What is FIFO?

FIFO matters operationally for any inventory that ages: food, dated medical supplies, batteries, anything with an expiration or a degradation curve. It also matters in accounting as a costing method that values cost of goods sold using the cost of the oldest inventory first, leaving newer (often more expensive) inventory on the balance sheet. The two uses are related but distinct. Physical FIFO is a stocking discipline. Accounting FIFO is a valuation method. Where teams trip: assuming FIFO happens automatically. It does not. FIFO requires putaway practices that put new stock behind old stock on the shelf, picking workflows that grab from the front, and lot tracking on items where dates matter. Without those practices, you can run accounting FIFO on books that contradict physical reality on the floor.