Last In First Out (L.I.F.O.)

The opposite of “F.I.F.O.” (First In First Out). With LIFO earlier orders are delayed in favor of newer orders which results in increased lead-time and unhappy customers regarding the earlier orders.

Comments: Both LIFO and FIFO can also be a reference to the order in which stock is consumed. Generally speaking companies should use their oldest stock before using the newest stock. This becomes very important with perishable goods and goods with limited shelf-life.

As consultants we have seen dust more than 1/4th of an inch thick on stock that should have been consumed in order of purchase years earlier. It is difficult to decide in many cases whether this stock is still good to use, has become obsolete in some way, has some latent defect, and etc.

Many advanced material handling systems, stacking systems, and simple KanBan methods can keep your inventory stocked in FIFO order to avoid the many pitfalls of LIFO failings.

All that said, there are times when LIFO measures seem essential. If a customer who represents the majority of your sales requests something immediately it is very difficult to tell them they must wait their turn.