Glossary
The "last in, first out" rotation rule: the most recently received items go out first, which suits non-perishable bulk materials but is not permitted for accounting in Canada.
LIFO (last in, first out) moves the most recently received items out first. It is the natural behaviour of a stack: you take what is on top. Like FIFO, the rule exists on two levels, physical handling and the accounting valuation of inventory.
For bulk materials in piles (gravel, sand, de-icing salt, wood chips) or stacked pallets of one non-perishable product, reaching the oldest lot would cost more handling than it is worth. LIFO then simply reflects how the goods are stored. A custom WMS can apply LIFO to those zones and FIFO to the rest of the warehouse.
When prices rise, LIFO pushes the recent (more expensive) purchases into the cost of sales, which lowers taxable profit and leaves old values sitting in inventory. That is why Canadian standards and IFRS do not allow it; it remains permitted in the United States.
The question to ask: does the product change over time? If yes (expiry, versions, fashion), FIFO is required. If not and handling is the main cost, LIFO can be the operating rule while FIFO or average cost is kept for the books. A good inventory system lets you separate the physical rule from the accounting rule.
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Physically in the warehouse, yes. For the accounting valuation of inventory, no: ASPE and IFRS require FIFO or weighted average cost.
Yes. A WMS assigns the rule per zone or product category: FIFO for perishables, LIFO for bulk. It is a common reason to go custom.
