FIFO Inventory: How to have and efficient supply chain of with perishable goods.
As we have discussed in previous blog entries, there are several ways to manage an inventory. Depending on each logistics company’s tasks, their transport fleet and warehouses must adopt strategies that allow a continuous flow of goods. Just in Time (JIT) strategy is perfect for reducing storage costs, while Just in Case (JIC) is an indispensable technique to prepare against unexpected situations. But, how do you manage a supply chain in which products become obsolete or spoil quickly?
Logistics companies have an enormous challenge when transporting and storing perishable products due to the small margins of time between production and spoilage. That’s why, in order to address this problem, these businesses use a strategy known as First in First Out (FIFO), which consists in the idea that assets or materials acquired first are the first ones to be sold or used.
This method prevents perishable products like food, beverages, and medicines to stay stored after their expiration date. In the case of electronics appliances, FIFO avoids inventories to become obsolete or make an older product to compete with newer iterations. Also, if the products have a warranty policy, coverage will last longer, benefitting the consumer. Besides, goods acquired first have a lower cost, allowing companies to sell them at a higher cost due to inflation.
Thanks to the benefits this technique has to offer, many companies have embraced this inventory management method. An important example is supermarket chains that, along with their logistics providers, constantly introduce and withdraw inventory from their storage facilities to prevent products to spoil before being sold.
However, FIFO is not exempt of disadvantages and problems that can occur while handling goods. Generally, this method is only viable when the warehouse’s design and physical configuration allows it. If the warehouse is not properly designed, FIFO will be very hard to be efficiently implemented. This takes us to a second downside: difficulty of tracking inventory. Due to the continuous movement of goods, tracking can be hard to achieve if it’s not done properly and with proper caution. That’s why some companies have to upgrade their inventory control system, which results in higher infrastructure and equipment costs.
Efficient and fast transportation of perishable goods is a challenging task for supply chain and logistics companies. That’s why at Woodward Logistics we have the necessary infrastructure and experience to implement logistics strategies that adequate to our clients’ needs.
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Kenton, W. (2019, February 7). First In, First Out (FIFO) . Retrieved from Investopedia: https://www.investopedia.com/terms/f/fifo.asp
Shelton, C. (2017, October 30). What Is The FIFO Inventory Method? First In, First Out Explained . Retrieved from Small Business: https://fitsmallbusiness.com/fifo-inventory-method/