LOFO is an acronym for LOwest in First Out. This is a simple, highly versatile management method, or way of organizing, handling and prioritization of movement of material or supplies, or anything else. LOFO means that first the reserves or material with low purchase price are consumed. Therefore at the end remain reserves with high purchase price.
Use of LOFO in practice: LOFO method is mostly used in logistics and transportation, warehouse management, production logistics, requirements management, and the inventory pricing and management. In contrast to the LIFO method is taken into account for the purchase price.
- Logistics and transport: material with the lowest price is shipped as the first
- LOFO as a method of inventory valuation