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Smart Inventory Control: How FIFO & FEFO Methods Minimize Stock Losses for Business

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Jul 21, 2022 | Inventory Management, Warehouse Management

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Home > Blog > Smart Inventory Control: How FIFO & FEFO Methods Minimize Stock Losses for Business

Inefficient inventory management is one of the most common and costly challenges for e-commerce businesses. From expired stock and obsolete items to unnecessary markdowns and storage costs, poor inventory control can directly erode profitability. Studies show that even in well-managed companies, 20–30% of inventory is often dead or obsolete. This not only ties up working capital but also increases warehousing costs, disrupts replenishment planning, and impacts overall order fulfillment efficiency.

For businesses managing high volumes or perishable products, the risks of inventory stagnation are even greater. To fix this, you need more than just tracking; you need the right inventory rotation strategy. That’s where FIFO and FEFO come in. In this blog, you’ll learn why they matter, how they differ, and how to implement them to reduce losses and run your operations smarter.

FIFO & FEFO: Smart Inventory Management Technique

Let’s say you run a snack box delivery brand, and new stock arrives every week, each with different expiry dates. But what if your team keeps picking the latest items first while the older ones quietly inch toward expiry? This is where the concept of batching becomes essential; it helps group and move inventory based on criteria like arrival time or expiry date, ensuring efficiency and minimizing waste. One common approach to batching is the use of FIFO (First-In-First-Out) and FEFO (First-Expiry-First-Out) methods. Let’s explore these two stock rotation methods commonly used in warehouses and retail businesses. 

1. FIFO (First-In-First-Out)

This approach helps you effectively reduce the risk of products becoming obsolete over time. This way, you ensure that older inventory is sold before newer stock, maintaining a fresh and up-to-date product selection.

Let’s say you run an e-commerce business selling seasonal clothes. In February, you stock up on summer T-shirts. A new batch arrives in March with updated packaging. If you start shipping the newer March batch first, the older inventory from February may remain unsold, forcing you to offer steep discounts later. With FIFO, your system ensures the February stock is sold first, keeping inventory fresh and avoiding unnecessary losses.

Why FIFO is important

  • Reduces Deadstock
  • Minimizes product deterioration or pilferage
  • Improves cash flow
  • Ensures accurate inventory valuation

what is fifo - first in first out

[Must read: Overcome Inventory Challenges With FIFO Based Picking]

2. FEFO (First-Expired-First-Out)

This pattern follows the selling of products that expire first. This method places significant emphasis on ensuring that items with earlier expiration dates are sold first.

Let’s say you manage inventory for an online health supplements brand. In April, you receive a batch of protein powders that expire in December. In May, a new batch arrives with a longer expiry—say, next March. If your warehouse starts dispatching the fresher batch first, the April stock might hit expiry while still sitting on the shelf.

With FEFO, your system ensures the December-expiring batch goes out first, minimizing wastage and keeping customers happy with fresh products.
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Why FEFO is important

  • Prevents expired stock from reaching customers
  • Improves regulatory compliance
  • Helps forecast more accurately

    • what is fefo - first expired first out

    How to Choose Between FIFO and FEFO in Inventory Management

    The right inventory method isn’t one-size-fits-all. It depends on what you sell, how fast it moves, and how time-sensitive your products are. Let’s break down when to use FIFO and FEFO, with practical examples to help you decide what suits your business best.

    Product Nature & Shelf Life

    Use FEFO for items with expiry dates—such as cosmetics, food, supplements, or pharmaceuticals—where freshness is critical.
    Use FIFO for non-perishables like electronics, fashion, or home décor, where the primary concern is obsolescence rather than expiration.

    Industry Regulations

    FEFO is mandatory in highly regulated sectors like FMCG and pharma, where strict compliance with safety and quality standards is required.

    FIFO is suitable for industries with fewer regulatory constraints, allowing more flexibility in stock rotation.

    Customer Experience & Brand Perception

    FEFO enhances customer satisfaction by ensuring fresh, usable products are always delivered.

    FIFO prevents the shipment of outdated or shelf-worn items, helping maintain brand trust for non-expiry-based products.

    Sales Velocity & Inventory Turnover

    Use FIFO for fast-moving SKUs where products don’t stay in stock long enough to risk aging.

    Use FEFO for slow-moving inventory where there’s a higher chance of nearing expiration before sale.

    Which Industries Use FIFO and FEFO Methods, and Why?

    Different industries follow distinct stock rotation strategies based on the nature of their products. Here’s how FIFO and FEFO are applied across sectors to manage inventory smarter and reduce waste.

