FIFO vs. LIFO vs. FEFO: which one does your stock actually need?
Stock rotation sounds like a warehouse-manager concern, but it’s really just one question: when you have several of the same thing, which one do you use or sell first? Get it wrong and you eat spoilage, write-offs and confused accounting. Here’s the plain-English version.
FIFO — first in, first out
The oldest stock goes out first. This is the default for almost everyone, and it’s the right call for any product that ages, dates or goes out of fashion. Physically, it means restocking from behind — new stock goes to the back, customers take from the front. If you only remember one method, remember this one.
FEFO — first expiry, first out
A sharper version of FIFO for anything perishable. Here you rotate by expiry date, not arrival date — because a carton that arrived later might expire sooner. Food, pharma, cosmetics, anything with a best-before: FEFO is the one you want. It’s why cafés and food banks live and die by recorded dates.
LIFO — last in, first out
The newest stock goes out first. Physically this rarely makes sense for anything perishable — you’d be selling fresh while old stock rots. It shows up mainly as an accounting method (valuing what you sold at the most recent cost), and in a few non-perishable cases like piled aggregate or stacked materials where you genuinely take from the top. For most small businesses, LIFO is something to understand, not adopt.
How to choose
- Has an expiry or best-before date? FEFO.
- Ages, dates, or goes out of style but no hard expiry? FIFO.
- Truly non-perishable and identical over time? FIFO still works; LIFO only if your accountant has a specific reason.
Make rotation actually happen
A rotation method is only as good as your records. You can’t rotate first-expiry-first if you don’t capture the dates. Record received dates and expiry dates as stock comes in, label so the right unit is obvious, and lean on cycle counts to catch anything aging at the back before it becomes a write-off.