FEFO stands for First Expired First Out. This prioritizes moving and selling stock that is nearest to its expiration date in order to minimize wastage.
FEFO will be used when allocating a batch to any inventory transaction. Paradigm will automatically assign an 'Approved' Batch that is closest to its expiration date that is not already expired.
Firstly, ensure that FEFO is turned on in the 'Company Settings'.
Navigate to 'Administration' > 'Setup' > 'Companies'
Open your company and go to the 'Settings' tab. Make sure that 'Use FEFO' is checked.
For FEFO to work, Batches need to be assigned an 'Expiry Date' either when they are created or by navigating to 'Inventory' > 'Processing' > 'Batch Tracking'.
Open the Batch you wish to edit. The 'Expiry Date' field can be edited here on the 'Batch Status' panel.
Every day at midnight, Paradigm runs a stored procedure which will update the 'Batch Status' of any Batch that has passed its Expiry Date to 'Expired'.
Below is an example of FEFO in action.
In 'Batch Tracking' I can see my available batches for a particular Inventory Item. 2 Batches hold stock with Batch '4' being nearest to its 'Expiry Date'.
I issue 20 units of item 'BUL001' when generating a Warehouse Transfer. Clicking the 'Auto Allocate Batches - FEFO' button 
, Paradigm then allocates 5 units of 'BUL001' from the Batch '4' and 15 units from batch '0000001'. Since batch '4' has the nearest expiry date, Paradigm takes stock from this batch first. Batch '4' is then depleted and now Paradigm takes stock from the next batch that is nearest to expiration.
If you are not able to issue the full amount due to not enough stock being available, you can navigate back to 'Batch Tracking' and open the batch in question. Go to the 'Outstanding Entries' tab. Here you will find all transactions that involve this batch that are not yet processed.
These transactions affect the 'Qty Available' and therefor the quantity that can be issued out of the batch.