Regardless of how well you manage your inventory, there will be times when you order too many products. That leaves you with extra stock.
Dead-stock and slow-moving stock may occur for various reasons, but it can be difficult to distinguish between them. When this is the case, think about the condition of your inventory – if you notice a difference in movement, then it is likely that your stock might be dead.
Managing inventory can be tricky, but with predictive data analysis and business experience, it’s easy to make the right predictions. Combine that with customer insight, and you’re able to order the correct amount.
The dead stock has the potential to impact revenue and cash flow, occupy rack space and threaten a business’s viability. Ensure you’re reducing your dead stock by following this guide and using these strategies to manage or repurpose excess inventory that’s already in your warehouse.
Article Content-
- What Is Dead Stock?
- Why is dead stock a problem?
- What are the causes of dead stock?
- How to prevent Dead Stock
- How to get rid of Dead Stock
- How SWIL software helps businesses to handle dead stocks?
- Conclusion
What Is Dead Stock?
Deadstock refers to items that are no longer being sold by the company. It can hurt a company’s bottom line, as the item costs money to maintain without selling it. Deadstock items are not the same as dead stock, which is a term often used by sellers to describe items they have had lying around for a while.
Deadstock usually applies to items like unused sneakers, discontinued clothing, or furniture with the original tags still on them. The price on these items can be much higher than other resellers because they’re seen as a limited collectible, whereas deadstock things are technically available.
Why is dead stock a problem?
Dead stock can be really expensive. If you don’t sell out your inventory, you lose all that money spent on the items and this lowers your profits. One disadvantage of having dead stock items is that they take up warehouse space, which could be used to store items that are in high demand.
It implies you have less cash flow and literal space available to invest in lucrative products. And on top of that, you still have to pay the costs for maintaining the dead stock on your shelves. All in all, deadstock means a loss in opportunity cost as well as other perks.
What are the causes of dead stock?
Dead stock can be caused by a variety of reasons. If you know what these are and work to improve each area, your business will be less likely to incur this inventory.
1. Incorrect forecasting
Planning ahead is important to smoothness in the fulfillment process. Forecasting inventory supplies prevents surplus stock and promotes efficient customer service.
Forecasting can be tricky, and many new or otherwise struggling retailers find that they underestimate the demand for their products. A former merchandiser for Levi’s and Old Navy, Taylor Daniel advises that “forgoing your financial obligations like payroll accounts receivable can lead to bankruptcy”
When you don’t have a good idea of the demand for your products or the data needed, it’s difficult to buy inventory that will have enough supply to match your needs.
To increase the accuracy of their forecasts, Daniel recommends forecasting “multiple ways” as retailers need to do tops-down and bottoms-up forecasting at an SKU level.
Total level planning often underestimates accurate demand, but SKU level planning can often overestimate it. By doing both forecasts, you can then compare the results of each and massage your targets to get a better idea of the likely outcome.
2. Bad ordering practices
Exact forecasts don’t really matter if you’re not using techniques like good ordering which will keep your business afloat. For example, although a sale might seem tempting, you need to be careful if the demand will still be there when your order hits shelves to avoid overstocking.
3. Fewer sales
You may be doing everything right with your product including forecasting and order, but other factors like price or marketing can impact its success. When you put your product in an obscure or poorly-positioned place, it won’t sell as well no matter what it is.
How to prevent Dead Stock
Dead stock is an increasingly common phenomenon as a result of supply chains being increasingly complex and businesses not having up-to-date inventory data. However, with inventory management software, you can have an accurate and up-to-date record of your inventory meaning that the likelihood of dead stock is lessened. With this data you can:
- Quickly identify slow-moving or outdated inventory and switch your marketing and sales strategies for them in real-time
- Find your dead stock
- Create accurate forecasts
- Use these tips to streamline your ordering practices
Dead stock is a huge problem. An inventory management system is the best way to avoid it, but there are some other things you can do too:
- Try to run small batches of new products before investing deeply. For example, you could test them in your online store or a location that’s more visited than other places.
- Make sure that you properly inspect your products when they arrive. When you’re happy with them, send them out to start selling.
- Try looking at things from a different perspective for your slowness items. Inventory management software can only identify slow-moving items, you have to figure out how to get them going.
How to get rid of Dead Stock
Though it’s not easy, you have some options on how to deal with inventory that is no longer selling.
1. Make bundles
Retailers use product bundles as a secret weapon for achieving various marketing goals. They increase average order value and are effective for getting rid of slow or dead stock. Product bundles can be used to pair your less desirable items with faster-selling ones because when people buy one thing in a bundle, they naturally want the other items in it too.
2. Do heavy promotions
Deadstock is all the items you have that are not moving, which makes it hard or impossible to get back your initial investment if you trade them in for cash. Try having a clearance sale and selling the items at a significant discount, it may help get them out of the storeroom and save you trouble with overstock.
We use this technique to clear out any winter stock left over after the holidays. Talbots, for example, operates a sale of their unwanted winter goods starting after December 25th.
Over the years, the success of their “Last Chance” program has increased gradually. The percentage discount that’s offered starts out at a low % and then will eventually increase. For example, if it’s early February and clothes have been on sale since January without selling out, there may be a % deal like 80% off (if not more) for a limited time.
If you have some dead stock, give it away as a gift with purchase! You can use giveaway items to motivate customers to buy your other products.
3. Donate the stock
No worries! You can still donate your dead stock. They’ve been used in the NFL for instance to make donations after every Super Bowl game. Merchandise is often created by both sides before the game, and after someone wins, all of the losers’ merchandise is donated so it can be sold.
How SWIL software helps businesses to handle dead stocks?
SWIL offers the best Inventory management software that has been around for a while and is mostly used by large stores that have to monitor the levels of their inventory. One of the best features is that it can track whether your store has enough products to meet demand, so you don’t overstock.
Inventory management software is no longer just about collecting data and periodically recording figures. Now, you can use machine learning to have a more accurate view of demand and inventory, which makes for better forecasting. You can rely on the data, calculations, and predictions generated by the software to determine when it’s time to re-order items.
SWIL inventory management software helps companies avoid holding excess stock that could end up sitting on shelves indefinitely. The software will track your inventory’s location and you can trace through any item’s entire lifecycle.
Conclusion
The dead stock shouldn’t be a problem for your business as long as you invest in the right inventory management system. Inventory software can generate reports, so you can check to see when particular SKUs are not selling well.
You can also say goodbye to unexpected discoveries of dead/dying stock and worry about your warehouse space again. Technology also minimizes the margin of error, maximizing efficiencies across all departments.
Dead stock is unavoidable in the retail world, it’s just a matter of when. But here are a few strategies for minimizing the problem and what to do if it does happen.
