Best Practices for Building a Warehouse That Supports a Strict FIFO Inventory Model

For customers whose products have expiration dates, compliance requirements, or quality standards tied to shelf life, First-In, First-Out (FIFO) inventory management isn’t just a preference; it’s a mandate. Whether you’re handling food, pharmaceuticals, or time-sensitive raw materials, building a warehouse that supports strict FIFO is critical to reducing waste, meeting customer expectations, and protecting brand reputation. By implementing a FIFO model, order fill rates can be expected to improve by 5-8%, boosting customer satisfaction.

So, what does it take to design and operate a warehouse that truly enables FIFO? The answer lies in aligning facility design, technology, and process discipline.

Design for Efficient Flow

• Action: Lay out racking, aisles, and dock doors to support natural product rotation.
• Best practice: Place receiving areas close to storage zones to minimize put-away time, and align shipping areas so the oldest product is the most accessible. Simulations have shown that optimizing storage and allocation methods have the potential to reduce order picking travel distance by 29-41%.
• Why it matters: FIFO fails when operators must “work around” product placement — efficient flow reduces errors and labor costs.

Leverage the Right Storage Systems

• Action: Use storage equipment designed for FIFO movement.
• Options:
  • Drive-through racks or pallet flow racks that feed older pallets forward automatically.
  • Carton flow shelving for smaller, fast-moving SKUs.
• Why it matters: Physical storage solutions can enforce FIFO at the structural level, reducing reliance on human intervention.

Implement a Warehouse Management System (WMS) with FIFO Logic

• Action: Choose a WMS that can track lot numbers, expiration dates, and receipt dates — and direct pickers accordingly.
• Best practice: Configure system rules to prevent bypassing FIFO, even during peak demand.
• Why it matters: Software-driven picking eliminates guesswork and enforces compliance at scale.

Enforce Strict Receiving Practices

• Action: Train teams to accurately record lot numbers, production dates, and expiration dates at the point of receiving.
• Best practice: Barcode scanning or RFID tagging ensures data accuracy.
• Why it matters: FIFO only works if product arrival information is precise — any gaps create downstream compliance risks.

Build Visibility Into Daily Operations

• Action: Use dashboards, exception reporting, and cycle counts to monitor adherence to FIFO rules.
• Best practice: Regularly audit picks against system recommendations to ensure operators aren’t “cherry-picking” product locations. Picking efficiency can be expected to improve by 25-30%.
• Why it matters: Visibility helps you catch small process failures before they become customer-impacting errors.

Create Dedicated FIFO Training and Culture

• Action: Train warehouse associates on the “why” behind FIFO — not just the “how.”
• Best practice: Reinforce FIFO discipline with KPIs tied to inventory accuracy and waste reduction.
• Why it matters: Technology and layout matter, but culture is the safeguard. Associates who understand the consequences of FIFO failure will follow procedures consistently.

Collaborate with the Customer

• Action: Align warehouse design with the customer’s compliance requirements and reporting needs.
• Best practice: Share real-time inventory data, expiration dashboards, and waste-reduction metrics.
• Why it matters: A warehouse designed for FIFO is only successful if it meets the customer’s audit and compliance expectations.

The Bottom Line

A strict FIFO model requires more than good intentions — it demands the right infrastructure, systems, and culture. By designing a warehouse around flow, leveraging technology to enforce FIFO rules, and maintaining rigorous process discipline, logistics providers can guarantee compliance while reducing costs and waste.

Action Step to Make Today: Review your current warehouse design and WMS configuration. Ask: Does our setup make FIFO the easiest option for operators? If not, it’s time to redesign for efficiency and compliance.