What is LIFO?

LIFO is mostly an accounting method, not a stocking discipline. As a costing method it values cost of goods sold using the most recently acquired inventory first, which during inflation reduces taxable income and leaves older (cheaper) inventory on the balance sheet. It's allowed under US GAAP but not under IFRS, so multinational businesses cannot use it. Physically rotating stock LIFO is rare and usually a mistake outside specific industries (some bulk commodities where last-in is physically on top). Where teams get confused: treating LIFO and FIFO as interchangeable choices for any inventory. They aren't. Most operations should run physical FIFO regardless of the accounting method, because aging inventory creates real costs (spoilage, obsolescence) that an accounting choice cannot prevent. The accounting method affects taxes and reported profit; the physical method affects whether customers get a fresh product.