FIFO Provider

The FIFO (First-In-First-Out) Inventory Value Provider implements precise cost tracking where the oldest inventory is always consumed first. Each batch maintains its original cost, providing accurate cost of goods sold (COGS) calculations.

Provider Key: FifoInventoryValueProvider

Overview

The FIFO method assumes that the first items received are the first items sold or used. Each receipt of inventory creates a distinct batch with its own cost, and when inventory is reduced, costs are applied from the oldest batches first.

COGS = Sum of costs from oldest batches consumed
Inventory Value = Sum of remaining batch values

This provider is ideal for businesses where precise cost tracking and COGS accuracy are important.

How It Works

Receiving Inventory

When inventory is received, the provider can operate in two modes:

Mode 1: Create New Batch (when receiving from a purchase order or explicitly requested)

1. Create a new batch with the incoming cost details
2. Convert costs to the default currency using current exchange rates
3. Add the batch to the inventory item

Mode 2: Increase Oldest Batch (default behavior)

1. Find the oldest existing batch
2. Add the incoming quantity to that batch
3. Use the existing batch's cost for the new quantity

Reducing Inventory

When inventory is reduced (sales, shipments, adjustments):

1. Order batches by transaction date (oldest first)
2. Consume from the oldest batch until depleted
3. Move to the next batch as needed
4. Calculate weighted COGS from the consumed batches
5. Remove fully depleted batches

Batch Cost Tracking

Each batch preserves its original purchase details:

Example Scenarios

Scenario 1: Sequential Receipts

Receive 100 units at $10:

Total Inventory Value: $1,000

Receive 50 units at $15:

Total Inventory Value: $1,750

Receive 75 units at $12:

Total Inventory Value: $2,650

Scenario 2: FIFO Reduction

Current state: 225 units across 3 batches (from above)

Ship 120 units:

FIFO consumption:

Batch 1: Take all 100 units @ $10 = $1,000
Batch 2: Take 20 units @ $15 = $300
Total COGS: $1,300
Average cost per unit: $1,300 / 120 = $10.83

Batches after shipment:

Total Inventory Value: $1,350 Remaining Quantity: 105 units

Scenario 3: Purchase Order Batch Creation

When receiving inventory linked to a purchase order, a new batch is always created:

Receive 50 units at $14 (from Purchase Order PO-001):

This ensures purchase order receipts are tracked as distinct batches.

Scenario 4: Multi-Currency Receipt

Receive 100 units at 1,200 NOK (exchange rate to USD: 0.095):

Cost in USD: 1,200 x 0.095 = $114.00 per unit

Batch created:

When these units are later sold, the COGS will reflect both the original NOK cost and the USD converted value.

Characteristics

Advantages

• Accurate COGS: Reflects actual purchase costs in the order acquired
• Precise valuation: Each batch maintains its true cost
• Audit trail: Complete history of inventory receipts and consumption
• Multi-currency: Full support with preserved exchange rates
• Tax benefits: Often advantageous during rising prices
• Natural flow: Matches physical inventory flow for many businesses

Limitations

• Complexity: More complex than average costing
• Storage overhead: Requires maintaining batch records
• Variable unit cost: Different units have different costs, complicating pricing decisions
• Batch maintenance: Need to track and clean up depleted batches

When to Use

The FIFO provider is appropriate when:

• Precise COGS tracking is required for financial reporting
• You deal with perishable goods or products with shelf life
• Purchase prices vary significantly over time
• You need to match physical inventory flow (oldest items sold first)
• Audit requirements demand detailed cost traceability
• Your industry standard or regulations require FIFO costing

Configuration

{
  "InventoryManagement": {
    "IsEnabled": true,
    "IsWriteEnabled": true,
    "InventoryValueProviders": [
      {
        "Key": "FifoInventoryValueProvider"
      }
    ]
  },
  "ProductSettings": {
    "DefaultProductCostCurrency": "USD"
  }
}

Controlling Batch Creation

By default, the FIFO provider increases the oldest batch when receiving inventory without a purchase order reference. To ensure each receipt creates a distinct batch:

• Link to a Purchase Order: When inventory is received through the purchase order workflow, each receipt automatically creates a new batch
• Enable batch creation: When updating inventory through other channels, request explicit batch creation to track receipts separately

This gives you control over whether inventory receipts are consolidated into existing batches or tracked individually.

Comparison with Average Cost

Related Topics

• Inventory Value Overview
• Default Provider
• Average Cost Provider