2025 Trends in FIFO vs. LIFO Inventory Strategies for Construction Supply
In the construction supply industry, inventory flow is more than a finance function—it’s an operational strategy. Whether you’re managing bagged concrete, pressure-treated lumber, sealants, or fabricated steel, how you move inventory matters.
Traditionally, companies have chosen between FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) based on accounting preferences. But in 2025, inventory flow strategies are evolving to support faster fulfillment, tighter margins, and smarter ERP-driven operations.
Here are the top FIFO vs. LIFO trends construction suppliers are leveraging this year—plus how to choose the right model for your SKUs, customers, and warehouse setup.
🔄 FIFO vs. LIFO: A Quick Refresher
FIFO (First-In, First-Out): The oldest inventory is sold or used first. Ideal for perishable, aging, or spec-sensitive items.
LIFO (Last-In, First-Out): The newest inventory is used first. Often used in inflationary periods to match high costs with current sales prices.
Both can exist in your system—if your ERP supports hybrid inventory logic.
🔍 Trend 1: Hybrid FIFO/LIFO Models by SKU Class
In 2025, more distributors are blending FIFO and LIFO strategies based on SKU behavior.
Common Examples:
FIFO for shelf-life or warranty-based materials (e.g. adhesives, foam insulation)
LIFO for commoditized or bulk SKUs (e.g. pipe, lumber, steel stock)
✅ Why it matters: Enables more accurate valuation and prevents product waste.
📦 Trend 2: ERP-Driven FIFO/LIFO Rules by Location or Warehouse Zone
Warehouse layouts are adapting too. Companies are setting up FIFO zones for sensitive materials and LIFO staging areas for high-volume dispatch items.
Your ERP can now:
Apply different inventory flows based on zone
Prioritize picking logic by storage method
Automatically assign FIFO or LIFO based on SKU or product group
✅ Why it matters: Turns what was once a back-end accounting decision into a frontline inventory workflow.
💸 Trend 3: LIFO Strategy Re-Emerges for Margin Management
With rising costs for commodities like cement, steel, and lumber, many distributors are reconsidering LIFO for financial protection.
Benefits include:
Matching high current costs to revenue
Reducing taxable profits (if using LIFO for accounting)
Better reflection of market volatility in reporting
⚠️ Note: LIFO is not allowed under IFRS—but is still permitted under U.S. GAAP.
📊 Trend 4: FIFO Enhancements for Expiry-Based or Lot-Controlled Inventory
More ERP systems in 2025 are enhancing FIFO logic by:
Auto-prioritizing earliest expiry date or lot number
Flagging aging materials nearing shelf life
Blocking fulfillment of materials outside FIFO unless approved
Especially useful for:
Adhesives
Bagged cement
Specialty coatings and epoxies
✅ Why it matters: Reduces warranty risk and customer complaints.
🧠 Trend 5: AI Forecasting Paired with FIFO/LIFO for Smart Procurement
Modern ERP systems now use AI to recommend:
When to buy based on price trends
How much to buy, factoring in LIFO or FIFO strategy
Which lots or batches to consume first for optimal cash flow
Example: Your ERP might suggest FIFO for summer products with shelf life, and LIFO for winter seasonal goods tied to volatile pricing.
✅ Why it matters: Procurement and inventory flow are finally aligned.
🏗️ Trend 6: Job-Site and Project-Based FIFO Flow for Contractors
Contractor customers often require materials delivered in the order they’ll be installed.
New workflows enable:
FIFO-based kitting and pre-bundled staging
Job-site-specific FIFO lots for inspections
Customer-specific fulfillment logic (FIFO enforced per project)
✅ Why it matters: Improves job-site scheduling and reduces rework or rejected deliveries.
Final Thoughts
In 2025, FIFO and LIFO aren’t just accounting concepts—they’re dynamic operational strategies that can be tailored by SKU, location, customer, or business need. With modern ERP tools, distributors can mix and match these flows to improve cash control, reduce product waste, and support smarter delivery schedules.
📦 Want help implementing hybrid FIFO/LIFO strategies in your ERP? Let’s tailor inventory flows based on your real SKU behavior and warehouse layout.
