FIFO stands for ‘First In, First Out.’ This is a method used for managing inventory and processing data. The underlying principle of FIFO is that items that are received or produced first are the ones to be used or sold first.
In practice, this means that older stock is pushed to the front of the storage area, ensuring that it gets used before newer stock. This approach is particularly important in industries with perishable goods, like food and pharmaceuticals, where it’s crucial to minimize waste by preventing items from expiring.
For example, in a grocery store, the products that come into the stock room are placed behind older products on the shelves. This ensures that customers purchase the older items first. By implementing FIFO, businesses can maintain optimal inventory levels and ensure product quality.