Understanding How Aged Inventory Impacts Your Warehouse

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Being able to understand the journey of your inventory stock and what it entails is a key part of inventory management. It’s also good to see if your inventory gets stuck on a part of its journey, Most often it pauses on the warehouse shelves. When you have a build-up of aged inventory in your warehouse this can cause problems for your business. This issue didn’t happen overnight, but you need to do something about it. Aged inventory can constrain cash flow and hinder new purchases. It’s time to see how you can fix this.

An aged inventory report is a helpful tool that allows you to understand your inventory better. It highlights key metrics about the health and status of your old inventory stock. It can indicate whether a product is a good return on investment or if it’s time to rethink. This supports you to make more informed decisions and helps you forecast.

What is aged inventory?

Essentially, aged inventory is dated, old inventory stock that has past the prime selling point and is building up on your warehouse shelves. Aged inventory can pile up and because it’s old, it can be hard to sell to customers. The longer it sits there, the less likely that you’ll be able to sell it for the suggested retail price.

How aged inventory impacts inventory management

Aged inventory can restrain your cash flow significantly. Imagine items getting stuck on an assembly line. If they all build up on the assembly line, they never get to the end of the line and choke the process in the meantime. An aged inventory report can shed light on how long certain stocks usually spend in storage before they get sold and shipped. These reports can show how much it is costing you to store the inventory and what you’re paying in maintenance costs while storing the item. If you can derive this info from the report, it will help with upcoming inventory purchasing decisions.

Remedying the problem

Since this problem didn’t start overnight, it’s not going to resolve overnight either. However, there are both long term steps and more immediate steps you can take to get your aged inventory under control.

You can start off by sweetening the deal for your sales team — give them a bonus for each piece sold or another attractive incentive. You can also have a massive clear-out sales event with inventory over a year old can help move stock quickly. You might not recover the hard costs, but you’ll gain it back with more inventory real estate space left in the warehouse. If there are lingering items from your big sale, consider donating it to a charity. It’s unlikely that it will sell and it’s better off with someone else. Here are more ways to get rid of inventory stock.

In the long term, make strides to build good relationships with your vendor. When you have a strong rapport, they will be willing to negotiate the terms on returning the aged inventory back to that vendor. Keep track of items as they age and when they hit the one-year mark of being on your shelves, consider dropping the price to get it moving. Create a schedule to track aged inventory and set in a markdown process to move it off your shelves.

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Melanie - Unleashed Software

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.

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