FIFO, FEFO, LIFO: Best Strategies of Inventory Management

There are 3 types of inventory management strategies used in warehouse management. They are commonly known as FIFO, FEFO, and LIFO. In this blog going to identify the FIFO, FEFO, LIFO concepts. Inventory management is more critical and more complex in the logistics industry. With inventory management strategies you can avoid issues of inventory handling.

What is FIFO in inventory management?

FIFO stands for First in, First Out

First, come, first left

in simple explanation we can say the batch came first into a warehouse and moved to sell or use first.

Using the FIFO strategy in a warehouse company can avoid the risk of obsolescence and reduce waste.

Need to do regular stock rotation and frequent inspections for the success of this strategy.

Advantages of FIFO

Reduce the cost of inventory

If keeping goods in a log time means incurring costs. So less inventory time means cost reduction.

Reduce the risk of obsolete and waste

If the product is obsoleted or expired it is not suitable for use. So that is not useful to consumers it means you can’t get revenue back. It will be a waste. In the FIFO concept always move the oldest items in first. So there is less chance of waste or expiration.

The concept of FIFO is easy to understand

Bookkeeping is easy and less chance of mistakes happening.

Because FIFO means the oldest purchased or received items are sold or used first it is a natural flow of receiving and sending goods from a warehouse so the accounting process is easy.

Excellent stock turnover

Tax advantages in some countries

Enhance financial reporting and accounting process

What products can be used for FIFO?

warehouse strategy depends on the product types which is used to store.FIFO warehouse management strategy can be followed for storing the below items,

Items that have a specific shelf life with an expiry date

perishable items such as food, medicines, cosmetics, supplements, toiletries, etc

Products that become obsolete or quickly “out of style”

Mobile phones, Laptops, technological equipment, textiles, home appliances, footwear

FiFO concept is not only for warehouse management but also can be used for supermarket tracks and outlets.

What are the best practices for the FIFO concept?

use software for inventory management

A better understanding of inventory flow

Storage systems for FIFO inventory management concept

Live Pallet Racking
Drive Through – Compact Pallet Racking System
AR Shuttle racking systems for pallets
Carton Flow picking system

Reference from: ar-racking.com

For more details on storage systems for FIFO, you can read the post of ar-racking.com

What is FEFO in inventory management?

FEFO stands for First expiry, First out

This strategy is commonly used in industries where products have a limited shelf life or expiration date,

For example the food and pharmaceutical sectors.

The FEFO strategy ensures that items with the earliest expiration dates are used or sold first to minimize waste due to product expiration.

This concept is vital for maintaining products or item’s quality and regulatory compliance.

Advantages of FEFO in warehouse management

Minimizes Product Waste
Earliest expiration dates having a product sold or used first.
Minimize the waste due to spoilage /expiration. And also reduce the financial losses.
Improving the quality of the products to the FEFO strategy in a warehouse is applicable to ensuring freshness and quality. This helps to Increase customer satisfaction and customer loyalty
Reduce the risk of recalls and financial losses.
Enhancing positive brand image
Efficient inventory turnover
Improving shelf management

What products can be used for the FEFO concept for inventory?

Perishable foods
Pharmaceuticals and Medications
Cosmetics and Personal Care Products
Health and Wellness Supplements
Beverages
Chemicals and Industrial Products
Printed Materials
Flowers and Plants
Pet Food
Bakery and Deli Items
Specialty Chemicals
Seasonal and Limited-Edition Products
Medical Supplies
Organic and Natural Products
Baby Products

What are the best practices for the FEFO concept?

Using inventory management software
Accurate Date Recording
Clear Product Labeling
Inventory Organization
Regular Inventory Audits
Training and Education
Regular Quality Control Checks
Supplier Collaboration
Traceability and Recall Plans
Regulatory Compliance
Customer Communication
Documentation and Records

By following these best practices with the FEFO concept for your business, reduce waste, maintain product quality, and meet industry regulations, ultimately improving overall inventory management processes.

What are the best racking systems/storage systems for the FEFO warehouse?

Pallet Flow Racking

These types of racks use gravity to move pallets from the loading side to the unloading side.
This is more suitable for large quantities of palletized products with expiration dates.
The first pallets loaded are the first to be picked.

Push-Back Rack

Store pallets multiple deep, with each level on inclined rails.
When a new pallet is loaded, it pushes the existing ones backward.
The first pallet loaded is the first to be unloaded.

Carton Flow Rack

Designed for smaller items stored in cartons or boxes.
Use rollers or wheels to allow cartons to flow from the loading side to the picking side.
Shorter shelf lives having products can be placed on the picking side for FEFO.

Drive-In Rack

Store pallets densely in lanes.
Forklifts drive into the lanes to place and retrieve pallets.
It’s ideal for products with the same expiration date within a lane.

Flow-Through Rack

This type of rack is designed for first-in, first-out product flow.
Suitable for products with short shelf lives, as the system automatically rotates products to ensure older items are picked first.

Mobile Racking

These racking systems are mounted on wheels or tracks, allowing rows of racks to be moved horizontally.
Can be configured to create dedicated lanes for products with different expiration dates, facilitating FEFO.

Dynamic Picking Systems

These like automated storage and retrieval systems (AS/RS), use conveyors, shuttles, or robotic arms to move products.
Dynamics picking systems can be programmed to follow FEFO principles and provide high-density storage.

Selective Rack with Lane Marking

FEFO can be implemented by using clear labeling, lane marking, and training staff to place products with different expiration dates in designated locations.

Automated Storage Systems

Include pallet cranes or robotic systems, that can be programmed to follow FEFO.
They offer high-density storage and precise control over product retrieval.

High-Density Shelving

including mobile shelving, can be adapted for FEFO by organizing products with different expiration dates on separate shelves or levels.

When selecting a storage system for the FEFO concept warehouse, consider factors like product characteristics, inventory volume, space constraints, and budget. Training your warehouse staff on FEFO procedures and inventory rotation is crucial, regardless of the chosen storage system, to ensure the strategy is effectively implemented.

What is LIFO?

LIFO stands for last in, First out.

It means the newest item used or sold first.

Mostly used in the LIFO concept when handling inventory for non-perishable goods and homogeneous products. Such as building and construction materials like ceramics, glass, and stone materials.