What does FIFO stand for in inventory management?

FIFO stands for "First In First Out," which is a method used in inventory management to ensure that the oldest stock (or inventory) is sold or used before the newer stock. This practice is particularly important in industries such as food and beverage, where perishable items have a limited shelf life. By utilizing the FIFO method, businesses can minimize waste and reduce the risk of expired or outdated products being sold to customers.

The principle behind FIFO is that the items added to inventory first are the ones to be sold or removed first. This helps in keeping inventory fresh and improves product turnover. For example, in a coffee shop, older coffee beans should be used first to ensure quality, while newer beans are kept for later use.

In contrast, the other options do not accurately capture the essence of this inventory management method, with each suggesting an incorrect sequence or interpretation of inventory flow.