FEFO: What FEFO Means and Why It Matters

FEFO stands for First Expired, First Out. It is an inventory management principle used to minimize spoilage, obsolescence, and safety risks by ensuring that products with the nearest expiration or best-before dates are moved out of storage first. FEFO is especially important for perishable goods (food, pharmaceuticals, chemicals), but it can also apply to seasonal products, promotional stock, and any items with time-based quality considerations.

At its core, FEFO is simple: when you pick, ship, or consume stock, choose the unit that will expire the soonest. This reduces the chance that items sit in inventory until they become unsellable or unsafe. For businesses that deal with regulated goods—such as medications or certain chemicals—FEFO can be a compliance requirement and a key part of risk management.

Why FEFO matters:

• Reduces waste: By using items that will expire first, organizations lower the quantity of unsellable or unusable stock, which improves margins and sustainability.
• Protects customers: Shipping fresher products improves customer satisfaction and reduces complaints or liability related to expired goods.
• Supports compliance: Industries with strict regulations often mandate that products be tracked and rotated by expiry date. FEFO helps demonstrate proper controls.
• Improves forecasting: Patterns of expiry-driven movement can reveal procurement or production timing issues that planners can correct.

How FEFO compares to other inventory methods:

• FEFO vs FIFO (First In, First Out): FIFO moves the oldest received inventory first. That often aligns with FEFO, but not always: if a newer batch has an earlier expiration date (e.g., older stock has a longer shelf life), FIFO could leave a closer-expiry item behind. FEFO prioritizes expiration date regardless of receipt date.
• FEFO vs LIFO (Last In, First Out): LIFO takes the newest receipt first—rarely appropriate for perishables since it increases spoilage risk.
• FEFO vs Batch/Lot-based strategies: FEFO often uses batch or lot tracking as the mechanism to determine expiry order. Batch tracking without FEFO rules won't prevent expired items from being shipped.

Simple FEFO example for beginners:

1. Receive three lots of yogurt: Lot A (received Jan 1, expiry May 1), Lot B (received Feb 1, expiry April 15), Lot C (received Mar 1, expiry June 1).
2. Under FEFO, you pick from Lot B first (expiry April 15), then Lot A (May 1), then Lot C (June 1), even though Lot A arrived before Lot B.

Practical considerations when applying FEFO:

• Accurate expiry data: FEFO depends on reliably captured expiration or best-before dates at receipt. Poor labeling or data entry defeats the method.
• Lot and serial tracking: To execute FEFO, systems need to associate expiry dates with lots or serial numbers. This is commonly managed by a Warehouse Management System (WMS) or inventory module of an ERP.
• Storage layout: Warehouse design should support FEFO flow—racking, picking faces, or bins arranged to make the closest-expiry items most accessible.
• System rules and automation: Configure picking logic in software to prioritize expiry date; consider alerts for near-expiry items or automatic markdowns.
• Training and audits: Staff must understand FEFO principles and occasionally audit racks to ensure compliance and identify errors like misplaced goods or mislabeled expiry dates.

Common challenges and solutions:

• Mixed expiry within cases: Occasionally, pallets or cases contain items with varying expiries. Establish receiving procedures to reject mixed-expiry shipments or to re-label and segregate them on receipt.
• Slow-moving near-expiry items: Use promotions or transfers to other locations to clear stock before expiry, and feed that insight back into purchasing or production planning.
• System limitations: If your current WMS can't enforce FEFO, use scanning and manual checks as an interim measure—then prioritize upgrading or configuring software to automate expiry-based picking.

FEFO is a practical, low-risk inventory method with immediate benefits for any organization handling time-sensitive goods. For beginners, start by ensuring every received item has a clear expiry date recorded, then align storage, picking procedures, and systems to prioritize those dates. Regular audits and cross-functional communication between operations, procurement, and quality teams will embed FEFO as an effective, day-to-day practice.