Glossary
The "first in, first out" rotation rule: items received first are shipped or consumed first, which limits expiry and reflects the real cost of goods sold.
FIFO (first in, first out) is the rule that moves the oldest items out of the warehouse before the newest. It applies at two levels: physical handling, where the WMS sends the picker to the oldest lot, and accounting, where the cost of goods sold is calculated on the price of the earliest purchases.
For anything that expires, goes out of fashion or degrades (food, chemicals, parts with a manufacturing date, electronics), FIFO prevents unsellable stock from piling up at the back of the shelves. On the accounting side, it gives an inventory value close to current prices and remains the method Canadian accounting standards favour.
The rule only exists if the system knows each lot's receiving date. Inventory must therefore be tracked by lot or by date, not only by total quantity. A WMS records the date at receiving and automatically suggests the right location at picking; without it, FIFO relies on staff memory and handwritten labels.
LIFO (last in, first out) is the reverse: it moves the newest items out first. It suits bulk materials stacked in piles (gravel, sand) where age does not matter, but it is not permitted for accounting purposes in Canada.
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Canadian standards (ASPE and IFRS) allow FIFO and weighted average cost, but not LIFO. The chosen method must stay the same from one fiscal year to the next.
Yes, with strict date discipline on labels and a storage layout that puts new lots behind old ones. Beyond a few hundred references, that discipline erodes and software becomes necessary.
