Find out how the FIFO method can help you manage your inventory and improve your operations.
Published 23 Nov 2022
The First In, First Out (FIFO) inventory management method is a system wherein the inventory brought into the storage area is also the first to be sold or used. The reasoning behind this system is that inventory has a shelf life and will expire eventually.
Many industries use the FIFO method, including food service and manufacturing. This process ensures that consumer products are safe by following Good Manufacturing Practices (GMPs). Many businesses use the FIFO inventory management method to stay compliant with GMPs.
Businesses can keep track of their inventory using software programs that follow the FIFO method. While the FIFO method may not be suitable for every business, it is a widely used system for managing inventory.
There are several pros and cons to the FIFO inventory management method. Below are some of the most:
In any business, the Cost of Goods Sold (COGS) is an essential indicator of success, and FIFO is a common method of determining COGS. Companies use it to match the costs of goods sold with the revenue generated from the sale of those goods.
The FIFO method requires businesses to keep track of the cost of each unit of inventory they purchase. The company records the price of each unit sold and calculates the COGS. It’s best to use software platforms to help with this process, as it can be difficult to track costs manually.
The FIFO method is a straightforward way to calculate COGS, but it can be time-consuming if a business has extensive inventories. There are other methods of calculating COGS, such as the weighted average method, which may be more suitable for companies with large stocks.
Eliminate manual tasks and streamline your operations.
Tracking inventory and calculating COGS don't have to be complicated or time-consuming. SafetyCulture (formerly iAuditor) is a multi-platform inspection app that can be used to track inventory levels and costs. Accessible from anywhere and easy to use, you can use it on any device.
SafetyCulture gives businesses the ability to:
Rob Paredes is a content contributor for SafetyCulture. He is a content writer who also does copy for websites, sales pages, and landing pages. Rob worked as a financial advisor, a freelance copywriter, and a Network Engineer for more than a decade before joining SafetyCulture. He got interested in writing because of the influence of his friends; aside from writing, he has an interest in personal finance, dogs, and collecting Allen Iverson cards.
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