FIFO vs FEFO in the warehouse: expiry dates, lots and quality holds

Short answer: FIFO (first in, first out) means the stock that arrived first leaves first. FEFO (first expired, first out) means the stock with the nearest expiry date leaves first. FIFO is enough for goods without a shelf life, or when lots arrive in the order they were made; FEFO is the rule for food, pharmaceuticals, cosmetics and any goods whose lots carry different expiry dates. In NG WMS the issuing rule — FIFO, LIFO, FEFO or location sequence — is set per item.

What do FIFO, FEFO and LIFO mean?

An issuing rule answers one question: when the same item sits in several places, which unit leaves first? There are four common answers:

• FIFO — first in, first out. The receipt date sets the order.
• FEFO — first expired, first out. The lot’s expiry date sets the order.
• LIFO — last in, first out. Rare in physical issuing; used where age does not matter, for example with bulk material stacked in a pile.
• Location sequence — stock is taken in the order locations are laid out for picking, when the picker’s route matters more than the age of the goods.

Do not confuse two different things: FIFO as a rule for physical issuing in the warehouse, and FIFO as an inventory valuation method in accounting. This article is about the first — which pallet actually comes off the shelf. Valuation stays in the ERP, and the two rules do not have to match.

FIFO or FEFO: which rule when?

The key point: FIFO assumes that stock which arrived earlier also expires earlier. That is often true, but not always. If a supplier delivers a lot expiring in December on Monday and a lot expiring in October on Wednesday, FIFO ships the December lot first and leaves the October lot to age. FEFO solves this, because it looks at the expiry date, not the receipt date.

What does a system need to know for FEFO to work?

FEFO does not work without data. The system has to know the expiry date of every unit of stock, not just of the item — which is why expiry is tied to the lot and to the stock row on a location. In NG WMS that looks like this:

• The item carries the rules: whether a lot is mandatory, shelf life in days, minimum remaining shelf life at receipt and at issue, and the issuing rule.
• Receiving records the data: lot, serial number and expiry date are entered on the receipt line, and the Excel order import also accepts production date and quality status.
• Stock keeps it: a stock row carries location, LPN, lot, serial number, expiry date and receipt date — so both FIFO and FEFO have something to work with.
• Mixing rules on a sub-area can require that only the same lot shares a location, so lots do not get mixed in one position.

An expiry date that was not recorded at receiving does not exist at issue either. So FEFO is really a receiving question — more in Goods receiving in a warehouse. Item and sub-area rules are set in the warehouse model.

What is minimum remaining shelf life?

Minimum remaining shelf life is the number of days of shelf life stock must still have at a given moment. Two are set:

• at receipt — so the warehouse does not accept stock that will expire before it sells;
• at issue — so a customer does not get stock that expires in a few days, even when it is the oldest lot.

An example (fictional): an item has a shelf life of 180 days and a minimum remaining shelf life at issue of 30 days. A lot with 20 days left comes first in FEFO order, but does not meet the issue rule. It needs a separate decision — a promotion, internal use or a write-off — before it expires. In NG WMS both minimums are set per item, so the rule lives in the system rather than in an operative’s head.

How is problem stock blocked?

An issuing rule decides the order, but it must never ship stock that is not allowed to leave. Stock with a suspected quality issue, damage or an expired date has to be blocked — on the shelf and in the system.

In NG WMS a block is a document with lines and a reason from a code list, not a note. The quality status has a priority and a flag saying whether release is required to continue. Block and quality status show on every stock row, and blocked stock and stock awaiting a quality decision are not offered in manual reservation, so they cannot reach a customer by mistake. Unblocking is a document too, with a reason. More on the Stock and replenishment page.

How is the issuing rule applied at picking?

1. A rule on the item. FIFO, LIFO, FEFO or location sequence is chosen per item; the rule sets the order in which stock leaves.
2. Reservation. When an order joins a wave, stock is reserved, in full or with a shortage. When a specific lot is needed — because the customer asks for it, for instance — manual reservation offers locations and LPNs with available quantity, lot and expiry date, and the manual choice is recorded.
3. Excluded stock. Blocked stock and stock on quality hold are not offered in manual reservation.
4. Scanning. The picker confirms location, container and item by scanning instead of copying from paper, and for dispatch the warehouse can choose guided mode with a strict sequence.
5. Checking. At the check-and-pack station every line is scanned and confirmed once more before it goes into the box.

How reservation and waves fit into dispatch is described on the Outbound page.

How do you keep track of stock nearing expiry?

An issuing rule settles the order, not the stock nobody buys: a lot that no one orders will expire even under perfect FEFO. So it pays to look regularly at what is expiring:

• The stock list and stock pivot by lot, serial number, expiry date and pallet show where short-dated stock sits.
• NG Copilot answers “Which goods expire in the next 30 days?” with a list by location and expiry date, with the receipt documents.
• A targeted count by item or LPN confirms the stock really is where the system says it is.

When a lot has to be recalled, forward and backward traceability produce the list from records rather than memory — see Traceability from goods-in to dispatch. All reports are on the Reports and traceability page.

Common FIFO and FEFO mistakes

• Expiry kept only on the item, not the lot — so the system cannot tell which pallet expires first.
• Lots mixed on one location, so the picker takes whichever is nearest.
• New stock stacked in front of old when the pick face is replenished.
• A block that is just a note on paper or in a spreadsheet, not a status in the system.
• One rule for every item, although screws and yoghurt do not need the same order.
• Manual choices without a trail — when the rule is overridden, you need to know who chose which lot and why.