Hi
Could somebody please help with understanding FIFO, LIFO and JIT in operations inventory management???
I just need some simple definitions and an example...
My teacher makes it sound soooo confusing..
Thanks heaps
Hey Louanna! Welcome to the forums! I didn't do Business Studies, but I did Retail Services, so I know what this stuff is
For our example, let's say we have a stack of boxes (representing inventory). You stack the new boxes on top as you receive them, meaning that the newest boxes are at the top, and the oldest are at the bottom.
First In, First Out (FIFO): This is where whatever stock goes into inventory first, is used first. This would mean taking boxes from the bottom of our pile.
Last In, First Out (LIFO): This is where whatever stock goes into inventory last, is used first. This would mean taking boxes from the top of our pile.
Just in Time (JIT): This is where you receive inventory as it is required in production. Meaning, you don't
have a stack of boxes at all - You just order a box whenever you need it. You have no inventory!
I hope this helps