{"id":38488,"date":"2025-11-20T18:56:17","date_gmt":"2025-11-20T18:56:17","guid":{"rendered":"https:\/\/www.speedrackwest.com\/resources\/\/"},"modified":"2025-11-25T16:27:39","modified_gmt":"2025-11-25T16:27:39","slug":"fifo-warehouse-management","status":"publish","type":"resource","link":"https:\/\/www.speedrackwest.com\/resources\/learn-warehouse-racking\/fifo-warehouse-management\/","title":{"rendered":"FIFO Warehouse Management: How It Works & Examples"},"content":{"rendered":"\n

Let’s dive into how FIFO works in warehouse management and why it’s crucial for efficient operations.<\/p>\n\n\n\n

What Is FIFO?<\/h2>\n\n\n\n

Imagine you buy apples for your store three times a year: in January for $1<\/strong> each, in June for $1.05<\/strong> each, and in November for $1.10 each<\/strong>. If you sell an apple in December, which one do you sell first? Under FIFO, you sell the $1<\/strong> apple first because it was the first one you bought.<\/p>\n\n\n\n

FIFO is an inventory management method in which the first stock received is the first to be sold, used, or shipped. While it typically aligns well with perishable goods, it also applies to items like lumber, tires, and apparel. The main goal is to use older stock first. But what does this process look like?<\/p>\n\n\n\n

How FIFO Works in Warehouse Management (Step-by-Step)<\/h2>\n\n\n
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\"How<\/figure>\n<\/div>\n\n\n
    \n
  1. New products arrive<\/strong> \u2013 Workers load new inventory onto the storage racks at the entry point.<\/li>\n\n\n\n
  2. Products move forward<\/strong> \u2013 As each new pallet is added, the previous pallets shift forward along the racking system toward the picking area.<\/li>\n\n\n\n
  3. First in, first out<\/strong> \u2013 When an order comes in, workers retrieve the oldest stock first, ensuring proper rotation.<\/li>\n\n\n\n
  4. The cycle repeats<\/strong> \u2013 As products are picked, newly added items continue moving forward, preventing waste and keeping inventory fresh.<\/li>\n<\/ol>\n\n\n\n

    How the FIFO Process Works in a Selective Racking System:<\/h3>\n\n\n\n
      \n
    1. Labeling and Tracking<\/strong> \u2013 When each pallet arrives, it gets a unique barcode or RFID tag. Think of it like writing a special number on the pallet and then putting that number in your notebook. In the warehouse, the role of that notebook is taken over by the Enterprise Resource Planning System (ERP) or Warehouse Management System (WMS). You enter details like the pallet number, expiration date, and other info into the WMS.<\/li>\n\n\n\n
    2. System Guidance<\/strong> \u2013 The WMS then automatically figures out which pallet should be picked first and lets you know.\u00a0 It\u2019s like your mobile reminding you to do something\u2014super helpful and keeps everything on track.<\/li>\n\n\n\n
    3. Efficient Picking<\/strong> \u2013 Workers use RFID scanners (these small devices that read the barcode-like tags on the pallets) to track inventory and ensure the oldest stock gets picked first.<\/li>\n\n\n\n
    4. Optimized Placement<\/strong> \u2013 High-turnover pallets are stored near the loading docks, which means workers don\u2019t have to waste time walking far to pick them. It makes everything faster.<\/li>\n\n\n\n
    5. Continuous Rotation<\/strong> \u2013 As older stock is picked, new pallets are added in the right spots, keeping everything organized and reducing waste.<\/li>\n<\/ol>\n\n\n
      \n
      \"How<\/figure>\n<\/div>\n\n\n

      When done right, FIFO with selective racking helps free up storage space, streamlines fulfillment and makes sure stock is always rotated properly. This keeps warehouses running like well-oiled machines. Now let’s talk about the sectors where the FIFO method is used and why.<\/p>\n\n\n\n

      Industries That Benefit from FIFO<\/h2>\n\n\n\n

      Food & Beverage.<\/strong> The United States discards more food than any other country\u2014nearly 120 billion pounds\u00b2<\/a> annually, amounting to almost 40% of the nation\u2019s food supply. The value of wasted food in the retail sector is estimated to be twice the profit made from food sales. FIFO helps reduce this waste by ensuring that perishable goods, such as dairy products (e.g., milk and yogurt), are sold before the newer stock is placed on shelves, preventing expired items from being overlooked.<\/p>\n\n\n\n

      Pharmaceuticals.<\/strong> When lives are on the line, <\/strong>strict inventory control is non-negotiable. FIFO ensures that <\/strong>medications, vaccines, and medical supplies are used before their expiration dates <\/strong>while meeting regulatory guidelines like <\/strong>GMP and FDA standards.<\/strong><\/p>\n\n\n\n

      Retail & E-Commerce.<\/strong> Retailers and online stores use FIFO to manage <\/strong>seasonal stock, fashion, and consumer electronics, ensuring older models are sold first to avoid markdowns and losses.<\/p>\n\n\n\n

      Manufacturing & Distribution.<\/strong> Factories apply FIFO to maintain a <\/strong>smooth production flow, that guarantees older raw materials are used first, minimizing waste, and <\/strong>buttressing supply chains.<\/strong><\/p>\n\n\n\n

      FIFO vs. Other Inventory Methods: Key Differences<\/h2>\n\n\n\n

      There are many inventory management methods. Each option has its advantages and challenges, and the right choice depends on the nature of the inventory and business goals. Here are some of the most common methods.<\/p>\n\n\n\n

      Inventory Method<\/th>How It Works<\/th>Best For<\/th><\/tr><\/thead>
      FIFO (First-In, First-Out)<\/strong><\/td>Oldest inventory is used or sold first<\/td>Pharmaceuticals, regulated goods<\/td><\/tr>
      LIFO (Last-In, First-Out)<\/strong><\/td>The newest inventory is used first<\/td>Non-perishables, tax advantages<\/td><\/tr>
      FEFO (First Expired, First Out)<\/strong><\/td>The oldest stock remains in storage for the longest<\/td>Food safety, perishables<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

      FIFO (First In, First Out):<\/strong> The oldest inventory is used or sold first. Ideal for perishable goods, ensuring freshness and reducing obsolescence. Common in food, pharmaceuticals, and retail.<\/p>\n\n\n

      \n
      \"FIFO\"<\/figure>\n<\/div>\n\n\n

      LIFO (Last In, First Out):<\/strong> Most recent inventory is used or sold first. It\u2019s often used with non-perishable goods or when businesses want to take advantage of tax benefits during inflation (because you\u2019re using up the newest, more expensive stock first). LIFO helps with pricing strategies and managing costs, especially in industries like oil, coal, or manufacturing where items don\u2019t spoil.<\/p>\n\n\n

      \n
      \"LIFO\"<\/figure>\n<\/div>\n\n\n

      FEFO (First Expired, First Out):<\/strong> Items with the nearest expiration date are prioritized. FEFO is more specialized than FIFO\u2014it\u2019s all about ensuring that products don\u2019t go bad and keeping safety in mind.<\/p>\n\n\n

      \n
      \"FEFO\"<\/figure>\n<\/div>\n\n\n

      Advantages of FIFO in Warehouse Operations<\/h2>\n\n\n\n