FIFO, LIFO, and FEFO: Inventory management methods for an efficient warehouse

Imagine your warehouse as a living organism - when everything flows smoothly, your business runs without a hitch. But once the movement of goods gets disrupted, stock starts piling up, orders are delayed, and costs begin to rise. Inventory management methods like FIFO, LIFO, and FEFO help bring order to the chaos, ensuring each item is in the right place at the right time. But how do you choose the right method and implement it effectively?

Core inventory management methods

FIFO: First In, First Out

The FIFO (First In, First Out) method ensures that goods are dispatched in the same order they were received. The oldest items are shipped first. This approach is essential for perishable goods such as food, beverages, and pharmaceuticals, where freshness is critical. It also works well for electronics and other items susceptible to obsolescence due to technological or market trends.

For FIFO to function effectively, warehouse layout plays a key role - flow racks, for example, allow goods to move forward automatically without requiring manual checking of arrival dates. Staff can then intuitively pick the oldest items without needing to inspect stock dates.

LIFO: Last In, First Out

LIFO (Last In, First Out) is the reverse of FIFO. The most recently received goods are shipped out first. This method is suitable for non-perishable goods where the arrival date isn't a priority. A typical example is a building materials warehouse, where new pallets are placed in front of older ones and picked first.

Push-back racking systems are ideal for LIFO, allowing new stock to push older goods to the back automatically. This setup saves handling time and maximizes space utilization - perfect for high-turnover warehouses with limited floor space.

FEFO: First Expired, First Out

FEFO (First Expired, First Out) takes a more sophisticated approach by prioritizing products based on expiry dates. Regardless of when they were received, items with the shortest remaining shelf life are dispatched first. For instance, a pharmaceutical distributor may receive a newer batch of medication that expires sooner than an older one. With FEFO, the soon-to-expire stock is prioritized for dispatch, minimizing waste.

Accurate tracking of expiration dates is essential for FEFO to work - this is where Warehouse Management Systems (WMS) come into play.

Choosing the right method

When selecting the best method, start with the nature of your goods.

• Do they have a limited shelf life?
• Are they prone to rapid obsolescence?
• Equally important are your customers’ expectations regarding freshness and usability.

Don’t overlook the physical setup of your warehouse either. Some methods require specific racking systems and handling zones. And remember: financial and tax implications matter too. Each method affects inventory valuation differently.

WMS and Inventory management automation

Regardless of your warehouse size or stock type, a structured approach to inventory flow helps reduce errors, cut costs, and speed up order fulfillment. Combining the right inventory method with a WMS allows for streamlined warehouse operations and helps prevent issues such as unexpected stockouts, picking delays, or excess inventory.

But WMS systems go beyond tracking what’s in stock and where - it’s also about when items should be shipped. For example:

• controlling outbound shipments using FIFO, LIFO, or FEFO,
• automatically tracking batch numbers and expiration dates,
• guiding warehouse staff through optimized pick paths,
• reducing errors via barcode scanning,
• integrating with ERP and logistics systems.

In short: WMS solutions make life easier for warehouse teams while enhancing customer satisfaction.

Want to bring order to your warehouse?

Start with the core principles of inventory flow management. FIFO, LIFO, and FEFO can help you create a system where every item knows when it’s time to move. Add a well-fitted WMS on top of that, and clarity and efficiency will follow naturally.