Of course, in this context, we are not referring to stock loss by way of customer and staff theft or vendor fraud. Instead, it concerns having better control of the movement of products into and out of your store. In short, it’s about organising your stock in a way that allows you to avoid loss by way of expiration or obsolescence. The FDA doesn’t actually require expiration dates on food, except baby formula. The USDA has non-binding guidelines that suggest the use of “Best if Used By” language.
If you’re a warehouse manager, you want to keep your stock as small as possible but, at the same time, own the most efficient stock in terms of margins and sales. This increases your productivity and efficiency, you get a very organized warehouse, and you save time and money at the end of the day. Similar to the benefit of FIFO, following the FEFO method also allows you to avoid dead stock. While FIFO refers to dead stock at a store level, in this context, its about avoiding obsolete inventory at a warehouse level, which is just as if not more devastating to your business. Following the FEFO method means you ensure that you sell these products either by their sell-by date or before. If you follow it correctly and you have the correct checks and balances in your inventory management system, the expiry date shouldn’t even come into consideration.
Understanding Sector Rotation
Sector rotation may also be a mismatch for investors who prefer a more hands-off approach since it requires you to actively manage your portfolio to a degree. Investing in sector mutual funds or exchange-traded funds (ETFs) can save you the trouble of having to buy and sell individual stocks from different sectors. Stock and sector rotation involve switching between different asset classes or stocks based on various factors. This strategy aims to optimize returns by capitalizing on the performance differences between sectors and asset classes. Several different types of cycles can cause a sector rotation, including the economic cycle, the stock market cycle, and oversold and overbought cycles.
Key economic factors for each sector or industry can also help you create an estimate of future performance for each sector. The next step is to identify sectors or industries that may be well positioned for the current and future phases of the business cycle. Depending on the phase of the business cycle—early, mid, late, or recession—certain sectors may be expected to outperform others. While each business cycle is unique, in the past, certain sectors have tended to perform well at different phases of the business cycle (see Fidelity Investments-AART 2021 chart below).
- Most of the time, the market cycle is usually well ahead of the economic cycle, as the financial markets attempt to predict the state of the economy.
- Businesses that want to use FIFO have the option to create a customized order processing logic that prioritizes the oldest orders first.
- FIFO is one of the most common stock rotation methods for most ecommerce retailers – particularly those that sell perishable goods such as food and beverages.
- The decline of stocks in the financials sector during the financial crisis once again demonstrated how stocks in the same sector often exhibit similar performance during a particular phase of the business cycle.
- With this visibility, you’ll be able to determine which products to rotate and prioritize.
As discussed earlier, FIFO (or First In, First Out) involves rotating stock so that the first inventory to come into the warehouse is also the first to get shipped out. Within FIFO, new products that warehouse workers receive are stored at the back of the shelf, which means that older products are pushed forward to be picked and sold first. In warehouses, stock rotation is often a physical task – for instance, workers must move older stock to the front of the shelf or closer to the fulfillment bay. Similarly, you may discover that a lot of inventory currently taking up shelf space is about to expire.
Wave goodbye to stale inventory with ShipBob
For that, there are two main stock rotation or inventory replenishment methods that are worth noting. The first is First-In, First-Out (FIFO) while the second is First-Expired, First-Out (FEFO). As for which process best suits your store and products, that’s what we intend to explore below. That simple business expansion grants fact has spawned an investment strategy that is based on sector rotation. Even those investors who don’t base their entire strategy on sector rotation would be wise to anticipate the cycle. To rotate your stock effectively, you’ll need to identify the prime real estate in your store layout.
Sector Rotation to Energy, Finance and Consumer Sectors
If things are organized the other way round, or stock is improperly rotated, newer stock will be sold first, leaving out of date stock sitting on the shelves which will have to be thrown away. If a product is still on shelves after its sell by date, it will have to be thrown away, which is both costly and wasteful to the store (suppliers must be paid even if stock is not sold). Therefore, it is imperative that sell by dates are strictly adhered to, and that products which will perish earlier be sold as quickly as possible. SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. SmartAsset does not review the ongoing performance of any RIA/IAR, participate in the management of any user’s account by an RIA/IAR or provide advice regarding specific investments.
Stages of the Economic Cycle
Malcolm’s other interests include collecting vinyl records, minor
league baseball, and cycling. Dead stock, spoilage, and obsolete inventory are a regular part of running an ecommerce operation. Pros and cons will depend on the specific case of each company, you should analyse your business and understand what yours are.
I really recommend you hit the end of season sales and stock up while things are hitting 50% off and more. With ShipBob, your brand can achieve 2-day express shipping anywhere across the continental U.S. This helps you meet customer expectations and encourage sales, which in turn helps you continuously move stock off shelves and make room for new inventory. I can literally not look at the ShipBob platform for 3 weeks, and then log in and within 10 minutes of analyzing the data, I know exactly where we stand in the business. Moreover, you can use the same dashboard to view inventory status across all the ShipBob fulfillment centers where you have distributed inventory.
Stock rotation FAQ
What you’ve encountered is one form of stock rotation in action—something that many retail stores use for maximizing sales and managing inventory. Stock rotation, or inventory turnover, refers to the frequency with which a firm manages to sell its physical products. Although some authors also define it as the number of times the stock in your warehouse has been renewed, either by sale or for other reasons. At ShipBob, you can find fulfillment and inventory management solutions that enable you to rotate stock and minimize dead stock with ease. From enhanced inventory visibility to express shipping, you can get better control over your inventory and how it moves across the supply chain. Without proper inventory control and stock management practices, outdated inventory can quickly get out of hand and cause problems for your brand.