One of the most delicate balancing acts for a growing food and beverage brand is determining the optimal production cadence. Produce too frequently, and you get killed by setup fees, minimum order quantities (MOQs), and inbound freight costs. Produce too infrequently, and you tie up your working capital in inventory that slowly marches toward its expiration date.
This is not a theoretical problem. A founder we interviewed recently described the constant tension of managing production runs for a product with a finite shelf life. "You have to balance the MOQ of the co-packer with the shelf life of the product and the requirements of the distributor," they noted.
Here is a framework for finding that balance.
The 75% Rule for Distributors
The first constraint on your production cadence is usually your retail or distributor partners. Most major distributors (like KeHE or UNFI) and large grocery chains require that a product have at least 75% of its shelf life remaining when it arrives at their distribution center.
If your product has a 12-month shelf life, you effectively have 3 months to produce it, hold it in your warehouse, sell it, and ship it. If you produce a 6-month supply in a single run to hit a co-packer's MOQ, half of that inventory will be rejected by the distributor by the time you try to sell it.
The Cost of Frequent Runs
The obvious solution to the shelf life problem is to produce smaller batches more frequently. But this introduces a new set of problems:
- Co-Packer MOQs: Most co-packers have minimum run sizes. If you want to run smaller batches, you either have to pay a premium or find a new co-packer.
- Setup and Washdown Fees: Co-packers charge for the time it takes to set up the line and clean it afterward. In a large run, this fixed cost is amortized across thousands of units. In a small run, it can destroy your unit economics.
- Inbound Freight: Ordering raw materials in smaller quantities means paying higher LTL (Less Than Truckload) freight rates, which increases your landed COGS.
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Apply as a Design Partner →Finding the Sweet Spot with MRP
The solution to this balancing act is Material Requirements Planning (MRP). MRP is a systematic approach to calculating exactly what you need to produce, and when you need to produce it, based on your forecasted demand, your current inventory levels, and your lead times.
Instead of guessing when to schedule the next run, a dynamic MRP system looks at your historical sales data, factors in the lead time of your longest-lead ingredient, and calculates the optimal production date to ensure you never run out of stock, while also ensuring you never hold inventory past its 75% shelf-life window.
By moving from a "guess and check" production model to a data-driven MRP approach, food brands can optimize their working capital, reduce waste, and improve their gross margins.