A common type of question in pharmaceutical manufacturing is:
“How large should my production lot be if my product has a shelf life of 24 months, but customers stop buying it once it is close to expiry?”
A practical rule of thumb used in many mature pharma supply chains is this: your production lot size should rarely exceed three months of demand. Not because SAP says so, but because markets do. Once remaining shelf life drops below what customers consider acceptable, inventory turns into risk, not stock.
The problem becomes sharper when operational realities intervene. Many organisations are forced to produce larger lots, sometimes covering six months of demand, because of pre-launch trial batches, validation constraints, or regulatory commitments. At that point, the question is no longer whether expiry risk exists, but how fast it grows.
There is a useful way to think about this. Expiry risk does not increase linearly with lot size. It increases disproportionately. In simplified terms, expiry risk rises roughly with the square of the mismatch between lot size and what can realistically be consumed within the usable shelf life. In plain English, doubling overproduction more than doubles the risk of expiry. Short shelf life products punish optimism very quickly.
This is not theory. In food and consumer products, the evidence is visible. Products like sour-cream-based snacks, baked goods, and fresh beverages routinely see expiry losses ranging from 5% to over 20%, depending on shelf life, demand volatility, and replenishment speed. High volumes and fast depletion sometimes justify this. In pharmaceuticals, they rarely do.
What complicates matters further is language. Shelf life is not a single concept. There is total shelf life, remaining shelf life, legal minimum shelf life, customer expected shelf life, warehouse shelf life, and expiry date, all of which influence planning, deployment, and fulfilment decisions differently. Treating them as interchangeable is one of the fastest ways to build inventory that looks good on paper and fails in the market.
This is where planning moves beyond formulas and into judgment. Lot sizing, deployment logic, and fulfilment rules must reflect how customers actually buy, how regulators define compliance, and how quickly inventory can realistically move through the network. Tools can help, but only if the assumptions are honest.
At Lydian, we help organisations design planning approaches that respect shelf life realities instead of fighting them with larger batches and better forecasts. If you are dealing with expiry risk, regulatory constraints, or uncomfortable inventory write-offs, it may be worth having that conversation.You can start it at lydiangbs.com.
