Batch vs FIFO/LIFO

Effective inventory management helps minimize the cost of maintaining inventory; too much in stock can lead to high storage costs, while too little in stock can lead to loss of sales opportunities and customer satisfaction. With an inventory management system, you ensure that you have the right goods, in the right place, at the right time. It provides a good basis for planning and forecasting supply chains, and you will be better able to meet customer expectations, as you have the necessary goods available for timely delivery. When warehouse management is optimized, you improve operational efficiency and productivity, as waste time is reduced and work processes in the warehouse are executed faster.

Batch

The batch method involves grouping items together based on a common characteristic, such as production batch number, lot number, or production date. The primary purpose is traceability. When these items are grouped, they are handled as one unit throughout the warehouse. When the goods are sold or produced, you decide which batches are included, regardless of when they were received in the warehouse. A shelf life date can also be added so that you are aware of which batches you should sell first. This method is particularly useful when some uniformity or quality control is required within each batch.

FIFO (First-in, First-out)

The FIFO method involves selling or using the oldest items in the warehouse first. In other words, sending out the items that were first received in the warehouse before the newer items. FIFO is chosen in cases where you do not need a strict warehouse for traceability, shelf life dates etc.

LIFO (Last-in, First-out)

The LIFO method works opposite to the FIFO method. LIFO prioritizes the newest items for shipment first. That is the items received in the warehouse most recently are considered to be the first to be sold. Like FIFO, LIFO is chosen in cases where traceability is not a must.

The biggest difference you will see in Tracelink is that with batch management you decide which batch you pick; with FIFO/LIFO, the system automatically chooses for you, as it will always be the oldest/newest that is picked. Batch is better for traceability, but also requires a bit more work when picking out the items.

May 2024