FIFO vs FEFO: Which to Use for Products That Expire

FIFO means first in, first out. The stock you received first is sold first. FEFO means first expiry, first out. The stock that expires first is sold first, whenever it arrived.

Most of the time they give the same answer, because goods that arrived earlier usually expire earlier. The trouble is in the cases where they do not. Those cases are more common than most shop owners think, and each one quietly turns into stock thrown away.

This guide explains where the two rules differ, which one to use for what, and how to set up shelves and records so the right pack goes out without anyone having to stop and think.

Suppliers do not always send fresh stock. A distributor clearing his own shelves may send you a batch in October that expires sooner than the batch you received in September. Under FIFO, you would sell the September stock first, and the October batch would expire on your shelf.

Worked example. A pharmacy receives 100 bottles of a cough syrup on 5 September, expiring next August. On 20 September a second lot of 100 arrives, expiring next April, because the stockist was clearing old stock. The shop sells about 20 bottles a month. Under FIFO, it spends five months selling the August batch first. By the time it reaches the April batch, that batch has expired. At ₹65 a bottle, that is ₹6,500 lost from one bad sequence. Under FEFO, the April batch goes first and both sell in time.

• A distributor ships an older batch to clear his own stock.
• You buy near-expiry stock on a scheme at a discount.
• Goods come back from a customer return or another branch.
• Two brands of the same item, with very different shelf lives, share one slot.

Use FEFO for anything where the printed expiry or use-by date matters: medicines, packaged food, dairy, baby food, cosmetics and some chemicals. Getting it wrong costs money, and for some products it is a safety problem too.

Use FIFO for goods that do not expire but do age: clothing, footwear, stationery, hardware and electronics. Old stock goes out of fashion, collects dust or is replaced by a newer model. Selling the oldest first keeps the range fresh.

Many shops need both. A general store might use FEFO for groceries and personal care, and FIFO for utensils and stationery. That is fine, as long as everyone knows which rule applies to which shelf. If staff change often, put a small sign on the shelves.

A separate question is how stock is valued in your books. Many businesses value stock on a FIFO basis even when they pick by FEFO on the shelf. Your CA will tell you how your stock should be valued. This guide is about which pack goes into the customer's hand.

The rule only works if the shelf makes it easy. Staff under pressure take whatever is in front. So the earliest expiry has to be in front.

• Stock from the back. New stock goes behind, earliest expiry stays in front.
• When a delivery expires earlier than what is already on the shelf, it goes in front. Tell whoever is stacking.
• Write the expiry month in large letters on the carton or shelf strip, so nobody has to read the small print on every pack.
• Keep one batch per slot where you can. Mixed batches in one bin are where FEFO breaks down.
• Do a monthly expiry walk and list everything expiring in the next 60 to 90 days.

On paper or in a spreadsheet, record each delivery as its own batch: product, batch number, expiry date, quantity, cost and MRP. Without batch records you only know how much you have, not which stock it is.

Worked example. A dairy shelf receives curd in two batches: 40 cups expiring on the 12th and 30 cups expiring on the 15th. By the evening of the 10th, 25 cups of the first batch have sold. You have 15 cups with two days left. That is the moment to act. Put them by the counter, offer a small markdown, or send them to the branch that sells curd faster. Selling 15 cups at ₹2 off costs you ₹30. Throwing away 15 cups that cost ₹22 each costs ₹330.

Record MRP per batch as well. When MRP changes between batches, each batch must still be sold at or below its own printed MRP.

Decide in advance what counts as close, category by category. For example: 90 days for medicines, 30 days for packaged food and a few days for dairy. Check what your supplier's return terms say about near-expiry stock, because that window often decides your cut-off. Then follow the same steps every time, in this order.

• Move it: to the front of the shelf, near the counter, or to another branch that sells it faster.
• Return it to the supplier, if your terms allow near-expiry returns.
• Discount it, staying within MRP and, if you can, above cost.
• Write it off, record the reason, and order less next time.

Okount tracks batches with expiry and sells first in, first out by default, with MRP per batch enforced as a ceiling. Its stock health view flags stock that is expiring, and in a warehouse, pick lists send people to the shelf with the oldest expiry first. Transfers between locations keep batch and expiry intact, so stock sent to another store carries its dates with it.