What Is First In, First Out?
First In, First Out (FIFO) is an inventory management system that ensures the oldest items in a company’s stock are sold first. This method of inventory control helps businesses maintain accurate records and avoid overstocking or running out of products. FIFO also allows companies to track their costs more accurately by ensuring they sell the oldest items at the lowest cost.
The FIFO system works on a simple principle: when new goods arrive, they are placed at the back of the queue while older goods remain at the front until they are sold. As customers purchase items from this queue, those at the front will be sold first before any newer arrivals can be purchased. This way, businesses can ensure that all their products have been used up before ordering new ones and prevent them from becoming outdated or obsolete due to long-term storage. Additionally, it helps keep track of how much money was spent on each item so that profits can be maximized accordingly.