How do you make sure that you are practicing FIFO right?

FIFO (First In, First Out) is a key method in managing inventory that helps businesses use their oldest stock first. This guide will walk you through the steps to practice FIFO correctly in your warehouse or storage facility.

1. Organize Your Storage Areas for FIFO 

• Physical Arrangement: Put older products in front or in easy-to-reach spots. This makes workers naturally pick the older items first.
• Flow Racks: Use shelves where items slide from back to front. Workers add new items at the back and pick old ones from the front.
• Clear Pick Paths: Make clear paths in your warehouse that lead workers to older stock first. For example, place older items near the main walking paths.
• Bin Locations: Assign specific bin locations for products based on their age. For instance, you could have a “red zone” for the oldest items, a “yellow zone” for intermediate-age stock, and a “green zone” for the newest arrivals. Train your staff to always pick from the red zone first, then yellow, and green only when the others are empty.
• Vertical Storage: When using vertical storage like pallet racks, always place older stock on lower levels and newer stock on higher levels. This not only follows FIFO but also improves safety by keeping heavier, more frequently accessed items at more manageable heights.

2. Labeling and Date Management 

• Date Labels: Put clear labels on all products showing when you received them, their batch numbers, or when they expire. This helps workers know which products came in first.
• Color-Coding: Use different colored labels for different weeks or months. This makes it easy to spot older stock quickly.
• FIFO Zones: Split your warehouse into areas for stock of different ages. For instance, “Zone A” for January items, “Zone B” for February items, and so on.
• Rotation Labels: For products that are frequently restocked, use rotation labels. These are labels with multiple dates that can be ripped off as the product ages. Each time you restock, you tear off the old date, revealing the new one underneath. This saves time and reduces label waste.
• Digital Labels: Consider using electronic shelf labels (ESLs) for frequently changing inventory. These can be updated remotely and can display not just dates but also other important information like stock levels or pricing.
• QR Codes: Include QR codes on labels that, when scanned, can provide detailed information about the product’s history, including the manufacture date, receipt date, and expected shelf life. This can be particularly useful for products with complex rotation requirements.

3. Use Technology and Software 

• Warehouse Management System (WMS): Get a computer system that keeps track of inventory dates and tells workers which older items to pick first.
• Barcode Scanning: Use barcode readers to track when items come in and go out. The system can warn workers if they try to pick newer items before older ones.
• Batch Tracking: Use systems that track groups of products by when they were made or received. This helps pick the right batch for each order.
• RFID Technology: Radio-Frequency Identification (RFID) can automate much of the inventory tracking process. RFID tags can be read without direct line of sight and can track multiple items simultaneously, making them ideal for large warehouses with high turnover.
• IoT Sensors: Internet of Things (IoT) sensors can monitor environmental conditions that affect product shelf life, such as temperature and humidity. This is particularly useful for perishable goods, helping you prioritize items that may be at risk of spoiling.
• Automated Storage and Retrieval Systems (AS/RS): For large operations, consider implementing AS/RS. These systems use robotics to store automatically and retrieve items, ensuring perfect FIFO adherence without human error.
• Predictive Analytics: Use advanced analytics to predict which items are likely to become obsolete or expire. This can help you prioritize certain stock for immediate use or sale.

4. Regular Inventory Audits and Cycle Counts 

• Cycle Counts: Do regular checks to make sure older stock is being picked first and no old items are being forgotten.
• Spot Checks: Do random checks in different warehouse areas to catch any old products that might be sitting while newer ones are being shipped.
• Inventory Turnover Analysis: Look at reports to see how fast products move out. If old items aren’t moving as they should, something might be wrong with your FIFO system.
• ABC Analysis: Use ABC analysis to categorize your inventory based on its value and turnover rate. ‘A’ items are high-value, fast-moving products that require strict FIFO control. ‘C’ items might be low-value, slow-moving products where FIFO is less critical. This allows you to focus your efforts where they matter most.
• Physical Audits: While technology is helpful, nothing beats a physical walk-through of your storage areas. Regular physical audits can reveal issues that might not show up in digital systems, such as damaged packaging or improperly stored items.
• Cross-Department Audits: Have employees from different departments participate in audits. This can provide fresh perspectives and help identify issues that might be overlooked by those who work in the area every day.

5. Employee Training 

• Training on FIFO Rules: Teach warehouse workers why FIFO is important and how to follow it. Show them how to read date labels, understand the storage layout, and use the computer systems.
• Standard Operating Procedures (SOPs): Write clear steps for picking and storing items that follow FIFO rules. Make sure all workers follow these steps.
• Regular Reminders: Keep reminding staff about FIFO through meetings, signs in the warehouse, and feedback on their work. Consider creating a “FIFO tip of the week” to keep the concept fresh in employees’ minds. You could also implement a reward system for employees who consistently follow FIFO procedures correctly.
• Cross-Training: Teach employees about different roles in the warehouse. This helps them understand how their work affects others and why FIFO is important for the entire operation. It also provides flexibility in staffing, as employees can fill in for different roles when needed.
• Simulation Exercises: Create mock scenarios where employees have to solve FIFO-related problems. This could include dealing with mixed-date inventory, identifying the correct picking sequence, or handling exceptions to normal FIFO rules.
• Continuous Learning: Inventory management practices and technologies are always evolving. Provide opportunities for ongoing education, such as workshops, online courses, or industry conferences, to keep your team updated on the latest FIFO best practices.

