Performance Indicators Retail Merch Tier 3 Practice Test

The recommended approach for managing inventory to ensure that older stock is sold first is known as First In, First Out (FIFO). This method works on the principle that the items which were added to inventory first should be sold first. It helps in minimizing the risk of obsolescence and spoilage, particularly for perishable goods, as it ensures that items nearing their expiration dates or becoming outdated are sold before newer inventory is introduced.

Using FIFO can enhance inventory turnover, maintain product freshness, and improve cash flow, as selling older inventory helps to recoup investments and make space for new stock. In addition, this approach aligns well with accounting practices, allowing businesses to accurately reflect inventory values and costs.

Other methods like Last In, First Out (LIFO) would sell the newest items first, which can lead to older stock remaining unsold longer. Random Stock Rotation does not follow any systematic approach to selling and can lead to inefficiencies in inventory management. First In, Last Out (FILO) is also not a commonly practiced method for managing product flow in retail, as it contradicts the logical movement of stock to serve both operational and customer requirements effectively.