A company’s inventory functions as the blood keeping it alive, where even the smallest adjustments to its operation methods allow significant benefits in return. Focusing on your inventory tracks its value for inventory financing purpose while reducing business income for tax purposes. 

The most commonly used warehousing method, First In First Out (FIFO), allows retailers, ecommerce, manufacturing, and other businesses quickly deliver their products to customers. 

What is FIFO? 

An important principle of inventory management, FIFO means your oldest stock (first in) gets sold first (first out), not your newest stock. This is especially important for perishable products to prevent situations involving unsellable spoilage. 

It’s also a good idea to practice FIFO for non-perishable products. If the same boxes are always sitting at the back, they’re more likely to get worn out. Plus, packaging design and features commonly change over time. You don’t want to end up with something obsolete that you can’t sell. 

Most businesses prefer FIFO due to its simplicity in bookkeeping and providing more accurate measures of live inventory. 

If the products in your warehouse have a shelf life, FIFO may be a solid strategy to choose from. When using a FIFO method, the oldest inventory moves first. 

In order to manage a FIFO system, you’ll need an organized warehouse. This typically means adding new product from the back or otherwise making sure old product stays at the front. If you’re working with a warehousing and fulfillment company, they probably do this already, but it’s a good idea to confirm. 

Pros And Cons When Using FIFO 

In logistics and warehousing, the crucial ability to deliver the right product to the right place at the right time can make or break a business. A FIFO procedure in your warehouse can effectively help you do this. 

There are many benefits of choosing a FIFO procedure for your warehouse. 


Reduce spoiled and expired products: Ship your oldest stock first to ensure that it’s delivered before it’s expiration date. This can help businesses reduce the quantity of inventory that remains unsold.  

  • Reduce out of date inventory: With items constantly moving in and out of the warehouse, you can reduce the chances of an item becoming obsolete before it is ultimately sold to a consumer. 
  • Ease quality control: By shipping products in the order in which they’re received, you can track deliveries with greater ease.  
  • Brace for inflation: Selling the oldest products first keeps prices more accurate-as they may have cost less to make. 
  • Keep current inventory value: As items purchased are pulled from shelves, the inventory system includes the most recently purchased inventory. This helps make sure that the inventory value and cost of goods sold is reflective of current market prices. 

Also: you may discover that FIFO gives a more accurate indicator of the value of your stock. With inventory quickly moving through efficient control, FIFO helps businesses increase net income.  

While FIFO serves many benefits in operation activities, you may discover some Cons depending on your specific situation. 

  • Reworking your warehouse space: When implementing FIFO procedures, you may need to rethink the space in your warehouse. The oldest products must be the most accessible. This may require additional time and efforts in reworking the space. 
  • Inflexibility in some situations: Some products like may expire very quickly, requiring an alternative approach. Furthermore, other products that don’t expire, may also benefit from a different procedure.  

Before deciding on a warehousing method, it’s crucial to weigh the pros on cons for your business.  

How To Implement FIFO 

If your warehouse consists of expiring products, you may need a FIFO warehouse management system involving the put away and picking process. There are a few other considerations to make when implementing FIFO procedures. Things you can do to make the process easier include: 

Label items: Using a clear labeling process can help you identify the oldest items in the warehouse to ship out first.  

Make older items most accessible: It’s important that the older items are the most accessible in the warehouse to prevent timing delays. Store product to streamline material handling. 

Stack the pallets appropriately: When organizing the warehouse, it is important that new pallets are not stacked on old pallets. Stacking pallets appropriately makes the fulfillment process easier. 

You need a strategy on how to best handle the inventory in your warehouse.  

Effectively managing a wide range of inventory turnover, standardized procedures must be set in place with careful tracking and accurate counts. Implementing FIFO procedures in your business may be a sharp business move. Before determining the best inventory control strategy for your business, it’s recommended to console with a trusted advisor to assess your current situation and further help you navigate through the complex process. Our team at MCDA CCG, INC. offer years of expertise in successfully helping businesses streamline their operations to outpace the competition and exceed customer expectations. If you’re serious about the capabilities of your business, contact us today! 


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