FEFO vs FIFO: Complete Guide for Expiring Inventory Management

The Problem: FIFO Ships Expired Products

If you're selling products with expiry dates and using FIFO (First-In-First-Out) allocation, you're at risk of shipping expired products to customers. This isn't a theory — it's a mathematical certainty when expiry dates don't correlate with receiving dates.

FIFO was designed for non-perishable products like apparel, electronics, and office supplies where "age" matters (oldest stock ships first). But for food, supplements, cosmetics, pharmaceuticals, and other expiring goods, age doesn't determine freshness — expiry date does.

What is FEFO (First-Expired-First-Out)?

FEFO (First-Expired-First-Out) is an inventory allocation method that prioritizes expiry dates over receiving dates. The batch with the earliest expiry date ships first, regardless of when it was received.

TraceLot's FEFO system ensures you systematically ship the earliest-expiring stock first — but it's still fresh, just the oldest of your fresh stock. This prevents both expired shipments and customer complaints about short shelf life.

• Prevents expired shipments - Automatically blocks expired batches from allocation
• Reduces inventory waste - Ensures oldest-expiring stock sells before expiration
• Improves customer satisfaction - Ships products with longest remaining shelf life
• Ensures compliance - Meets FDA, FSMA, and other regulatory requirements
• Cuts write-offs dramatically - Reduces waste from 10-18% to under 3%

Why FIFO Fails for Perishable Products: The Math

FIFO assumes that receiving order = expiry order. This is rarely true for perishable products. Here's why:

This scenario repeats monthly. Suppliers don't deliver batches in expiry order — they deliver what they have. Manufacturing dates, regional sourcing, and inventory rotation at the supplier level all mean that newer shipments often have shorter expiry dates.

How FEFO Works in Practice

FEFO requires batch-level tracking with expiry dates. Instead of tracking total quantity per SKU, you track individual batches with lot numbers and expiry dates. Here's the workflow:

1. Receive inventory with batch details - Create a batch with supplier lot number, expiry date, and quantity when receiving stock
2. Track batches separately in system - Each batch maintains its own quantity, even for the same SKU
3. Order comes in - System identifies which batches have available quantity for this SKU
4. FEFO allocation logic runs - System selects the batch with earliest expiry date (that hasn't expired)
5. Picker gets guidance - System tells warehouse which batch to pick from for this order
6. Inventory deducts from correct batch - Quantity reduces for the specific batch assigned, maintaining accurate tracking

TraceLot automates this entire process for Veeqo, syncing batch quantities bidirectionally and ensuring every order follows FEFO without manual intervention.

When to Use FEFO vs FIFO

Choosing between FEFO and FIFO depends on your product type:

The True Cost of Not Using FEFO

Let's quantify what FIFO costs businesses selling perishable products:

• Inventory write-offs: 10-18% - Industry average for food/supplement sellers using FIFO or no batch tracking. For $500k annual inventory, that's $50k-$90k in lost product.
• Customer returns: 3-8% - Customers receiving products near expiry return them or leave negative reviews. Return processing costs 2-3x the product value.
• Compliance violations - FDA warning letters, state health department citations, failed audits. Fines range from $1,000-$10,000 per violation.
• Recall costs - Without batch tracking, recalls take days and cost $50k-$500k+ in customer outreach, destroyed inventory, and brand damage.
• Reputation damage - One viral social media post about receiving expired products can tank sales for months. Hard to quantify but devastating.

With FEFO and batch tracking, businesses typically reduce waste to under 3%, eliminate expired shipments, pass compliance audits, and execute recalls in 5 minutes instead of days.

How to Implement FEFO in Veeqo

Veeqo doesn't natively support batch tracking with expiry dates. You need a solution that adds batch-level tracking and FEFO allocation on top of Veeqo. Here's how TraceLot implements FEFO for Veeqo sellers:

1. Connect Veeqo account - OAuth integration syncs products and inventory bidirectionally
2. Select products needing batch tracking - Choose which SKUs require expiry management and FEFO allocation
3. Create batches when receiving inventory - Split each shipment into batches with lot numbers, expiry dates, and quantities
4. FEFO runs automatically on every order - TraceLot assigns the earliest-expiring batch (that hasn't expired) to each order
5. Expired batches auto-blocked - Once a batch passes its expiry date, it's automatically held back from allocation
6. Daily expiry alerts - Get email notifications for batches expiring in 30, 60, or 90 days to run promotions and prevent waste
7. Veeqo quantities stay synced - Inventory updates flow bidirectionally, keeping both systems accurate

The entire process is automated. You create batches once when receiving inventory, and FEFO runs automatically on every order without manual intervention.

FEFO Success Stories: Results from Real Businesses

Businesses that switch from FIFO (or no batch tracking) to FEFO see dramatic improvements:

FEFO for Multi-Warehouse Operations

If you operate multiple warehouses, FEFO becomes more complex. You need to enforce FEFO independently at each location while maintaining global visibility.

TraceLot's multi-warehouse FEFO works location-aware: When an order is assigned to a specific warehouse, TraceLot selects the earliest-expiring batch from that warehouse's inventory only. This prevents cross-location allocation errors while ensuring freshest stock ships from each location.