First In, First Out (FIFO)

First In, First Out (FIFO) is an inventory management method where the oldest stock items are sold or used before newer inventory. This approach ensures that products are moved through the supply chain in the order they were received, minimizing the risk of spoilage, expiration, or obsolescence. FIFO is particularly critical for perishable goods, time-sensitive products, and items with expiration dates.

Why it matters for e-commerce brands

For Shopify and DTC merchants, implementing FIFO helps maintain product quality and reduces waste, which directly impacts customer satisfaction and profitability. This is especially important for brands selling food, beauty products, supplements, or any items with shelf lives, as shipping expired or near-expiration products can lead to returns, negative reviews, and brand damage. Proper FIFO practices also provide more accurate inventory valuation and cost of goods sold calculations for financial reporting.

Example

A Shopify skincare brand receives a shipment of vitamin C serums on January 1st with an 18-month shelf life, followed by another shipment on March 1st. Using FIFO, the warehouse team organizes stock so the January batch is picked and shipped first for all customer orders. When restocking picking locations, they ensure older inventory remains at the front. This prevents the January batch from sitting unused while newer products ship out, ensuring customers receive products with maximum remaining shelf life and reducing the risk of having to dispose of expired inventory.

Related terms

• Last In, First Out (LIFO)
• Inventory turnover
• Shelf life management
• Stock rotation
• Batch tracking