The process of taking raw materials and transforming them into a product that can be sold by retailers can seem complicated, especially to consumers. But it’s exactly this complex arrangement of procedures, facilities, standards, and attention to detail that can separate one company from another. This is especially true in food production, where the quality of the final product will be evident to anyone who bites into it. Final products like this are also known as finished goods, and understanding the journey from start to finish can tell you a lot about the company that sold it.
What Are Finished Goods?
In the simplest terms, finished goods are products that have been fully completed through a manufacturing process but have yet to be sold to an end user. In the case of agriculture-based food production, this can mean the end result of either primary or secondary processing; primary processing is the conversion of raw materials into ingredients, and secondary processing involves the use of those ingredients to produce a final, edible product. The three main components of any food production process are as follows:
- Raw materials: These are the recently harvested fruits, vegetables, grains, or other produce that are provided by growers in their unprocessed forms. Not all raw materials are equal in quality, however, and numerous factors (soil quality, farming practices, type of pesticides used, etc.) can contribute to the quality and usefulness of the produce. Onions, for instance, might grow better on one farm than another because the climate is better suited for that crop.
- Unfinished goods: Also sometimes referred to as work in process or work in progress (WIP), unfinished goods come from raw materials that have started the production process but are not yet complete. This stage of production has the most variability because different materials have different production needs. Depending on the end use, fruits like blueberries might have a quicker production time than corn because they don’t need to have a husk and tassels to remove.
- Finished goods: Goods are only considered finished when they are finally ready to be sold and shipped. A finished goods inventory is what manufacturers rely on in order to generate revenue and fulfill their customers’ needs. In the context of a primary production process, this might include something like a vacuum-sealed package of dried cilantro that is ready to be incorporated into a jar of salsa or a can of soup.
Depending on the perspective of the producer and the end user, a finished good may look different and be treated differently. From the perspective of a producer of high quality ingredients like Silva International, finished goods are the fruits, vegetables, herbs, and spices that have been prepared for use by a food production company. From a commercial food manufacturer’s perspective, the finished goods are the packaged food products that make it onto the shelves of groceries stores or into the pantries of commercial kitchens.
Finished Goods from a Financial Perspective
Although food production companies may have passion for the products they make, at the end of the day they are still businesses with balance sheets and other financial statements to consider. One important aspect of financial health for food companies involves inventory management and specifically understanding the value of their finished goods inventory. This is calculated with the following formula:
finished goods inventory = cost of goods manufactured - cost of goods sold (COGS) + finished goods value from the previous accounting period
All companies are obligated to consider various costs in running their business: overhead costs, direct labor, direct materials, etc. One of the benefits of keeping track of finished goods inventory is that it can help prevent the waste of raw materials by not producing more of a product that is already plentiful in the inventory. Finished goods also are recorded as current assets on the balance sheet and can highlight items that are available for short-term cash needs.
How Are Finished Goods Processed?
To arrive at a high quality finished good, there are a variety of detailed steps that require precision, timing, and the proper equipment. It is a complex process to take raw apples, for example, and process them into a dried ingredient that can then be used as a component of a commercially produced baked good like an apple pie. At a high-end company like Silva, there are several crucial steps to ensuring quality:
- Sourcing: One of the most important steps is to make sure that the raw materials are sourced from a high quality grower. This might involve working with domestic or international growers who can be relied on to have a consistent product. Sourcing also means being flexible, however, to adjust to numerous real-world conditions that might impact the ability to get good raw materials.
- Cleaning and sorting: To ensure a consistent finished product, the raw materials inventory must go through a rigorous process of cleaning and sorting. This refining step is ultimately about making sure that both quality and food safety standards are always met.
- Cutting to size: Secondary processing involves ingredients being used in countless different ways, and so it is important that these ingredients be processed to standard market sizes as well as customized ones. Depending on the raw material in question, this can include cross-cut pieces, granulation, flakes, or powders.
- Blending: Sometimes ingredients are useful as one primary component like dried red bell peppers; in other circumstances, though, different types of peppers or other vegetables might be better mixed or blended together.
- Treatment: One of the final steps of the process in producing finished food products is treatment; this might involve steam sterilization or infrared treatment that can ensure maximum food safety and quality before the ingredient is sold and shipped.
Trust Silva for the Highest Quality Ingredients
At Silva, we are proud to provide only the best premium dried vegetable, herb, and fruit ingredients for countless uses in commercial food production settings. And the reason we are so confident about our products is our state-of-the-art production process that ensures quality and safety. To learn more about partnering with Silva or to request samples of our excellent ingredients, please contact us today.