What is First In, First Out (FIFO)?
Goods received first are shipped first; commonly used for products with a shelf life.
In detail
FIFO stands for First In, First Out. Shipping goods out in the order they came in keeps earlier arrivals from sitting in the warehouse until they expire or spoil. In finance, FIFO is also one method for calculating inventory cost.
For example
A warehouse holds the same milk received in March and in May. When picking, the March batch goes first, so it does not pass its shelf life in storage.
How companies use it
Place newly arrived goods at the back of the shelf, record the batch and receipt date of each lot in the system, and have the system prompt picking by batch. This matters especially in food, pharmaceuticals, cosmetics and similar industries.
Common misconceptions
Assuming every product must follow first in, first out. For goods with a shelf life, “first expired, first out” is often more accurate, because a batch received later does not necessarily expire later.
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