There are a few key terms and phrases in the world of business that any successful business owner should know. One of those, commonly used in business parlance, is what we call dead stock inventory. Sounds scary, right? Well, in some situations, it can be. In the following article, we break down the ins-and-outs of dead stock inventory, including ways to minimise it and use it effectively.
As any business owner will know, to sell goods to customers, you have to have them in stock to begin with. This requires ordering enough stock to meet demand so that you can keep your customers satisfied and increase revenue. However, this is not necessarily as straightforward as it sounds. Building an inventory requires financial investment and time, so you need to be reasonably certain that you will make a return on the goods you are stocking.
Getting this right is all about planning ahead, using historical sales data, market research and the right inventory management software. By doing so, you can predict which goods and products will be most popular with your consumer base, and order inventory accordingly. However, sometimes this is difficult to achieve, and you may end up with stock which is unsellable or obsolete – this is what we call dead stock inventory.
It can be difficult to judge what your consumer base wants, especially as your business begins to grow. Without the necessary data on trends and sales history, you can easily make the mistake of ordering large amounts of stock which are no longer popular, leading to money wasted and obsolete stock gathering dust on your shelves. Dead stock inventory, then, is something you want to avoid at all costs.
How do I prevent dead stock inventory?
One of the best ways to avoid this situation is to download inventory management software. This software can gather information on previous sales trends, in order to calculate the fastest-moving products in your inventory. By doing so, when you next put in an order you can distinguish between the items worth stocking and those you might want to reconsider.
Another method is to look at what other businesses like yours are stocking. This can help you gain valuable insight into current trends in your industry, as well as the types of items that are currently popular with your target audience. Adjust your inventory order to suit and you are less likely to end up with dead stock inventory.
What if you can’t avoid deadstock inventory?
Of course, there are some circumstances when dead stock inventory simply cannot be avoided, for instance, if there is an unexpected slow in demand. In this case, there are a few ways in which you can get a return on your dead stock inventory, and one of the best methods for doing so is to put these items on sale. While you obviously may not get a full return on your dead stock inventory, you can at least make the best of the situation and get back some of the financial investment tied up in your dead stock.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.