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FIFO vs. LIFO: Pros, Cons, and How They Affect Your Warehouse Equipment

There are two main inventory rotation systems utilized by warehouses: FIFO and LIFO. While there are variations on these two systems used by many warehouses, these are the primary ones, and FIFO is by far the most popular. Which one your warehouse uses will affect what kind of pallet racking system and warehouse equipment you’ll need to use. Our warehouse consultants can help you determine which system is better suited for your inventory needs as well as help you get the equipment you need to make it all work.

FIFO: First In, First Out

This inventory rotation system is better for warehouses that need to rotate their inventory in order to prevent items from perishing. It’s not just for perishables, though; if any of your stock is time sensitive, such as fashion-based products or items that are in a series, then FIFO is the way to go. If you don’t get the older stock out the door, it could go bad or go out of style and you could end up holding the bill for the inventory that can’t be sold.

 

What warehouse equipment is best for FIFO?

Carton flow racks and pallet flow racks are ideally suited for FIFO inventory control. You’ll be able to restock merchandise from the back of the racks while gravity moves the older stock to the front to be used in picking and packing. This allows restocking to happen without getting in the way of the pick team because each function is happening on separate sides of the racks. Gravity flow racks are a big time saver for warehouses because the items move forward independently without pickers having to dig around on the back of the shelf for anything. It can cut down on your labor expenses and get your orders out faster. Having a good pick module in a FIFO inventory system is often paramount to productivity, too, since items need to be moved out in order of their age. In that case, carton flow racks may be useful as well as conveyor belts in order to help get the product moved through the warehouse as quickly as possible. By and large, most warehouse storage systems are going to be useful in the FIFO system because of their widespread use in materials handling.

 

LIFO: Last In, First Out

This system of rotation is slightly rarer in distribution centers because it’s best suited for specific kinds of merchandise. It’s also beneficial if you are manufacturing your own goods; if the cost of manufacturing those goods goes up, it might be better from a cost-analysis standpoint to get the more expensive items out the door sooner. It’s also the easier option when it comes to restocking. Since you aren’t worried about using up the old inventory first, you can simply restock however it’s most convenient, even if that means just throwing the new items on top of the old.

One word of warning, though. There are tax implications when using the LIFO system, so you’ll want to be aware of them if this is the system you choose to use. If you start with LIFO, you’ll need to continue using it for the entire tax year, so be aware of the implications that could have on your company by speaking to a professional accountant.

 

What warehouse equipment is best for LIFO?

Push-back and drive-in pallet racking are both perfect for LIFO systems. That’s because they allow easy access to deposit and remove inventory from a single side. A forklift or other warehouse equipment can load up the racking system easily, meaning you’ll be able to restock your pallet racks quickly and with minimal fuss and push the older inventory to the back until it’s needed. When you need to remove the inventory, it comes out the same way. This is great for storage density, as you don’t have to worry about having access to the shelves from both sides like you would with a gravity flow rack. Along with your storage system, forklifts and pallet movers are often very useful in a LIFO warehouse since product will need to be moved in and out of the larger racking systems. Other warehouse storage systems that might be beneficial include double deep and triple deep racking setups.

 

Find the Right Warehouse Equipment for Your Inventory Control Needs

So which system is right for you? You’ll determine which one to use based primarily on the kind of inventory you are handling. If it’s at all time sensitive, then you need to set up for a FIFO rotation system. If your inventory is all the same and especially if you are manufacturing it yourself, then you’ll want to develop a warehouse setup that’s suited for LIFO. In either case and no matter what inventory rotation system you choose, you’ll want to talk to the DAK Equipment & Engineering team. We can help you develop a storage system that meets the needs of your inventory as well as your budget.

Get in touch with one of our project managers and let us provide you with a warehouse design that’s right for your business. Our team has experience with all different types of inventory rotation and setup needs, so we can find a system that works for you. You can get in touch with a project manager in your area by giving us a call or contacting us through our website today.

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