What Does FIFO Require?
First In, First Out (FIFO) is an inventory management method that assumes that the first items added to inventory are the first items sold. This method is often used in industries where freshness is important, such as food and beverage.
What does FIFO require?
FIFO requires the following:
- Items to be marked with a date or other identifier that indicates when they were added to inventory. This identifier can be a date of purchase, a production date, or a lot number.
- Items to be stored in a way that makes it easy to identify the oldest items. This can be done by storing items by date, by lot number, or by some other method that ensures that the oldest items are always at the front of the inventory.
- Employees to be trained in the FIFO method and to follow it consistently.
Related questions
- What are the benefits of FIFO?
The benefits of FIFO include:
* **Improved product freshness:** FIFO helps to ensure that products are sold before they expire or become stale. This can help to reduce waste and improve customer satisfaction. * **Reduced inventory costs:** FIFO can help to reduce inventory costs by ensuring that the oldest items are sold first. This is because older items are often less valuable than newer items. * **Improved inventory control:** FIFO can help to improve inventory control by making it easy to track the age of inventory. This can help to prevent stockouts and overstocks. - What are the drawbacks of FIFO?
The drawbacks of FIFO include:
* **Increased labor costs:** FIFO can increase labor costs if employees need to be trained in the method and if they need to spend time rotating inventory. * **Reduced flexibility:** FIFO can reduce flexibility if it is difficult to move inventory around in storage. Conclusion
FIFO is a valuable inventory management method that can help to improve product freshness, reduce inventory costs, and improve inventory control. However, it is important to weigh the benefits and drawbacks of FIFO before implementing it in your business.
