What does FIFO stand for in inventory management?

In inventory management, FIFO stands for "First In, First Out." This method is crucial for businesses that deal with perishable goods or products that can become obsolete. The principle behind FIFO is that the items that were produced or acquired first are sold or used first. This helps to minimize spoilage and waste, as older stock is moved out before more recent stock.

The application of FIFO is particularly important in industries such as food and beverages, pharmaceuticals, and any other sector where inventory has a limited shelf life. By adhering to this practice, companies can maintain the freshness and quality of their products, thereby enhancing customer satisfaction.

Other options presented may suggest different interpretations of inventory management but do not accurately represent the FIFO concept. For example, terms like "Fast In, First Out" or "Fixed Inventory Flow Order" suggest an incorrect understanding of the flow of stock. The correct principle, "First In, First Out," specifically prioritizes the chronological order of inventory turnover.