Created at 16 May 2025
Inventory management is a process of managing and controlling products encompassing activities from receiving, storing, inventory tracking, picking orders and dispatching items. The most used inventory management methods are FIFO (First In, First Out), FEFO (First Expired, First Out) and LIFO (Last In, First Out). Following these methods, businesses can optimise inventory levels, minimise waste and enhance customer satisfaction to provide high-quality products. In this article, we will explore the differences between these methods and their advantages in supply chain management.
FIFO is an inventory management method where the goods produced first are the first to be picked and distributed. This method is applicable to products with a short shelf life such as food, beverages and pharmaceuticals. Some advantages of managing inventory through FIFO are:
Reduce inventory costs and waste
By picking older stock first, FIFO helps reduce overall operational costs by minimizing waste due to spoilage and maintaining optimal inventory levels.
Enhance customer satisfaction
FIFO method ensures customers receive fresh products and high-quality products. This will improve customer satisfaction and build customer loyalty.
Enhance operational efficiency
This method helps businesses streamline inventory management with accurate inventory data and quick order fulfillment.
This method is similar to FIFO, but FEFO prioritises expiration dates to prevent the distribution of expired products. This method is crucial for perishable goods such as food and pharmaceuticals based on regulatory standards and maintain product quality. Highlights of benefits using FEFO are
Waste reduction
For perishable goods, FEFO method helps ensure that product is used or sold before they expire. This method helps businesses to manage inventory more effectively and prevent wastage due to expired items.
Enhance customer satisfaction
FEFO method maintains product quality, which ensures customer satisfaction.
LIFO is an inventory management method where the goods that entered the warehouse last will be the first to leave to the warehouse. This is the opposite of FIFO where the oldest products are shipped first and it is applied to products that have similar shelf life. Advantages of LIFO includes:
Increase profitability
LIFO is often for companies that have high turnover or seasonal products. By adapting to this method ensures high margin goods are shipped first and increase profitability.
Minimise travel distance
By working in the same aisle for loading and unloading, this method reduces the distance forklifts that need to travel.
Choosing the right inventory management methods (FIFO/FEFO/LIFO) is essential for effective supply chain management. FIFO and FEFO are effective to reduce waste and maintain high quality products. LIFO is suitable for products with similar shelf life and help businesses to improve their profitability.
By aligning inventory management methods, businesses requires partnership with an experienced 3PL warehouse like Atlantic Container Line Australia. Our company helps businesses to optimise their logistic and warehouse operation strategies.