What does "FIFO" stand for in inventory management practices?

In inventory management practices, "FIFO" stands for "First In, First Out." This method is essential for ensuring that the oldest inventory items are sold or used first, minimizing the risk of product spoilage and obsolescence. By applying FIFO, businesses can maintain a more accurate reflection of their inventory costs and ensure that older products do not sit for extended periods. This practice is particularly critical in industries dealing with perishable goods, where using the oldest stock first helps avoid losses due to expiration. Beyond perishable goods, FIFO is a standard approach that helps streamline operations and reflects a logical way of managing inventory flow, thereby supporting effective asset management overall.