--- title: "Which Inventory Model Suits You Better? The Role of FIFO Is Not Omnipotent!" description: "When it comes to inventory models, many people immediately think of the FIFO (First-In, First-Out) model. However, FIFO is not a one-size-fits-all solution. In warehousing, FIFO, LIFO (Last-In, First-Out), and random issue are common models, each closely tied to the characteristics of the goods. Supply chain expert Mr. Wu shares insights on these models and offers practical warehousing tips." author: "吴宇" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2017-08-25" language: "en" canonical: "https://xinjignxiao.com/en/articles/which-inventory-model-suits-you-better-the-role-of-fifo-is-not-omnipoten-5ae7f576/" markdown: "https://xinjignxiao.com/en/articles/which-inventory-model-suits-you-better-the-role-of-fifo-is-not-omnipoten-5ae7f576.md" original_source: "https://mp.weixin.qq.com/s/Y1WLgctAfEc7nvnYlRkEuQ" translation: "https://xinjignxiao.com/zh/articles/%E5%93%AA%E7%A7%8D%E7%BB%8F%E9%94%80%E5%95%86%E5%AD%98%E8%B4%A7%E6%A8%A1%E5%BC%8F%E6%9B%B4%E9%80%82%E5%90%88%E4%BD%A0-%E5%85%88%E8%BF%9B%E5%85%88%E5%87%BA%E7%9A%84%E4%BD%9C%E7%94%A8%E5%B9%B6%E4%B8%8D%E6%98%AF%E4%B8%87%E8%83%BD%E7%9A%84-5ae7f576.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/which-inventory-model-suits-you-better-the-role-of-fifo-is-not-omnipoten-5ae7f576/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Which Inventory Model Suits You Better? The Role of FIFO Is Not Omnipotent! > When it comes to inventory models, many people immediately think of the FIFO (First-In, First-Out) model. However, FIFO is not a one-size-fits-all solution. In warehousing, FIFO, LIFO (Last-In, First-Out), and random issue are common models, each closely tied to the characteristics of the goods. Supply chain expert Mr. Wu shares insights on these models and offers practical warehousing tips. Click the image for details. Introduction When it comes to inventory models, many people immediately think of the **FIFO (First-In, First-Out) model**. In reality, FIFO is not omnipotent. In warehousing, FIFO, LIFO (Last-In, First-Out), and random issue are common models for material dispatch. Regardless of the model, it is inevitably closely linked to the characteristics of the goods themselves. Below, let's see what supply chain expert Mr. Wu has to say. **1. FIFO (First-In, First-Out)** In logistics control, FIFO means that goods received earlier are displayed in front of goods received later, ensuring that products with earlier production dates are sold first. It is a method where, based on the principle of first-in, first-out, the cost of inventory issued is calculated using the unit price of the earliest received inventory. **Advantages** The primary role of FIFO is to ensure that all products are sold within their normal shelf life, control losses, and reduce costs. It prevents enterprises from arbitrarily selecting inventory valuation methods to adjust current profits. For customers, purchased goods should have a certain usage time within the shelf life. If they buy expired goods, it can cause extremely unfavorable compensation and impact on the store's reputation. For goods without a clear shelf life, FIFO can keep displayed items fresh at all times. **Disadvantages** FIFO is not omnipotent. Its drawback is that it is relatively cumbersome, especially for enterprises with frequent inventory inflows and outflows. Moreover, when prices rise, it can overestimate current profits and inventory value; conversely, it can underestimate inventory value and current profits. **2. LIFO (Last-In, First-Out)** The LIFO method is based on the inventory flow assumption of "last in, first out." Its basic characteristic is to match the cost of the most recently acquired inventory with the sales revenue realized. For most enterprises, LIFO is generally chosen when inventory prices are expected to rise continuously. **3. Random Issue** The random issue model may be suitable for enterprises where the cost fluctuation of goods is minimal, there is no shelf life, or there are low requirements for market factors and financial cost accounting. Regardless of which inventory issue model is adopted, the following warehousing tips should be noted: **Warehousing Tips** 1. Store items facing the aisle. To facilitate easy entry and exit of goods and movement within the warehouse, the basic condition is to store items facing the aisle. 2. Stack as high as possible to improve storage efficiency. To effectively utilize the warehouse volume, stack items as high as possible. To prevent damage and ensure safety, use shelving and other storage equipment as much as possible. 3. Select locations based on dispatch frequency. Items with high dispatch and receipt frequency should be placed near the entrance/exit for easy handling; items with low mobility should be placed farther from the entrance/exit; seasonal items should be placed according to their seasonal characteristics. 4. Store the same variety in the same place. To improve operational and storage efficiency, the same or similar items should be stored in the same place. The familiarity of employees with the location of items directly affects the time for inbound and outbound operations. Placing similar items nearby is also an important method to improve efficiency. 5. Arrange storage positions based on item weight. When arranging storage locations, heavy items should be placed at the bottom and light items on the top of shelves. For large items requiring manual handling, waist height should be the benchmark. This is an important principle for improving efficiency and ensuring safety. 6. For easily damaged items, follow the FIFO principle as much as possible to speed up turnover. Due to the diversification, personalization, and generally shortened service life of products, this principle is very important. 7. Arrange storage methods based on shape. Storing items according to their shape is also important. For example, standardized goods should be stored on pallets or shelves. **Source: Efficient Dealer Operations** The **3rd (CFIC) China FMCG + Internet Conference** will be held in Chongqing in October 2017. At this conference, New Distribution has invited **1000+ dealers, 500+ brand owners, founders of 200+ B2B platforms, and 100+ investment and financing institutions** to participate. The theme of this conference: **New Forces, New Ecosystem**. We will invite well-known domestic B2B industry experts, mentors, and B2B platform founders to discuss the following topics: > **How can the FMCG industry leverage B2B to achieve new growth opportunities?** > > > > > **How should the new supply chain behind new retail be built?** > > > > > **How can intra-city logistics help B2B achieve leapfrog development?** **Highlights of this conference:** > **The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"** > > > > > **Closed-door matchmaking meeting between B2B and investors** > > > > > **Conference site + exhibition center, dual internet technology exhibition** > > > > > **Leaders from Alibaba, Eternal Asia, Best Store Plus, Global Logistics, Unilever, Hd, Yunmei Co., Ltd., and other well-known enterprises in various fields will deliver speeches and share pioneering views.** October 17-18, 2017 Chongqing Convention and Exhibition Center Registration is now open. Long-press the QR code below or click "Read Original" to register. Early bird tickets before September 15 enjoy a 30% discount! Add friend with note "Conference Registration" Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: [2016 "FMCG + Internet" Summit Forum]() -END- --- ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671