FIFO (First-In, First-Out)

What Is FIFO?

FIFO stands for first-in, first-out. In a warehouse, it means units are shipped in the same order they were received, so older inventory leaves before newer inventory. The term is also used in accounting, where it describes how the cost of goods sold is calculated.

FIFO is the default rotation method for many products because it keeps stock moving and prevents older units from sitting at the back of a shelf indefinitely.

How It Works

When inventory arrives, the warehouse records the receiving date. As orders come in, the system directs pickers to the oldest stock of that SKU first. Physical layout helps, too. Many warehouses place new stock behind or below existing stock so the older units are naturally picked first.

For example, an apparel brand receives 500 units in January and another 500 in February. Under FIFO, every order ships from the January batch until it runs out, then the February batch begins shipping.

• Best for products without a shelf life.
• Simple to run with clear receiving dates.
• Pairs with FEFO for catalogs that mix dated and non-dated items.

Why It Matters for Ecommerce Brands

FIFO reduces the risk of products aging, fading, getting dusty or going out of style while they wait on the shelf. For apparel, it keeps older production runs from lingering after a newer run arrives. For packaging changes, it ensures the old version sells through before the new one starts shipping.

For products with expiration dates, FIFO is not always enough. If a newer shipment has an earlier expiration date, FIFO would ship the wrong lot. That is where FEFO, which uses expiration dates instead of receiving dates, is the better rule.

Choosing the right rotation method is an easy conversation to have with your 3PL during onboarding, and it should be set per product type.