Removal Strategy in Odoo 17: LIFO in Odoo 17 Inventory | Odoo 17 Inventory Tutorials
3LIFO can also be used as a removal strategy for managing stock movements within a system, such as a warehouse. In this case, it dictates that when items are needed, the most recently added ones are picked first. This can be useful for:
Preventing obsolescence: This ensures older items are used first, reducing the risk of them expiring or going out of style. #odoo17
Warehouse organization: You can simplify picking processes by focusing on the latest stock. #odooinventory
It also has disadvantages like:
Increased accounting complexity: LIFO requires more record-keeping compared to FIFO.
Potential volatility in reported profits: During deflation, LIFO can lead to higher reported profits compared to FIFO.
LIFO Example: Bakery with Different Purchase Costs
#odoofunctionalvideos #lifo
Imagine a small bakery that uses LIFO for both inventory valuation and stock removal. They sell two types of cookies: chocolate chip and oatmeal raisin. Here's an example:
Purchase Dates and Costs:
Jan 10th: Bought 20 chocolate chip cookies at $0.50 each.
Jan 15th: Bought 15 oatmeal raisin cookies at $0.60 each.
Jan 20th: Bought 30 chocolate chip cookies at $0.55 each.
Jan 25th: Bought 25 oatmeal raisin cookies at $0.65 each.
Current Inventory:
50 chocolate chip cookies
40 oatmeal-raisin cookies
Customer Orders:
Order 1: 10 chocolate chip cookies
Order 2: 20 oatmeal-raisin cookies
LIFO in action:
Order 1:
LIFO prioritizes the last-received cookies.
10 cookies are picked from the most recent batch of chocolate chips (Jan 20th).
Cost of goods sold (COGS) for order 1: 10 cookies * $0.55 = $5.50.
Order 2:
20 cookies are picked from the most recent batch of oatmeal raisins (Jan 25th).
COGS for order 2: 20 cookies * $0.65 = $13.00.
Inventory Update:
40 chocolate chip cookies (20 from January 10th + 20 from January 20th)
20 oatmeal-raisin cookies (all from January 15th)
Impact:
The bakery uses the most recent purchase costs for COGS, reflecting current market prices.
This might reduce taxable income during periods of inflation.
However, older inventory (Jan. 10th chocolate chip) remains on the balance sheet at a lower cost.
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