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FIFO, FEFO or LIFO? What is it?

04 Mar

You may have already come across these abbreviations. They sound technical and perhaps a bit complicated, but in reality they represent a very simple principle – they determine which goods should leave the warehouse first. Their use in a warehouse is important, despite the seemingly complex names, because they help prevent the accumulation of older stock and reduce chaos and lack of clarity in inventory management.

Are you wondering what these abbreviations mean or whether they are suitable for your business? In this blog, we will explain them in more detail.

The value of goods can only be maintained when the warehouse operates smoothly.

There are several warehouse strategies that can help you keep this process under control. You are probably already using one of them in your warehouse without even realizing it.

FIFO – First In, First Out

or First stocked goes out first

This is the best-known and most commonly used strategy. Its principle is simple – the customer should receive the goods that were stocked first.

FIFO is an ideal method for:

  • Most e-shops without expiration dates
  • E-shops selling a stable assortment
  • E-shops with products that do not become obsolete with the arrival of newer models, trends or seasons (e.g. fashion, electronics)

What should you watch out for?

To ensure FIFO does not remain only a theory, it is necessary to make sure that warehouse workers do not pack products that are simply “closest at hand” or those placed on top of a pallet.

It helps to have:

  • clear labeling of warehouse locations
  • an overview of incoming goods
  • a systematic picking process

FEFO – First Expired, First Out

or First with the nearest expiration goes out

This method protects both your margin and your reputation. It ensures that goods with a shorter shelf life do not remain in the warehouse for too long. This helps prevent unnecessary write-offs worth hundreds or thousands of euros and minimizes the risk that a customer receives a product close to its expiration date.

FEFO is an ideal method for:

  • E-shops selling products with expiration dates (cosmetics, food supplements, food, drugstore products, etc.)

What should you watch out for?

When storing larger volumes of goods, you especially need a stable system with a clear overview and records of all batches.

LIFO – Last In, Fisrt Out

or Last stocked goes out first

This method is used less frequently in e-commerce environments, but it still has its place.

LIFO is an ideal method for:

  • E-shops with rapidly changing collections (for example fashion)
  • E-shops with seasonal products
  • E-shops with oversized or heavy goods (e.g. wood, gravel, sand)

Important notice

It should be noted that this method is not compliant with international accounting standards and Slovak legislation does not allow it for accounting purposes or inventory valuation.

What a good warehouse worker does naturally must also be done by the system

Knowing FIFO, FEFO or LIFO is not enough. Often, depending on the type of assortment, we naturally use one of these methods. However, it is important to apply these natural principles systematically as well. A suitable solution is a managed warehouse with location tracking.

In such a warehouse, you have a clear overview of where the goods are physically located, where older expiration dates are, or where specific batches are stored.

The Chameleoon Skladník application supports a managed warehouse mode. If these topics are relevant to you, contact us at podpora@chameleoon.sk. We will be happy to meet with you and discuss the topic and possible solutions for your warehouse in more detail.

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