First In, First Out (FIFO) is a system for storing and rotating food. In FIFO, the food that has been in storage longest (“first in”) should be the next food used (“first out”). This method helps restaurants and homes keep their food storage organized and to use food before it goes bad. First In, First Out is an effective system that should be a standard operating procedure for every food service establishment and a staple practice for food managers.
Organization is key
Everyone wants to be first, but food service works better when there is order (I’m looking at you, Martin the Milk). The key to FIFO is organization, and it all starts with use-by dates.
Follow use-by dates
First In, First Out organizes food by expiration or use-by date. For the system to work, all food in refrigerators, freezers, and dry storage must be marked with a use-by date. If food doesn’t have a use-by or expiration date, workers should mark the food package with the date received and use that date as a storage reference.
Store the same food together
Under FIFO, food is organized to keep the same kinds of foods together. For example, packages of the same food should be stored in one area so they are all kept together. This organization makes finding foods easier and cuts down on the time it takes to stock items.
Arrange older food in front
Storing food by category isn’t enough on its own. Food in storage should be arranged oldest to newest according to use-by dates. Newer foods should be put at the back of the shelf behind older foods, leaving the oldest food in the most accessible place near the front of the shelf.
This system makes it easy for food workers to find the oldest food and to use it first when that ingredient is needed. FIFO organization saves food workers the time they would have spent searching for an item or comparing expiration dates.
Maintain FIFO
For FIFO to really work, the organization system must be maintained. The process of date-marking, organizing, and arranging food in First In, First Out order should happen every time the facility receives new shipments of food. Different foods require different steps to integrate them into the FIFO system. Some foods may need date-marking. Other food will need some preparation before it can be stored in a refrigerator or freezer. Depending on the size of the packaging, a row of older food may need to be shifted forward or temporarily taken out so newer food can be placed in the back.
FIFO benefits
It takes extra effort to organize food according to First In, First Out, but the effort pays off. FIFO keeps older food from being shoved to the back where it can be forgotten or overlooked. FIFO helps food establishments cycle through their stock, keeping food fresher. This constant rotation helps prevent mold and pathogen growth. When employees monitor the time food spends in storage, they improve the safety and freshness of food.
FIFO can help restaurants track how quickly their food stock is used. This information is useful in managing inventory and adjusting orders to more closely fit the needs of the facility, reducing waste. FIFO also makes it easier to identify food that is about to expire. Food must be discarded if it is past its use-by date, and FIFO can help food establishments catch items that are almost expired and use or sell them before this date passes.
For organization, tracking, safety, and usefulness, FIFO can’t be beat. If your establishment hasn’t tried First In, First Out, give it a trail run and enjoy the benefits.
Food safety reminder
To minimize waste in your establishment, use older products first—as long as they are safe to use.
To learn more safe food practices, check out our food handler training!
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—Suzanna Sandridge
Editor’s note: This post was originally published in March 2017 and has been updated for freshness, accuracy, and comprehensiveness.
FAQs
The first in, first out, aka FIFO (pronounced FIE-foe), accounting method assumes that sellable assets, such as inventory, raw materials, or components acquired first were sold first. That is, the oldest merchandise is sold first, with its associated costs being used to determine profitability.
What is a FIFO first in, first out queue? ›
In queue management, the “First In, First Out” Queue method or FIFO queuing follows a simple rule: the first person or item to join the line is the first to be served. Imagine waiting in line at a store – the person who arrives first gets served before those who come later. This approach ensures fairness and order.
What does the FIFO rule first in, first out refer to? ›
FIFO stands for “first in, first out”, which is an inventory valuation method that assumes that a business always sells the first goods they purchased or produced first. This means that the business's oldest inventory gets shipped out to customers before newer inventory.
What is the difference between FIFO first in, first out and LIFO? ›
The first in, first out (FIFO) cost method assumes that the oldest inventory items are sold first, while the last in, first out method (LIFO) states that the newest items are sold first. The inventory valuation method that you choose affects cost of goods sold, sales, and profits.
