What Is FIFO (First-In, First-Out) for Inventory Management?

FIFO, also known as First-In, First-Out, is a method of inventory management that determines the order in which goods are sold and replaced. As its name suggests, the first items that are added to inventory will be the first ones to be sold. This system is commonly used in warehouses for businesses with rotating inventory, such as seasonal merchandise or perishable goods. Using FIFO management, the oldest items are sold first, ensuring that inventory does not expire or become outdated. It can also reduce overhead, avoid spoiling, and increase profitability. In this blog, we will discuss what FIFO is, how it benefits inventory management, and how Xpressman Courier & Trucking can help with our professional services.

What Is FIFO Management?

As mentioned above, FIFO management is a system that sends out the earliest inventory items first. It is also commonly known as First-In, First-Out inventory management. FIFO is a way to reduce waste and maximize profit by ensuring that goods are sold before they expire or become obsolete. During this process, the products on the shelves the longest are sold first, while those in inventory for less time remain in the warehouse.

How Is FIFO Different than LIFO?

FIFO and LIFO are two different methods of inventory management. In LIFO management, the last items added to inventory are the first to sell. This method is often used for businesses that sell products with a limited shelf life, such as food or fashion items. While LIFO may seem more efficient because it reduces the risk of spoilage, it can also create issues when determining the actual cost of goods sold and calculating taxes. On the other hand, First-In, First-Out management can provide a more accurate calculation of profit and taxes, making it a preferred method for many businesses.

Top 3 Benefits of Using FIFO for Inventory Management

There are several benefits to using FIFO management for inventory control. Some of the top advantages include:

Reduce Surplus & Overhead Costs

Since First-In, First-Out management ensures that the oldest products are sold first, it reduces the risk of having excess inventory and potentially incurring costs associated with storing or disposing of expired goods. If you notice that you are beginning to have a build-up of older products, you can move them quickly by offering special promotions or discounts to encourage customers to purchase them before they become outdated.

Make Room for New SKUs

If you are constantly coming out with new products, by getting rid of the older ones first, you can easily make space for additional SKUs. This prevents overcrowding and allows for better organization in the warehouse. You can also save time and resources by not constantly rearranging products to make room for new ones.

Increase Overall Profits

First-in, First-Out management can also help businesses increase their overall profits. By selling the oldest products first, you can keep prices steady and avoid heavily discounting products that are close to their expiration date. This can also increase your return on investment for these items, as they are sold at full price.

How Do I Know If FIFO is Right for My Business?

When planning your inventory management strategy, there are a few factors to consider to determine if FIFO is the best method for your business. Depending on the size and type of your business, FIFO may or may not be the most suitable option. The types of products you sell, your customer purchasing habits, and the size of your inventory are all important factors to consider. For smaller businesses with a limited variety of products, FIFO may not be necessary as manually tracking and managing inventory may be easier. However, for larger businesses with a higher volume of sales and a wide range of products, implementing First-In, First-Out can help streamline operations and improve efficiency. Additionally, if your business deals with perishable goods or has a high turnover rate for certain products, FIFO can greatly benefit in reducing waste and maximizing profits.

Get a Free Quote on Warehousing & Inventory Management Services in Randolph, Massachusetts, with Xpressman Trucking & Courier

At Xpressman Trucking & Courier, we understand the importance of efficient inventory management and warehousing services for businesses of all sizes. With over 30 years of experience in the industry, we offer customizable solutions to meet each client’s unique needs. We provide a variety of services, including First-In-First-Out (FIFO) inventory management, temperature-controlled storage, and online inventory tracking for real-time updates. Our team is dedicated to providing top-notch customer service and ensuring the safe and timely delivery of your products. To learn more and get a free quote, submit an online estimate request or call us at 781-836-4614!