FIFO, LIFO and FEFO: Methods for effective inventory management in a warehouse

Think of a warehouse as a living organism – if everything flows properly, your business runs smoothly. But if the flow of materials is poorly managed, inventory builds up, orders are delayed, and costs rise. Methods like FIFO, LIFO, and FEFO help keep your warehouse organized and ensure that each item finds its right place and time. But how do you choose the right one and put it into practice effectively?

Basic methods of material flow control

FIFO: First in, first out

The FIFO ( First In, First Out ) method ensures that goods leave the warehouse in the same order in which they were placed in the warehouse. The oldest items therefore leave first . This system is an absolute necessity for food, beverage and pharmaceutical products, where freshness plays a crucial role. It also works well for electronics and other goods subject to technological or trend obsolescence.

For FIFO to work properly, the physical layout of the warehouse is important – for example, flow racks that allow the smooth movement of goods without complicated checking of the receipt date. Staff then intuitively remove the oldest items without having to complicatedly check the stocking dates.

LIFO: Last in, first out

LIFO (Last In, First Out) is the opposite of FIFO. The goods that are stored last are the first to leave the warehouse. This method is used primarily for non-perishable goods, where the date of storage does not play a major role . A typical example is a building materials warehouse, where new pallets are unloaded before older ones and removed in reverse order.

Push-back racking systems are ideal for LIFO, where new goods automatically push older items to the back. The advantage is time-saving handling and better use of space - ideal for warehouses with high picking frequencies and limited space.

FEFO: First in, first out

FEFO ( First Expired, First Out ) provides a more sophisticated approach to tracking expiration dates. Regardless of the date of stocking , the products with the shortest remaining shelf life are shipped first . Imagine a situation where a pharmaceutical distributor receives newer products with a shorter shelf life than an older shipment. With FEFO, they ship products with an approaching expiration date first, minimizing the risk of inventory deterioration.

For FEFO to function properly, accurate records of expiration dates are essential. This is where WMS (Warehouse Management System) systems come into play.

How to choose the right method?

When deciding on the optimal method, consider the nature of your goods first.

• Does it have a limited shelf life?
• Is it subject to rapid obsolescence?
• Equally important are your customers' expectations regarding freshness and remaining shelf life.

You should also consider the physical layout of the warehouse and its customization options. Some methods require specific racking and handling space arrangements. Last but not least, accounting and tax aspects also play a role, as each method has a different impact on inventory valuation.

WMS systems and inventory management automation

Regardless of the size of your warehouse or the type of goods stored, a systematic approach to managing your material flow helps minimize errors, reduce costs, and speed up shipping. The right inventory management method, along with a WMS system, enables efficient management of warehouse operations and prevents problems such as unexpected stockouts, picking delays, or excess inventory.

However, WMS systems don't just look at what you have and where. They also help control when a specific item should leave. For example:

• stock removal management according to FIFO, LIFO or FEFO ,
• automatic tracking of batches and expiration dates,
• intelligent tracking of warehouse worker movements during picking,
• minimizing errors using barcodes,
• connection to ERP and logistics systems.

In short: it can make the work of people in the warehouse easier and at the same time increase customer satisfaction.

Do you want to keep your warehouse organized?

Start with the principles behind inventory management. FIFO, LIFO, and FEFO methods help you set up a system where each item knows when it's time to come. And when you support them with the right WMS, clarity and efficiency almost come naturally.