What is the purpose of using FIFO in inventory management?

The primary purpose of using FIFO, or First In, First Out, in inventory management is to reduce waste and spoilage. This method operates on the principle that the oldest inventory items are sold or used first. In industries dealing with perishable goods, such as food and pharmaceuticals, this approach is crucial as it ensures that older items are not left to expire or deteriorate before being sold. By consistently using the oldest stock first, companies can maintain product freshness and minimize losses due to spoilage.

While FIFO helps streamline inventory processes, it doesn't inherently increase costs nor necessarily make inventory management easier on its own. The method does prioritize older stock over new stock, which indirectly supports waste reduction, but its main goal is ensuring that perishable items are utilized effectively.