FIFO & FEFO

What is FEFO?

First Expired First Out

This term is used in logistics and inventory management to describe a way of dealing with perishable products, or with a specified expiry date. The product with the deadline for the next intake will be the first to be served or removed from stock. Majorly used in Pharmaceutical and Chemical industry where expired dates are calculated based on Batch expired date or Shelf lifetime.

A common example of this treatment is the management of perishable products in a shelf display: Products with deadlines closest consumption should be used before the other.

What is FIFO?

"FIFO" stands for first-in, first-out, meaning that the oldest inventory items are recorded as sold first but do not necessarily mean that the exact oldest physical object has been tracked and sold. In other words, the cost associated with the inventory that was purchased first is the cost expenses first. With FIFO, the cost of inventory reported on the balance sheet represents the cost of the inventory most recently purchased.

Merits of FIFO and FEFO:

These techniques are very similar to each other as they both are applied to similar kinds of products i.e. for products which have an expiration date. The only time these might differ is when a stock set, which is manufactured after the date of manufacture of another stock set, moves into the warehouse first. This is a very rare scenario and hence these two are almost synonymous with each other.

This is the wisest method of warehouse management when it comes to products which have a shelf /service life. This method is especially preferred in businesses stocking FMCG (Fast Moving Consumer Goods), medicines, pharmaceuticals and other consumer durables.

If FIFO or FEFO is not followed in this case the chances of losing money and clients are higher as no clients would like to buy an expired or stale product, and even if they do, you would be at a greater loss than your customer as you would lose a valuable customer.

-Gazi Sanaul Hasan