What is the purpose of a first-in, first-out (FIFO) inventory system?

The purpose of a first-in, first-out (FIFO) inventory system is to ensure that older stock is used before newer stock. This method is particularly important in industries like food and beverage, where products have a limited shelf life. By utilizing older inventory first, businesses minimize the risk of spoilage or obsolescence, ensuring that customers receive fresh products. This approach not only helps maintain the quality of the inventory but also supports better cash flow and inventory management by preventing excess waste and improving turnover rates. Utilizing older stock first aligns with best practices for handling perishable items, promoting inventory efficiency and customer satisfaction.