Catch Weight Inventory Management
Catch weight is the concept of stocking and selling a product in one unit of measure but pricing it in another, usually by weight. A catch weight inventory management system tracks inventory of a catch weight product by both the stocking unit of measure (e.g., Case) and by weight.
How is Catch Weight Used?
Catch weight is widely used in the food distribution industry, where food items have natural variability. As such, any food service distribution software or any ERP software for food distributors must have strong catch weight functionality.
How does this work? Well, for example, a distributor might sell a 16-count Box of flash-frozen lobster tails, that has a nominal weight of 6 Lbs. Each box will have 16 lobster tails, but lobster tails can vary from 5 oz to 7 oz, so the total weight may vary slightly from box to box. The distributor doesn’t repackage the boxes, and so has no control over the selection of which lobster tails go into each box. No customer would be happy to pay the same price for 5 Lbs of lobster tails as for 7 Lbs. To account for this natural variability, the box is priced at $46.00 per Lb, with a nominal price of $276 per Box. So, in this catch weight example, the lobster tails are stocked and sold by the 16-count Box but priced by the pound.
How Does a Catch Weight Inventory Management System Track This?
In this example, the food service distribution software would have to keep track of the number of Boxes of frozen lobster tails as well as the weight of each Box. The distributor can then look up inventory in a particular warehouse of flash-frozen lobster tails and see 12 Boxes with a weight for each Box as well as a total weight of all 12 Boxes (e.g., 72.85 Lbs). The catch weight inventory management system keeps the average cost of the inventory by weight. So, the average cost for this product, which is updated for every purchase order received in and every invoiced sale transaction going out, might be something like $36.80 per Lb.
The Bigger Picture – Catch Weight Used Throughout the System
The catch weight inventory management system doesn’t only keep track of the quantity of catch weight items in inventory. The full flow for a catch weight product is more complicated. It involves purchasing, PO Receiving, order management, warehouse management (in particular, picking and packing operations), and invoicing, in addition to inventory management.
When a purchase order is placed for this product, it is placed for the quantity ordered in the PO Unit of Measure (UOM) (i.e., in this example, that is 16-count Box) at the nominal weight. So, the PO might specify 10 Boxes at a cost of $220.80 per Box. This total cost is based on the cost per Lb of $36.80 multiplied by the 6 Lbs notional weight of a Box. When the PO is actually received, the catch weight inventory management system records the weight of each Box received for a total weight of say 59.82 Lbs and reprices the PO to $2,201.38 reflecting the receipt of 59.82 Lbs rather than 60.00 Lbs. The inventory and average cost will be incremented by 10 Boxes and 59.82 Lbs at a total cost of $2201.38 or a per Lb cost of $36.80.
When a Box is sold, the Box weight will be recorded at (say) 6.03 Lbs and the Box will be priced at $277.38 reflecting the actual weight sold. The catch weight inventory management system will adjust the inventory and the average cost for 1 Box and 6.03 Lbs at a cost of $221.90. The distributor’s total inventory would now be 9 Boxes with a total weight of 53.79 Lbs and an extended average cost of $1,979.47.
Catch Weight for Food Distributors
In practice, a catch weight inventory management system doesn’t just record weights and quantities. Food products are subject to extensive regulatory safeguards including chain-of-custody requirements, Lot No tracking, location history or cold-chain monitoring, packed date, expiry date, etc. Food manufacturers are required to record this information and label products with all this information at the time they leave the processing plant. Good food service distribution software will capture all this, and record for each Box in this example, the number of Boxes (or other UOM), the weight, the manufacturer’s Lot No, the location, the order date, and expiry date. The system should allow you to scan all this information into the system with one compound barcode scan. Using barcode labeling also allows the items to be scanned to pick from a Lot that is closest to its expiry date.
ADS Solutions’ Accolent ERP software for food distributors is Cloud-based and fully supports catch weight throughout the system. It supports the use of custom compound barcodes to record all the information food service distributors need to manage their businesses. Contact us today to see what Accolent ERP can do to help your food distribution business.