Dictionary of Procurement Terms

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  • Last In-First Out (LIFO)

    A warehousing inventory term used to indicate that the latest acquired materials are assumed to be physically used first and the remaining materials acquired earlier in date time are assumed to be still on hand in inventory. The LIFO methodology does not rotate inventory therefore it tends to result in aged and outdated materials remaining in inventory; An accounting technique where the highest price is selected from a range of prices that have been paid for the item over a period of time, thus lowering the average cost per unit remaining in inventory while simultaneously increasing the cost of goods sold. The LIFO accounting technique tends to be more popular during inflationary periods, especially in private sector organizations, because of tax considerations.

    See Also: First In-First Out (FIFO)