Why is FIFO Important in Warehousing?
In terms of warehouse management, FIFO offers several benefits, as it streamlines the procedure and lowers associated operating expenses. By selling or moving older items first, the business minimises the risk associated with product deterioration, especially within the food and pharmaceutical industries.
Besides preventing spoilage, FIFO is one way to keep inventory levels more manageable and to enable better forecasting. Smoother inventory turnover also releases valuable warehouse space, cutting down storage costs and accelerating stock movement.
This systematic inventory management method improves warehouse efficiency by detailing the procedures for rotating products and making it easier for staff to locate and handle stock.
How Does FIFO Work in the Freight Industry?
In freight, FIFO plays a significant role in loading and unloading. Items are transported and received in the same sequence they were shipped. This ensures efficient operations and reduces the time goods spend in storage.
For instance, consumable products will not be held in the storage longer than expected, which to businesses dealing with fast-moving goods is very critical. In the same way, FIFO minimises the possibility of handling products that are near their expiration date or have expired, enhancing customer satisfaction and maintaining brand integrity.
What Are the Benefits of Using FIFO?
FIFO offers several advantages. It helps in managing costs by reducing storage and spoilage expenses. It ensures that the supply chain remains efficient and effective. The system improves inventory turnover rates. Businesses can maintain better control over their stock.
Furthermore, by pricing older inventory first, FIFO helps ensure accurate financial reporting. This is especially helpful in inflationary contexts where product costs tend to increase over time.
Are There Challenges with FIFO?
Despite its benefits, FIFO has challenges. Inaccurate data entry can disrupt the system and it requires careful tracking of inventory movement. Companies need appropriate technology and training. Implementing FIFO in complex operations could be difficult. Yet, overcoming these challenges can maximise its benefits.
Where operations are pretty complex for certain industries or where large inventories are maintained, manual tracking of the application of FIFO is enormously cumbersome.
How is FIFO Different from Other Inventory Methods: LIFO and FEFO?
Other inventory methods aside from the FIFO that businesses may use include the Last in, First Out (LIFO) and First Expired, First Out (FEFO). Opposite to the FIFO, which focuses on the first stock and moves forward from there, LIFO utilises the most recent stock added.
It can be beneficial for non-perishable goods in markets where high inflation occurs. Conversely, FEFO is based on expiration dates, not arrival sequence, in order to be certain that products closer to expiration will be the first sold or consumed.
