First in, first out
Definition: First-in, first-out (FIFO) inventory is self-explanatory, as the first items to arrive at a warehouse or distribution center (DC) are the first to leave. The method’s most obvious advantages come with products that are closest to obsolescence or expiry, but other benefits are accounting — FIFO is often used to calculate the value of inventory and cost of goods sold (COGS) — and safety.
Field guide: While the finance department must tap the accounting and tax benefits of FIFO, the warehouse/DC staff must ensure that it happens in practice. Many facilities have pallet flow racks, in which products are fed into one end, moved along by a track or roller system, and unloaded from the other end when needed for order fulfillment.
Factoid: Rest in Peace, a mattress w in Fresno, California, adopted a first-in, first-out method after the coronavirus (COVID-19) pandemic hit. “We always have about 1,500 to 2,000 mattresses in inventory waiting to be processed, and we make sure now to process mattresses first that have been in inventory the longest,” company president Matt Young told Bed Times magazine. “That gives us an extra couple of days, so that if a mattress did contain the virus, it would be gone over that time.