FIFO vs LIFO: Inventory Management Methods Compared
FIFO (First In First Out) dispatches oldest stock first; LIFO (Last In First Out) dispatches newest first. FIFO is mandatory for perishable goods. LIFO is not accepted under IFRS accounting standards. In logistics, FIFO is the standard.
FIFO and LIFO
FIFO and LIFO are methods for determining the order in which inventory is used or sold. In logistics, they determine which items are dispatched first from the warehouse.
Comparison
| Factor | FIFO | LIFO |
|---|---|---|
| Principle | First in, first out | Last in, first out |
| Spoilage risk | Low (old items used first) | High (old items stay) |
| Racking | Flow-through (drive-through) | Dead-end (drive-in) |
| Best for | Perishables, date-sensitive | Non-perishable bulk materials |
| Accounting (IFRS) | Accepted | Not accepted |
In Logistics
Logistics operations primarily use FIFO. Consolidation hubs, cargo distribution centers, and e-commerce fulfillment facilities process shipments in arrival order. Kolay Parsiyel's consolidation centers operate on FIFO: first-received cargo ships on the next available departure.
FEFO (First Expired, First Out)
For perishable goods, FEFO prioritizes items closest to expiry regardless of receipt date. Commonly used in food and pharmaceutical logistics.
FAQ
Is FIFO mandatory?
For food and pharmaceuticals, yes. For general logistics, it's best practice.
LIFO used in logistics?
Rarely. Primarily for non-perishable bulk materials (sand, gravel).
LIFO in accounting?
Not accepted under IFRS (international standard). Used under US GAAP only.
FEFO vs FIFO?
FEFO uses expiry date priority. FIFO uses receipt date priority. FEFO is a FIFO refinement for perishables.
References
- CSCMP Inventory Management
- IFRS Inventory Standards
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