FIFO

What FIFO means — simply put

FIFO stands for First-In, First-Out. Imagine a grocery shelf: the milk that arrived first should be sold first so the older cartons don’t go bad. That’s FIFO. In a warehouse, it means you pick and ship the oldest stock before newer arrivals.

Why FIFO is useful

• Reduces waste: Older items get used or sold before they expire, cutting losses from spoiled goods.
• Makes things predictable: Simple rules are easy to teach staff and follow every day.
• Supports quality and compliance: For regulated products like medicines or food, FIFO helps meet safety and traceability rules.
• Improves customer satisfaction: Customers receive fresher, less-damaged items.

How FIFO works in a warehouse — step by step

1. When new stock arrives, place it behind or to the side of existing stock so older units remain in front (or at the picking face).
2. Label incoming shipments with receipt dates and lot numbers so staff can quickly identify older items.
3. Set pick instructions in your warehouse system to select the oldest available lot first, or train pickers to take from the front position where older goods sit.
4. Regularly check and rotate stock during receiving and replenishment so older units are not buried.

Simple examples

• Grocery: Place newly received cans behind older ones on the shelf so cashiers and customers naturally take older stock first.
• Small e-commerce warehouse: Use two-bin locations—when you refill, put new items in the back bin so the front bin (older) is used first.

When FIFO is a great choice

• Perishable or expiry-sensitive products (food, drugs).
• Products that deteriorate in storage (some chemicals or adhesives).
• Businesses that want a low-complexity rule that aligns physical flow and records.

When FIFO might not be the best

• If items never degrade and your main concern is cost accounting during inflation, other methods might be considered for financial reporting.
• If your storage design makes it hard to reach older stock without excessive handling, you may need different storage or a hybrid approach.

Practical tips to implement FIFO

• Design for flow: Use shelves or racks that let you load new stock behind old stock (gravity flow racks are ideal).
• Label clearly: Put receipt dates and lot numbers on pallets or cartons so pickers can identify oldest stock quickly.
• Use your WMS: If you have warehouse software, enable FIFO picking logic to reduce human error.
• Train and audit: Show your team how to rotate stock and run regular cycle counts to catch mistakes.

Common beginner mistakes

• Stacking new items in front: This buries older stock and breaks the FIFO flow.
• No clear labeling: Without dates or lots, pickers guess and often take newer items by mistake.
• Ignoring returns: Returned goods should be quarantined or re-dated; otherwise they can break FIFO sequencing.

Quick FAQ

• Is FIFO the same as FEFO? Not exactly. FIFO uses receipt date; FEFO (First-Expired, First-Out) prioritizes expiry dates. Use FEFO when expiry matters more than receipt date.
• Do I need fancy software? Not always. Small operations can run FIFO with good labeling and shelf discipline. Software helps at scale or with many lots.
• Will FIFO always lower costs? FIFO lowers waste and returns for perishable goods, but accounting/tax effects depend on your financial rules.

Bottom line

FIFO is the straightforward, beginner-friendly way to keep inventory fresh and avoid waste. For most perishable, regulated, or easily obsolescent goods it’s the best starting point. With clear labels, thoughtful storage layout and a little training, you can implement FIFO quickly and see immediate benefits.