FIFO stands for “First In, First Out”, and it is a widely used inventory management principle in warehouse and logistics operations. This method ensures that the oldest inventory items (those that were received or produced first) are the first to be picked, used, or shipped out. FIFO is especially relevant for perishable goods, time-sensitive products, or inventory with expiration dates, as it helps minimize waste and preserve product quality.
How FIFO Works in a Warehouse
In a FIFO-based warehouse system, inventory is rotated systematically so that the earliest stock items are positioned for first access. This means that when a new shipment arrives, it is stored behind or beneath the existing stock, ensuring that older items are selected and dispatched before the newer ones. Warehouse layouts and racking systems—such as drive-through racks, flow racks, or pallet flow systems—are often designed to support FIFO logic.
For example, if a warehouse receives 100 units of a product on July 1 and another 100 units on July 15, the units from July 1 will be picked and shipped before the July 15 stock is touched.
Benefits of FIFO in Warehouse Inventory Management
Reduces Waste and Obsolescence
FIFO minimizes the risk of products expiring, becoming obsolete, or degrading in quality while sitting in storage. This is particularly important for food, pharmaceuticals, and other perishable or regulated items.
Improves Inventory Accuracy
When items are picked in the order they were received, it’s easier to keep inventory records up to date. FIFO helps avoid confusion about stock ages and ensures traceability.
Supports Compliance and Safety
Many industries, such as food and healthcare, are required to follow strict inventory rotation rules. FIFO supports compliance with safety and health regulations.
Enhances Cash Flow
By ensuring that older inventory moves out first, businesses can avoid tying up cash in unsellable or expired stock. This improves inventory turnover and overall efficiency.
Simplifies Stock Audits
FIFO creates a clear, time-based inventory flow. This consistency makes cycle counting and stock auditing more straightforward.
Where FIFO Is Most Commonly Used
FIFO is especially important in the following industries:
Food and Beverage – to avoid spoilage and ensure product freshness
Pharmaceuticals and Healthcare – for safety and regulatory compliance
Cosmetics and Beauty Products – due to limited shelf life
Retail – especially fashion or seasonal products with short sales windows
Manufacturing – where raw materials may degrade or have expiration dates
FIFO vs. LIFO
It’s useful to contrast FIFO with another inventory method: LIFO (Last In, First Out). In LIFO, the most recently received stock is used first. While LIFO can offer certain tax advantages in inflationary environments, it is rarely used in physical warehouse operations because it increases the risk of older stock sitting unused, becoming outdated, or going to waste.
In real-world warehouse applications, FIFO is preferred because it aligns with both operational logic and product preservation requirements.
Implementing FIFO in a Warehouse
To successfully implement FIFO in a warehouse environment, the following steps are often required:
Organize storage areas with clear labels and date markings
Use racking systems designed to promote first-in, first-out flow (e.g., pallet flow racking)
Train staff on FIFO procedures and proper inventory rotation
Implement warehouse management software (WMS) that supports FIFO tracking
Conduct regular inventory checks to confirm proper stock movement
Conclusion
FIFO, or First In, First Out, is a foundational concept in warehouse racking systems. It ensures that products are stored, rotated, and shipped in the order they are received, helping businesses reduce waste, stay compliant, and improve operational efficiency. Whether you’re managing perishable goods or simply trying to streamline your stock turnover, FIFO is a best practice that delivers long-term value in inventory control.
Post time: Jul-30-2025