. Reduces expiration waste by 50-70%.

Production Scheduling: Make product to match historical sales. Don't overbatch hoping to store. Fresh product sells better anyway.

Extended Shelf Life Solutions: Preservatives, refrigeration, vacuum sealing. Cost ($0.25-$0.75/unit) vs. waste savings ($1+). Often profitable.

Secondary Markets: Near-expiration products at discount. Wholesale to restaurants at 20-30% off retail. Better than disposal.

Key Takeaways

✓ Track actual waste rate over 3-6 months

✓ Adjust pricing: Cost per sold unit = Cost ÷ (1 - Waste %)

✓ Implement FIFO rotation (reduces waste 50-70%)

✓ Consider shelf-life extension tech (preservatives, packaging) vs. waste savings

✓ Develop secondary markets for near-expiration products

Minimize Waste. Maximize Profit.

TrueCraft tracks expiration dates and inventory turnover.

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