What does FIFO stand for in inventory management?

FIFO stands for First In, First Out, which is an important inventory management strategy. This method ensures that the oldest inventory items are sold or used before newer ones. This approach is particularly critical in industries where products have expiration dates, such as food or pharmaceuticals, to minimize wastage and ensure safety. By managing inventory this way, businesses can maintain product quality and achieve more accurate accounting of inventory costs, as older costs will be matched with current revenues. This practice helps in maintaining a consistent flow of goods and can optimize storage space and inventory turnover rates. Overall, FIFO is a widely accepted and effective method for managing inventory efficiently.