FIFO: First In – First Out
FIFO is the principle that determines the order of processing items in the system. Translated as “first in – first out”, it means that items that enter the system first are also the first to be removed from the system. Imagine a line of people in a store. The customer who gets in line first will also be the first to be served.
The use of FIFO in production
The FIFO (First In – First Out) principle is commonly used in manufacturing to control the flow of materials and inventory. It has a number of advantages that make it suitable for a variety of manufacturing processes:
1.Reducing wastage: FIFO helps reduce material and inventory waste by ensuring that the oldest materials are used first. This prevents spoilage and obsolescence of materials, thereby reducing costs.
2. Increased efficiency: FIFO can streamline production processes by ensuring a smooth flow of materials through the production line. This leads to shorter production times, lower costs and better product quality.
3. Improving traceability: FIFO facilitates the tracking of materials and inventory throughout the production process. This allows manufacturers to more accurately track their inventory and identify potential problems.
4. Simplifying inventory management: FIFO simplifies inventory management by providing a simple and transparent system for tracking and storing materials. This leads to lower storage costs and less inventory loss.
Examples of using FIFO in production
- Storage of raw materials: Raw materials should be stored according to the FIFO principle, so that the oldest raw materials are consumed first. This prevents spoilage and loss of materials.
- Production of components: Components should be produced according to the FIFO principle so that the oldest components are consumed first. This prevents component obsolescence and simplifies the assembly of final products.
- Storage of finished products: Finished products should be stored according to the FIFO principle so that the oldest products are sold first. This prevents product obsolescence and loss of sales.
FIFO implementation in production
Implementing FIFO in manufacturing requires some planning and effort. It is important to have a system to track materials and inventory by the date they are stocked. This can be achieved using barcodes, RFID tags or inventory management software. In some cases, FIFO can be challenging to implement, especially in complex manufacturing processes. Nevertheless, it can bring significant benefits in terms of reducing waste, increasing efficiency and simplifying inventory management.
Benefits of FIFO
- Simplicity: The implementation of FIFO in various systems and processes is easy due to its easy understandability.
- Predictability: thanks to FIFO, it is possible to predict when an element will be processed, allowing for better planning and process control.
- Efficiency in stable conditions: It ensures smooth system operation and minimizes downtime.
- Tax compliance: In some countries, the FIFO method is required for tax purposes. The use of FIFO allows easier and more accurate tracking of inventory and calculation of tax liabilities.
Disadvantages of FIFO
- Inefficiency in dynamic conditions: in dynamic conditions with varying item processing speeds, FIFO can be inefficient. Important items may not be processed on time and less important items may block them.
- Ignoring priority: FIFO does not consider the priority of items. All items are processed in the same order regardless of their importance, which can lead to unnecessary delays and waste in cases where it is important to process some items in priority.
- Inefficient use of storage space: in warehouses, FIFO can lead to inefficient use of storage space. Older items have to be stored for longer, which can reduce the space available for newer items.
- Potential for waste: In some cases, FIFO can lead to waste. If items become perishable or obsolete, storing and processing them according to the FIFO principle can lead to wastage.
