What are FIFO & LIFO Inventory Management Systems? Whether you are running a small industrial warehouse facility or a large international distribution center, the majority of logistics managers are familiar to some degree with FIFO and LIFO inventory systems. It comes as no surprise that one of the best ways to ensure smooth and seamless operations is by maintaining an extremely organized inventory record at all times. But, how can you be sure that your products are all in the right place at the right time and being picked in the proper order?
As the name implies, this method refers to a process in which the first stock units produced and stored are the first ones to be sold. In this case, the newest materials received are the last ones sold and the older materials take priority in order picking.
Conversely, this method assumes that the last stock unit placed into inventory is the first to be picked and sent to clients or directly to customers. In other words, the newest materials received are the first ones sold and thereby take priority over any older materials.
Inventory management is often ranked as the number one challenge for warehouse managers and the type of system used will ultimately have an impact on your consumers. In addition, how you choose to handle and store your inventory will directly affect how much the remaining stock will cost your company and the profit margins obtained.
Here we have seen how the main difference in classification between LIFO and FIFO systems is in terms of the arrival of stock and when it is actually sold. Now it is up to you to determine which option is most appropriate for your inventory needs in order to get the most out of these unique storage criteria.