6. Monitor Expiration Dates and Shelf Life 

• Expiration Date Management: Set up alerts in your computer system for products that will expire soon. This helps move these items out quickly.
• Regular Reviews: Often check products that don’t last long or expire quickly to make sure they’re moved out fast.
• Special Labels for Older Stock: Use special marks or labels for items that will expire soon, showing workers these need to be picked first.
• First-Expired, First-Out (FEFO): For perishable goods, consider using FEFO instead of FIFO. This means you’ll use items with the closest expiration date first, regardless of when they arrived. This can help minimize waste for products with variable shelf lives.
• Supplier Collaboration: Work with your suppliers to ensure that incoming stock has the maximum possible shelf life. You might negotiate to receive products with a certain minimum time until expiration, or arrange for more frequent deliveries of smaller quantities for fast-expiring items.
• Markdown Strategy: Develop a system for marking down prices on items approaching their expiration date. This can help move stock faster and reduce waste, while still recovering some of the product’s cost.

7. Plan Your Layout with FIFO in Mind 

• Receiving and Shipping Area Placement: Set up your receiving and storage areas so products naturally flow from receiving to storage to shipping, helping FIFO work better.
• Special FIFO Areas: For products that must strictly follow FIFO, use special areas where only FIFO products are kept. This stops newer items from being picked before older ones.
• Staging Areas: Create dedicated staging areas for incoming and outgoing goods. This prevents new arrivals from being mixed with existing stock before they can be properly sorted and stored according to FIFO principles.
• Aisle Configuration: Design your aisles to promote FIFO. For example, you could have one-way aisles where pickers always move in the same direction, encountering older stock first.
• Inventory Slotting: Arrange your inventory so that fast-moving items are stored in easily accessible locations. This not only improves efficiency but also ensures that these items, which are more likely to follow FIFO naturally due to their high turnover, are handled correctly.
• Seasonal Considerations: If you deal with seasonal products, plan for flexible storage areas that can be easily reconfigured. This allows you to maintain FIFO practices even as your inventory mix changes throughout the year.

8. Review and Adjust Picking Strategies 

• First-Expiring-First-Out (FEFO): For items that can spoil, you might need to pick based on expiration dates rather than when they arrived, which still follows FIFO principles.
• Batch Picking: Use your computer system to make pick lists based on dates or batches, so workers pick items in the right order.
• Worker Feedback: Ask workers to tell you when following FIFO is hard and use their input to make your system better.
• Zone Picking: Divide your warehouse into zones and assign pickers to specific zones. This can help ensure that each zone maintains proper FIFO practices and allows workers to become experts in managing the inventory in their area.
• Wave Picking: Organize picking tasks into waves based on factors like shipping deadlines, product types, or customer orders. This can help balance FIFO practices with other business needs, such as meeting specific shipping times.
• Pick-to-Light or Pick-to-Voice Systems: These technologies can guide workers to the correct items in FIFO order, reducing errors and improving efficiency.

9. Use FIFO-Focused Reports 

• Age of Inventory Reports: Often look at reports showing how old your inventory is. This helps find old stock that hasn’t moved and needs attention.
• FIFO Rule Following Reports: Some computer systems can show how well FIFO rules are being followed. Use these to spot and fix problems.
• Key Numbers to Watch: Keep track of things like average stock age, how fast inventory moves, and how much spoils to make sure FIFO is working right.
• Exception Reports: Create reports that flag any deviations from FIFO practices. This could include instances where newer stock was picked before older stock, or where old stock hasn’t moved in a specified period.
• Cost Saving Reports: Track the financial impact of your FIFO practices. This could include reductions in waste due to expired products or improvements in inventory carrying costs. These reports can help justify the resources spent on maintaining FIFO systems.
• Trend Analysis: Look at long-term trends in your FIFO performance. Are certain seasons or events associated with better or worse FIFO adherence? Use this information to plan and adjust your strategies accordingly.

Signs That FIFO is Working Correctly: 

1. Less Expired Products: When FIFO works well, limited products should expire while in storage.
2. Smooth Product Movement: Older stock consistently leaves before newer arrivals, showing balanced inventory movement.
3. Better Inventory Accuracy: Regular counts match what your computer system says, showing that stock dates match what’s actually on the shelves.

To make FIFO work well, you need to combine good layout planning, technology, training, and constant checking. This helps reduce waste, keep the right amount of inventory, and make your warehouse work better.

Here’s a simplified way to think about practicing FIFO correctly:

1. Make it Easy: Set up your storage so it’s natural and simple to take older items first.
2. Mark Everything Clearly: Use clear dates and labels so everyone knows which items are older.
3. Use Good Tools: Get the right equipment and computer systems to help track everything.
4. Check Often: Regularly make sure the system is working by counting and checking stock.
5. Train Everyone Well: Make sure all workers know how to follow FIFO and why it’s important.
6. Keep Track of Old Items: Pay special attention to items that might expire or become outdated.
7. Fix Problems Quickly: When something isn’t working, change it to make the system better.

Remember, good FIFO practice isn’t just about following rules – it’s about making smart choices that help your business run smoothly and save money by reducing waste and keeping your inventory fresh.

By following these guidelines and constantly looking for ways to improve, you can make sure your FIFO system works well and helps your business succeed. The key is to make the process as clear and simple as possible for everyone involved, while still maintaining good control over your inventory.

Whether you’re running a small stockroom or a large warehouse, these principles can help you manage your inventory better and avoid the problems that come from keeping stock too long or using newer items before older ones.