Inventory management is so important when managing your eCommerce business. Planning your inventory can make a huge difference in your profit margins and cash flow. FIFO (first in, first out) is an essential concept to understand and follow. This method can help you understand your and account for your cost of goods sold (COGS) and help you possibly reduce your eCommerce fulfillment costs.
What is First In, First Out? (FIFO)
First in, first out is exactly what it sounds like. The first stock received is the first stock to leave. FIFO works slightly differently was talking about order fulfillment but ultimately uses a similar system.
I’m sure you have seen the FIFO method used at places like your grocery store. What the employee stocks the shelves of the perishable foods, they make sure to put the newest inventory on the back of the shelf pushing the oldest inventory to the front. This makes it so the inventory gets sold before the expiration date. Making sure it gets sold before then will help the food not spoil leading to the loss of money. FIFO will ensure food and perishables don’t expire before they are sold.
With an eCommerce fulfillment center, there are some businesses that will need to use the FIFO method and there will be some that will not. For the businesses who use it, stockers with place the newer items closer to the back of the shelf and move the older inventory to the front. Then when a customer places an order the picker will pick from the older inventory on the front of the shelf. This makes the inventory leave the warehouse in basically the same order it came into the warehouse.
Launch Fulfillment strives to use the FIFO method with every product. Not just the perishables or the items with expiration dates. We think making sure we use the older inventory first will help our clients not waste money and continue to make sales and provide the best items for their customers. Read about 3PL and fulfillment centers.