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What is the First In First Out (FIFO) concept in Inventory Management?

FIFO inventory management strategy

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 concept. Inventory management is more critical and more complex in the logistics industry. With inventory management strategies you can avoid issues of inventory handling.

FIFO Concept

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

Related posts you may like to read,

Warehouse Management & Warehouse Management System: Everything you need to know

What is Logistics? Types of logistics,7 R’s, and more in a simple way of explanation

Main 3 Types of Logistics – Inbound, Outbound, Reverse

Reverse Logistics: Everything you need to know

What is Third party Logistics(3PL)?:Everything you need to know

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