The three methods
| Method | Rule | Typical products |
|---|---|---|
| FIFO – First In, First Out | Ship the oldest received stock first | Most consumer goods, packaging, seasonal items, anything that can age or become outdated |
| FEFO – First Expired, First Out | Ship the units with the nearest expiry date first | Food, food supplements, cosmetics, pharmaceuticals, chemicals, batteries |
| LIFO – Last In, First Out | Ship the most recently received stock first | Rarely used physically; mainly non-perishable bulk goods |
FIFO
FIFO is the default for most warehouses. It keeps stock fresh, reduces the risk of old or damaged packaging, and makes stock ageing easy to follow. In practice it needs a receipt date per stock unit and locations organised so that older stock can be reached first.
FEFO and expiry dates
FEFO goes one step further: what counts is not when the goods arrived, but when they expire. A batch received yesterday may expire earlier than one received last month. FEFO therefore needs:
- Batch or lot numbers with an expiry date, registered at receiving. See batch and lot traceability.
- A picking rule in the WMS that allocates the batch with the nearest expiry date.
- A minimum remaining shelf life for outbound orders, if your customers require it – for example that retailers must receive goods with at least a certain number of months left.
- Rules for short-dated stock – blocking, discounting or disposal before the date passes.
Best before vs expiry date: a best-before date indicates when quality is guaranteed until; a use-by or expiry date is a safety limit after which the product should not be sold or used. Which applies depends on the product and its regulations – your rules should state which date the warehouse uses.
LIFO
LIFO is mostly a theoretical or accounting concept. Physically it can occur in drive-in racking or block stacking, where the last pallet in is the first one reachable – which is why such storage is unsuitable for goods with expiry dates. As an accounting method for valuing inventory, LIFO is not permitted under IFRS.
Stock rotation in a 3PL warehouse
Tell your 3PL which rule each product group needs, which date fields your supplier labels carry and what remaining shelf life your customers accept. Whether batch, lot or expiry tracking is needed for your products is decided during onboarding; at Karlholm Logistics, warehouse events are scanned in Ongoing WMS so that each unit's batch and location can be followed.
Frequently asked questions
What is the difference between FIFO and FEFO?
FIFO uses the receipt date: oldest in, first out. FEFO uses the expiry date: shortest shelf life first. If all batches have the same shelf life they give the same result; if they do not, only FEFO protects you against expired stock.
Is LIFO used in warehouses?
Rarely as a physical picking rule, except for goods that do not age, such as bulk materials stacked in a way where the newest units are the easiest to reach. As an inventory accounting method, LIFO is not permitted under IFRS.
What does the warehouse need to apply FEFO?
Each batch or lot must be registered with its expiry date when it is received, and the picking rule must be set up in the warehouse system.
Short definitions in the glossary: FIFO – First In, First Out · LIFO – Last In, First Out · FEFO – First Expired, First Out · Expiry date · Best before
This page gives general information about logistics terms. It is not legal, customs or tax advice, and it does not describe the terms of any specific agreement with Karlholm Logistics.