FIFO: Stop Throwing Away Stock
What is FIFO?
FIFO stands for "First-In, First-Out," a principle used to manage inventory by ensuring that the oldest stock (the first in) is used or sold before the newest stock (the last in). This method is crucial in environments where products have expiration dates, such as dental practices.
Why is FIFO important?
Reduces Waste: By using older stock first, FIFO prevents products from expiring and needing to be discarded.
Improves Cash Flow: Reducing waste helps maintain a better cash flow, as less money is tied up in unusable inventory.
Enhances Efficiency: Streamlined stock management processes reduce the time spent searching for items and managing inventory.
How FIFO Works:
Stock Rotation: When new supplies arrive, they are placed behind the existing stock, ensuring that the older items are used first.
Date Labeling: Items are labeled with the date they were received to make it easy to identify which items to use first.
Regular Audits: Frequent checks ensure that older items are not overlooked and are used before they expire.
Do I need FIFO?
Maybe – maybe not. Here is some common indicators that could point to FIFO having the potential of bringing benefit to your practice. Hre is some common indicators:
Expired Stock: Regularly finding expired items during inventory checks.
Overordering: Tendency to order supplies in bulk (e.g., 2-3 months’ worth) for convenience, leading to overstocking.
Frequent Reordering: Continuously needing to reorder specific items despite having a large inventory, indicating inefficient usage patterns.
Implementing FIFO in Your Dental Practice
So what if you wanted to implement FIFO? It’s not rocket science – we have adopted a simple step-by-step guide to help you in your journey. Difficulty: easy.
Steps to Set Up FIFO:
Assess Current Inventory:
Conduct a comprehensive audit of your existing stock.
Identify items that are close to their expiration dates.
Order the stock by expiration. For example: if you had surgical gloves expiring in Aug-24 and a second box expiring in Dec-24, then you would place the Aug-24 at the front. This becomes the item that will be physically easier to reach.
Organize Storage Areas:
Arrange shelves and storage units to facilitate easy access to older stock.
Clearly label sections to differentiate between new and older stock. This can be done as simply as using boxes. The box at the front holds ‘old stock’ the box at the back holds ‘new stock’.
Here is a simple representation - of course this can be replicated in a number of settings, including cabinets, cupboards, drawers etc. In image below - the oldest stock would be at the back of the drawer, with newest stock at the front.
Label Items:
Implement a labeling system with the date of receipt for each item.
Use clear, consistent labels to avoid confusion. You could make this even more clear by using colour codes for the ordering period. For example, if you order stock monthly, you could use different colours for each month.
Train Staff:
Once 1-4 are complete, educate your team on the importance of FIFO and how to implement it.
Provide training sessions and written guidelines. It will go wrong at first – old habits take time to be replaced (roughly 66 days!) so be patient and take early opportunities to rectify behaviours.
Make 1 person accountable for ensuring that the process is being followed.
Set Up a Monitoring System:
Establish regular inventory checks to ensure compliance with FIFO.
How often? We can calculate a representative sample size or we could keep it simple by checking 5 locations of fast-moving stock , 5 locations of medium moving stock and 5-location from slow moving stock.
Use inventory management software if possible to track stock levels and expiration dates.
Create a Restocking Plan:
Develop a schedule for ordering supplies based on usage patterns.
Avoid bulk ordering unless necessary to prevent overstocking.
This can be done in two ways: top-down or bottom up.
Top-Down: you can look at your re-order levels, wasted inventory, and work out your average usage. Of course, this will always be dependent on the patient-mix you get.
Bottom up: you can look at the average stock used by each patient and create an estimate of needs based on your bookings. This will be the more time consuming approach to set-up, however, the most accurate.
Maintaining FIFO:
Daily Practice:
Ensure staff consistently place new stock behind existing items.
Regularly check for and remove expired items.
Periodic Audits:
Conduct weekly or monthly audits to ensure FIFO processes are being followed.
Adjust stock levels based on findings to optimize inventory.
Feedback and Improvement:
Encourage staff to provide feedback on the FIFO system.
Continuously refine processes based on practical experience and feedback.
Final Thoughts
A simple concept. It has been used in manufacturing, operations, and the groceries industry for decades. As with all change management, your biggest challenge will be the friction to making a change from 'the old ways'. It is imperative that the people that work around you understand the impact of FIFO and the cost of not using it (both financial and to the environment).