What is a FIFO example? ›
FIFO is calculated by adding the cost of the earliest inventory items sold. For example, if 10 units of inventory were sold, the price of the first ten items bought as inventory is added together. This equals the cost of goods sold. Depending on the valuation method chosen, the cost of these 10 items may differ.
What are the disadvantages of FIFO? ›
What Are the Disadvantages of FIFO? The FIFO method can result in higher income tax for a business to pay, because the gap between costs and profit is wider (than with LIFO). A company also needs to be careful with the FIFO method in that it is not overstating profit.
What is a real life example of FIFO? ›
Most queues that we encounter throughout the day are FIFO queues. Waiting for the bus, waiting in front of the elevator or a vending machine, or even standing in line to the bathroom all share one quality — the person standing in the front goes before the one standing behind.
How does FIFO work? ›
'Fly in fly out' (FIFO) jobs are those where an employer will temporarily transport the employee to a location or site of work and then transport them back for a period of rest. This method is most commonly employed in order to avoid relocating the employee (and possibly their family) to the site on a permanent basis.
What is an example of last in first out? ›
Example of LIFO
Assume company A has 10 widgets. The first five widgets cost $100 each and arrived two days ago. The last five widgets cost $200 each and arrived one day ago. Based on the LIFO method of inventory management, the last widgets in are the first ones to be sold.
Why is first in, first out FIFO storage used? ›
It takes extra effort to organize food according to First In, First Out, but the effort pays off. FIFO keeps older food from being shoved to the back where it can be forgotten or overlooked. FIFO helps food establishments cycle through their stock, keeping food fresher.
First In, First Out (FIFO) is an inventory management and valuation method where raw materials and goods produced or bought first are sold, used, or disposed of first. For inventory accounting and tax purposes, FIFO assigns the cost of the oldest inventory for the cost of goods sold (COGS) in the income statement.
What is the correct FIFO order? ›
FIFO stands for First-In First-Out. It is a stock rotation system used for food storage. You put items with the soonest best before or use-by dates at the front and place items with the furthest dates at the back.
How is the first in first out or FIFO rule best implemented? ›
Using the FIFO system also helps businesses to maximize their profits by keeping their COGS low. As mentioned earlier, this is done by assuming that the oldest items in stock are used to fulfill customer orders. This means that businesses can avoid passing on more costly prices associated with newer products.
Do investors prefer LIFO or FIFO? ›
Most companies prefer FIFO to LIFO because there is no valid reason for using recent inventory first, while leaving older inventory to become outdated. This is particularly true if you're selling perishable items or items that can quickly become obsolete.
What is an example of the first in first out FIFO method? ›
For example, a company purchases 100 items at $15 each and later purchases 100 items at $20 each. It sells 75 items. FIFO assumes that those 75 items sold cost the company $15, so the cost of goods sold for that period would be $1,125.
What is FIFO first in, first out scheduling? ›
First in, first out (FIFO), also known as first come, first served (FCFS), is the simplest scheduling algorithm. FIFO simply queues processes in the order that they arrive in the ready queue. This is commonly used for a task queue, for example as illustrated in this section.
What is an example of LIFO? ›
Based on the LIFO method, the last inventory in is the first inventory sold. This means the widgets that cost $200 sold first. The company then sold two more of the $100 widgets. In total, the cost of the widgets under the LIFO method is $1,200, or five at $200 and two at $100.
What is the LIFO method? ›
Last-in First-out (LIFO) is an inventory valuation method based on the assumption that assets produced or acquired last are the first to be expensed. In other words, under the last-in, first-out method, the latest purchased or produced goods are removed and expensed first.
What is the first in, first out sequence? ›
First In, First Out (FIFO) is the principle and practice of maintaining precise production and conveyance sequence by ensuring that the first part to enter a process or storage location is also the first part to exit.
First In, First Out (FIFO) is a system for storing and rotating food. In FIFO, the food that has been in storage longest (“first in”) should be the next food used (“first out”). This method helps restaurants and homes keep their food storage organized and to use food before it goes bad. First In, First Out is an effective system that should be a standard operating procedure for every food service establishment and a staple practice for food managers.