What It Is LIFO System In Stock Management

What It Is LIFO System In Stock Management

In the world of warehouse management, several methods can be used to optimize the work. And one of the most used, given its efficiency and usefulness, is the LIFO system. And you, do you know what it is and what it is used for?

What Is The LIFO System

The LIFO (Last In – First Out) method is a stock management system governed by the following rule: the last thing in is the first thing out. In other words, the latest batches manufactured or purchased have priority over those that were already there and must be the first to leave the warehouse.  The main objective of the LIFO method is to reduce the distance traveled by goods, either on foot or with forklifts, so operators must load and unload products at the same end of the aisle. 

It should be mentioned that not all storage systems are suitable for implementing LIFO, since it must be possible to operate in this way.  On the other hand, the LIFO method should not be confused with the FIFO (First In – First Out) method, which gives output priority to the first thing that enters the store.

What Products Can Be Managed In The Warehouse Through The LIFO Method

Since the LIFO method moves batches that have later entered the warehouse out of the warehouse, it is often used for the storage of non-perishable products that have long-term expiration dates or change little in value.  It is also ideal in cases of goods in which stock rotation is not decisive.

Benefits Of Using The LIFO Method For Warehouse Management

As we have already mentioned, the LIFO method serves to shorten the distances that the goods must travel in the warehouse; in this way work, and times are optimized. But, in addition, the LIFO method has many advantages, which is why it is one of the most widely used warehouse management systems. These advantages are the following: 

  • In the first place, the occupancy ratio is higher by using only one loading aisle.
  • Secondly, much less movement is generated in the warehouse, with which there is a greater order in the workspace. 
  • In addition, it is possible to better compare income and expenses because the data on the cost of the merchandise that has been sold is closer in time. 
  • Finally, in periods of high inflation such as the current one, the first products to leave the warehouse are those with the highest cost, which reduces margins and, therefore, the tax on profits. 

In conclusion, although the LIFO method is not as widely used as the FIFO, it is ideal for managing the stock of certain products, so it is worth knowing about it. 

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