    1. Food & Beverage

    Freshness and quality are top priorities in the food and beverage industry. FEFO helps by making sure items with the nearest expiry dates are sold or dispatched first, so nothing goes to waste, and customers get the best possible product. 

    2. Pharmaceuticals

    FEFO and FIFO in pharmacy are used based on product type—FIFO manages non-expiry items like medical tools, while FEFO ensures expiry-bound medicines are dispensed in order to meet safety and regulatory standards. 

    3. Electronics Industry

    In the electronics industry, FIFO is used to clear older stock first and avoid inventory obsolescence. It helps manage warranty timelines and ensures older components are used before newer batches arrive.

    4. Cosmetics & Personal Care

    In the fast-moving world of cosmetics, where product quality and shelf life are everything, smart inventory batching is a game-changer. By using FEFO in cosmetics, brands can make sure serums, creams, and other skincare products are shipped in the right order, before they expire or lose effectiveness. The result? Less waste, fresher deliveries, and happier customers. 

    Health & Wellness

    In the health and wellness industry, FEFO is commonly used for consumables like supplements and functional foods to ensure expiry compliance and product efficacy. FIFO applies to non-perishable items such as wellness accessories or devices, helping clear older stock and maintain inventory flow.  

    What Are the Best Ways to Implement FIFO and FEFO Stock Rotation Methods?

    Getting stock rotation right can be the difference between smooth operations and mounting losses. Whether you’re in cosmetics, food & beverage, pharma, or electronics, knowing how to apply FIFO and FEFO the right way ensures fresher products, less spoilage, and better profits. Here’s how you can do it:

    Accurate Data Management

    Accurate data is key to effective inventory rotation. Recording expiration dates at the time of receiving, ideally through barcoding or RFID, helps avoid manual errors. Regularly updating inventory as items move ensures the FEFO or FIFO method is applied correctly, reducing spoilage and maintaining stock integrity. 

    FMCG (Fast-Moving Consumer Goods)

    FMCG products often have short shelf lives and high volume turnover. FEFO is crucial for items like packaged foods, beverages, personal hygiene products, and household essentials. It helps brands reduce wastage, meet compliance requirements, and maintain strong shelf performance across retail networks.

    Regular Inventory Audit

    Regular audits and quality checks are essential to maintaining effective inventory rotation. Scheduled audits help identify discrepancies in stock prioritization and ensure that products nearing expiration are appropriately handled. Alongside this, routine quality control checks reinforce the consistent application of the FEFO/ FIFO method, preventing older products from being overlooked and ensuring a well-organized, accurate inventory system.

    Product Barcoding

    Barcoding is a practical way to manage products that have a limited shelf life, like skincare creams, supplements, or packaged foods. For instance, if a batch of vitamin C serums is set to expire in 60 days, barcoding allows the system to flag and prioritize those units for dispatch before newer stock. This helps businesses avoid manual errors, reduce spoilage, and maintain smooth supply chain operations with minimal waste.

    Automate Warehouse Operations

    Implementing a robust WMS like Unicommerce helps you automate stock rotation methods like FIFO and FEFO, track inventory in real time, and eliminate manual errors. It brings clarity to your stock movement, so your team always knows what to ship first, without second-guessing.

    Unicommerce’s Proven Solutions to Cut Stock Losses in Ecommerce

    Unicommerce acts as the nerve center of ecommerce and retail operations, empowering 7,000+ brands to prevent deadstock, reduce inventory aging, and streamline fulfillment across 9,000+ warehouses and 3,000+ stores. Here is the breakdown of proven solutions that cut inventory losses and enhance growth.

    SKU, Item & Batch-Level Traceability

    Unicommerce helps e-commerce businesses reduce deadstock, avoid expired or outdated items, and improve stock health by providing traceability at different levels. Let’s see how Unicommerce has helped brands in expiry date management via different traceability.

    How The Man Company Achieved Seamless Batch-Level Traceability With Unicommerce

    The Man Company streamlined its inventory operations by leveraging Unicommerce’s advanced batching feature. This allowed the brand to trace products at the batch level using key attributes like expiry date, cost, manufacturing date, and vendor information.

    With better traceability in place, the team could:

    • Spot soon-to-expire inventory early
    • Prioritize the liquidation of aging stock
    • Implement FIFO and FEFO strategies for smarter stock rotation

      • As a result, The Man Company significantly reduced inventory spoilage and maintained better control over expiry-sensitive products, translating into less waste and improved margins.

      How The Urban Company Reduced Inventory Aging with Smart Traceability Using Unicommerce

      Unicommerce enabled the brand to track each SKU within their kits through an integrated barcode system.

      Solutions Implemented by Unicommerce:

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