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Dead inventory meaning8/11/2023 ![]() ![]() ![]() Slow-moving inventory can be problematic in a few ways.Slow moving inventory are inventoried items (both raw materials and finished goods) that have minimal customer demand based on the quantity on hand for a period of typically six months or greater. Why Is Slow-Moving Inventory Problematic? In that case, sales may not have slowed at all it's just that you made a decision that rendered the 90-day rule inappropriate. For example, if your business has a rule that inventory taking more than 90 days to sell is slow-moving, but 91 days ago a supplier offered a fantastic deal on a huge bulk purchase, you may have pushed that product category into the "slow-moving" definition on purpose by securing a great price and being willing to hold onto more units to sell over a longer period of time. Second, the slow-moving inventory may just be an artifact of how the business identifies it. If marketing isn't reaching the right customers, that requires a different solution than if prices are too high. It's important to identify the cause of slow-moving inventory for two reasons. Offers may become uncompetitive over time, or a business's tried-and-true marketing channels may no longer reach its customers - for example, if its customers are aging but it is still marketing through the channels that reached them when they were young. A product that was once "hot" may go out of fashion or be replaced by another. If the business sells big-ticket items like cars and refrigerators, economic downturns and anxieties can cause customers to delay purchases. A new competitor or substitute for a product could be drawing customers away. Good inventory management software is indispensable to every step of slow-moving inventory solutions - identifying which products are moving slowly, figuring out why and crafting the appropriate response.Ī business could find its inventory moving slowly for a number of reasons.When responding to slow-moving-inventory, finding the underlying cause is the most important first step - each possibility listed in the previous bullet requires a different response.Inventory can become slow-moving for a variety of reasons, from changing seasons to tougher competition, poor marketing or deteriorating sales channels.But fast-forward another technology generation or two and that model may be completely obsolete. That old model may have just become slow-moving. Most people will want the new one, but some will prefer the old one because it's familiar or to save money. ![]() ![]() Think of technology products when a new version comes out. At first, it can be hard to tell if inventory is slow-moving or becoming obsolete, and often a product that becomes obsolete will spend some time as slow-moving inventory first. Obsolete inventory, sometimes called "excess inventory" or " dead stock," is inventory that customers don't want and the business believes it won't ever sell. Companies that go this route put boundaries in place like, "Trigger an alert if sales go Y% below the slowest sales month for this product in the last two years" or - if the company is confident about its demand forecasting abilities - “Anything more than Z% below the bottom of our forecasted sales range.” These are the main ways of defining and identifying slow-moving inventory other ways are discussed below. This method of identifying slow-moving inventory can be trickier, though, because there's not a convenient hard cutoff. If a company knows roughly how many units it should be selling each week or month, it can look at the rate of sales for a product instead of time spent in inventory, which will give it an earlier heads up than inventory metrics. But a business selling baked goods or dairy products certainly can't keep items on shelves for 80 days and expect them to remain viable for sale.Įven some companies whose products don't spoil can't wait 90 days to determine whether inventory is slow-moving or not. Common definitions say things like, “inventory that's been in stock for over X days” where X is usually 90 or 120 or 180. That may sound too vague to be helpful, but truth is that "slow-moving" is going to be defined differently for different industries, companies, and even for different products within the same company. Slow-moving inventory is inventory that's taking a long time to sell. Knowing how to identify slow-moving products in your business, find the underlying cause and address the problem is an important skill set to have when selling physical products. The challenge is knowing what to do about it, since the reasons sales may slow for a particular product can vary significantly - and the solution must match the cause. Slow-moving inventory is a problem many businesses deal with from time to time. East, Nordics and Other Regions (opens in new tab) ![]()
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