Skip to content 
EN 
DE 
العربية 
What Is FIFO?
FIFO (First-In, First-Out) is a method used in inventory management and accounting where the oldest items purchased or produced are sold or used first. It helps businesses maintain proper inventory rotation, reduce waste—especially for perishable goods—and accurately value goods sold by matching earlier costs to current revenue.
What Does FIFO Mean Across Different Industries?
FIFO (First-In, First-Out) has different meanings depending on the industry, but the core idea stays the same: the oldest item, cost, or input is handled first.
In business and inventory management, FIFO means selling or using the earliest stock first. This approach is especially important for food, medicine, and seasonal products, as it helps prevent spoilage, keeps products fresh, and reduces waste. It also supports better cost control by aligning older, lower-cost inventory with current sales during inflation.
In accounting, FIFO is a costing method where the first goods purchased are assumed to be the first sold. As a result, older costs are recorded as Cost of Goods Sold (COGS). In periods of rising prices, this often leads to higher reported profits and a balance sheet that reflects more current inventory values.
In computing and data structures, FIFO describes a queue system where data is processed in the order it arrives—similar to people waiting in line. A common example is a print queue, where the first file sent is the first one printed.
In manufacturing, FIFO supports pull-based production systems. Materials move through FIFO lanes in sequence, and downstream processes signal when more items are needed, helping maintain smooth workflow, reduce bottlenecks, and improve production efficiency.
In remote work, particularly in Australia, FIFO stands for Fly-In, Fly-Out. Workers travel to remote locations, such as mining sites, for scheduled shifts and then return home. This work model is widely used in mining, construction, and healthcare in remote regions.
Overall, FIFO is a foundational concept that improves efficiency, accuracy, and resource management across many industries.
Why Would A Company Choose FIFO?
Companies choose FIFO (First-In, First-Out) because it helps them use or sell older stock first, reducing the risk of spoilage, expiration, or obsolete inventory. This is especially important for perishable, seasonal, or fast-moving products, where freshness and timing directly affect profitability.
FIFO also brings consistency across warehouses and store locations, making inventory handling easier to manage and audit. From a financial perspective, it simplifies accounting and reporting, improves inventory accuracy, and provides clearer insight into costs and margins—helping businesses operate more efficiently and make better decisions.
What Types of Companies Uuse FIFO?
Many types of companies use FIFO (First-In, First-Out), especially those where inventory freshness, expiration dates, or fast turnover are critical. FIFO closely matches how products naturally move through supply chains, making it a practical and widely adopted method.
Food and beverage businesses, such as restaurants, cafés, and grocery stores, rely on FIFO to sell older items first and reduce spoilage. Pharmaceutical and healthcare companies use FIFO to manage expiry dates and maintain product safety. Consumer goods brands and fast-moving consumer goods (FMCG) companies—including global names like Unilever and Newell Brands—use FIFO to keep inventory flowing efficiently.
FIFO is also common in fashion and retail, where products have short life cycles, and in manufacturing, where companies such as Paccar and Oshkosh Corp. have shifted significant inventory to FIFO to improve cost transparency during inflation. Additionally, many international and multinational companies, including non-U.S. operations of major retailers like Costco, use FIFO because it aligns with global accounting standards (IFRS).
Overall, FIFO is preferred by companies that need accurate shelf-life tracking, clearer financial reporting, and consistency across global operations.