FIFO (First In, First Out) Inventory Method

Reduce waste and maximise warehouse space with effective FIFO inventory management

  • What is the FIFO inventory method?

    FIFO represents the initials of the term “First In, First Out”. Which is a method of inventory management achieved by sequencing goods by order of entry into stock.

    In the context of warehousing and stock management, FIFO means exactly what it sounds like. This method of inventory control involves the first products entering the warehouse leaving first.

    The method is based on the simple principle that the first items to be received are the items you’ve held the longest. Therefore, they are closest to obsolescence, expiry, or depreciation.

    It is imperative for business owners to move these products before they become useless inventory and can end up in waste and lost profit.

    However, controlling inventory using FIFO helps whether you have goods prone to spoilage or not as it provides a more efficient way to manage your stock – and can support in keeping your workplace hazard free.

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What are the benefits of FIFO stock control?

Businesses benefit from the FIFO method in several ways, including better use of warehouse space, reduced labour costs, and a reduction in equipment wear and tear. FIFO is particularly useful in the following industries where products can become obsolete quite quickly:

  • Food and Beverage
  • E-Commerce
  • Clothing
  • Pharmaceutical
  • Cosmetics
  • Electronics

FIFO is also a great stock rotation technique for any business whose stock doesn’t necessarily expire. Another advantage of FIFO is that it allows accuracy when aligning the expected cost with the actual flow of goods.

How do you implement FIFO Methodology?

In industry, FIFO enables manageable inventory management, although it does require adequate storage and processing methods. You may need to invest in quality storage and stocking systems to get your team on board with this process, we’ve outlined some ideas below:

  • Storage 

    Ensuring you manage your warehouse space effectively is the key to a successful FIFO strategy. You will need to designate areas for storage, ensuring areas are thought out with consideration to your practices and systems already in place. To make FIFO successful, the oldest items need to be the most accessible.

  • Monorails

    Often, stock replenishment is managed with rolling trolleys– and as such companies must install a sequencing FIFO system using reliable FIFO tools and FIFO stations. Monorails allow your staff to quickly move stock around the warehouse, whilst minimising physical strain.

  • Container Labelling

    A vital element of FIFO is container labelling. Most companies use label holders to attach barcodes to products, which can be used in conjunction with a stock management system. Labels can also be used to note the expiry date of products, when they were manufactured, and other important information that staff may need to be aware of.

  • Gravity Flow Racks 

    Flow racks are an ideal way to store smaller goods to implement a FIFO system. With this type of system, the oldest products are picked from the front, with newer products only rolling forward when there is space. When using this system, products are only restocked from the back.

High Quality FIFO Systems for warehouses

ORGATEX offers the most innovative FIFO stations on the market, which are adopted by the largest companies. These stations are made of high-quality aluminium rails that can be connected together to create FIFO stations and portable storage solutions in bespoke sizes, suitable for any project.

In addition, we stock a range of FIFO systems material supplies to help you increase the efficiency of your inventory management. Choose from FIFO Monorails, FIFO Adapters, Monorail Brackets, Parking Slot Rails, End Caps and more. We can also build and supply a bespoke gantry frame to allow identification within each lane when used in conjunction with our hanging signs.

We also stock a number of products that are useful alongside our rail systems. These include pallet labels, label holders, signage, and more. If you would like to place an order, or you need advice, please contact our team.

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If you have any questions about the FIFO process and how it works, read our frequently asked questions below. If the question you have isn’t answered, please feel free to contact a member of our team, who will be happy to advise.

Lean Management FAQs

What does FIFO stand for?

FIFO stands for ‘First In, First Out’, which is a stock rotation and management technique.

What is the difference between FIFO and FEFO?

In some industries, FIFO is non-negotiable, particularly when dealing with food. FEFO is used instead in situations like this, and stands for ‘First Expired First Out’, which ensures that the products closest to their expiry date are used up and sold first. This technique is used in complex warehouse systems, but you also see it used on supermarket shelves. FIFO is different because products manufactured at a later date will be sold at a later date, regardless of when things expire.

When should you not use FIFO?

FIFO isn’t suitable for every environment and is best avoided when:

  • You want to prioritise some customer orders over others (for example, if you’re trying to satisfy a high-paying customer)
  • If you need to pay for extra storage (eg if your warehouse is full it would make sense to empty the paid-for extra storage first before emptying your own)
  • As the cost of living increases, FIFO may show inaccurate price of cost (older inventory may have been cheaper to make, which means the latest sale may look more profitable than it actually is)

How does FIFO work with sequencing?

Sequencing is a large part of Lean Manufacturing and the just-in-time (JIT) process. When using the FIFO method, items are chosen in a sequential order based on which is the oldest.

What are the benefits of FIFO?

The FIFO inventory method relates to the idea of inventory control that the first products entering the facility are also the first leaving. Businesses have seen major improvements when implementing the FIFO method including:

  • More efficient use of warehouse space and availability 
  • Reduction in the wear and tear of equipment 
  • Reduction in labour costs as stock handling is kept to a minimum

What Is the difference between FIFO and LIFO?

The FIFO (First In, First Out) and LIFO (Last In, First Out) methods are complete opposites in their approach to handling inventory. FIFO believes that the oldest unit of stock should be removed or sold in most cases, whereas LIFO believes that the newest arrival stock should be sold first. This is because FIFO aims to help prevent the company from losing profit from products that expire or are relevant whereas LIFO aims to sell products based on their cost of inventory. The LIFO method is not as popular as the FIFO method because it is often not practical for companies to have old stock sitting around and taking up space.

What types of company would use FIFO?

FIFO is often implemented in companies which have products that are perishable or can eventually become obsolete such as food, fashion or pharmaceuticals, where the products either have an expiration date or are changing because of consumer impact. So, it’s important for those businesses to sell older stock first, in order to reduce waste.

Want to find out which management process would best fit your business best? Contact our friendly team members to find out more.

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