FEFO vs FIFO/LIFO: Choosing the Right Rotation Strategy

Inventory rotation strategies determine which physical units are selected to fulfill demand. FEFO (First-Expired, First-Out) sorts by expiration date, FIFO (First-In, First-Out) sorts by receipt date, and LIFO (Last-In, First-Out) selects the most recently received items first. For beginners with a technical bent, comparing these approaches helps determine the correct operational rule for a given SKU or supply chain.

Fundamental differences:

• FEFO: Prioritizes remaining usable life. It minimizes expiry-related losses and is essential for perishables, pharmaceuticals, and regulated products. FEFO requires lot-level tracking and explicit expiry data.
• FIFO: Prioritizes chronological arrival. It approximates FEFO when products have uniform shelf lives and batch variability is low. FIFO is simpler to implement because it can often be enforced with location sequencing and basic stock rotation practices.
• LIFO: Selects the newest stock first. LIFO may be used in non-perishable contexts for accounting strategies or where specific operational flows justify using the newest materials. LIFO is rarely appropriate for product expiry control.

When to use FEFO

• Perishable goods: Food, drink, dairy, and fresh produce where remaining shelf life directly affects safety and quality.
• Pharmaceuticals and regulated chemicals: Products with mandated expiry management and recall traceability.
• Products with variable shelf life by batch: If different batches have different stability or expiry profiles, FEFO is safer than FIFO.

When FIFO is sufficient

• Uniform shelf life batches: If manufacturing yields consistent shelf life and expiry differences are negligible, FIFO is a practical and lower-complexity approach.
• Non-critical consumables: Products where expiry is not a safety or regulatory concern and inventory turnover is steady.

When LIFO might be used

• Obsolete or non-perishable goods: Very niche; typically not recommended when shelf life or quality is relevant.
• Accounting-driven decisions: In some regions or accounting treatments, LIFO may be used for cost-of-goods-sold strategies, but it must be reconciled with physical handling requirements.

Hybrid approaches and practical selection

Many operations adopt hybrid strategies: enforce FEFO on perishable and regulated SKUs, use FIFO on general consumables, and reserve LIFO for specific production or packaging flows where justified. A WMS that supports per-SKU pick rules allows precise enforcement: define pick strategy attributes at the SKU or lot family level so FEFO is only applied where necessary.

Example analysis: choosing the rotation strategy

Consider two SKUs: S1 is a refrigerated dairy product with variable batch shelf life; S2 is a boxed, non-perishable accessory with long life. For S1, FEFO is mandatory to minimize spoilage and fulfill safety obligations. For S2, FIFO may be adequate and simpler to execute. This selective application reduces operational overhead while protecting high-risk SKUs.

Measuring the impact of FEFO vs FIFO

• Write-off reduction: Track expired quantity/value before and after FEFO. A successful FEFO rollout should reduce expiry write-offs significantly for targeted SKUs.
• Order-fill accuracy: Monitor percent of orders shipped without near-expiry units. Improvement indicates better customer protection.
• Operational cost: Evaluate added labor and scanning time versus savings from reduced spoilage and improved compliance.

Common mistakes and how they skew the choice

• Assuming FIFO equals FEFO: When batches have differing expiry, FIFO can leave short-life items behind, increasing waste.
• Applying FEFO to all SKUs indiscriminately: Overhead of lot-level tracking for low-risk items increases cost; use SKU-level rules instead.
• Ignoring system capability: Attempting FEFO without a WMS that supports expiry fields will lead to manual errors; tool capability must match the rotation strategy.

Case example: reducing write-offs with FEFO

A mid-size food distributor experienced 4% monthly write-offs on a refrigerated SKU due to expiry. They implemented FEFO in the WMS for that SKU, enforced barcode scanning for lot expiry at pick, and trained staff. Within three months, expiry write-offs dropped to 0.5%, offsetting the minor throughput slowdown caused by extra scanning.

Conclusion and recommendation for beginners

Use FEFO where product shelf life, safety, or regulation requires it. Use FIFO where shelf life is long and consistent and the overhead of FEFO cannot be justified. Reserve LIFO for specific technical cases and align physical handling with accounting choices. The best practice is to configure per-SKU rotation strategies in your WMS, monitor KPIs, and iterate: start FEFO on the highest-risk SKUs, measure impact, and expand selectively.