Understanding Dead Stock Inventory

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When inventory management effort goes into moving products off the shelves and optimising turnover rates, it’s frustrating when some merchandise does not sell. These products lurking unsold on your warehouse shelves are considered dead stock. It can be hard to get rid of dead stock and it can put a financial strain on your business. If you can’t sell a product onward, you won’t be able to recover the costs of the unsold merchandise. Moreover, as dead stock sits there collecting dust, it could be taking up valuable shelf space in your warehouse, used instead for lucrative products. What are some reasons dead stock inventory happens?

Customers don’t like the item

Perhaps you thought it would be trendy, but in actuality, your customers don’t like it. This type of dead stock occurs frequently, as fashion changes rapidly and it’s hard to satisfy everyone’s tastes all of the time. In this situation, the best option is to dramatically reduce the price of the dead stock and get it sold. In order to get it moving, you may need to cut prices 40 to 50 percent.

Lack of communication

When communication problems occur between the warehouse and the store, dead stock can result. Essentially, dead stock happens when the people on the sales floor don’t know how to sell the product. This is normally due to a lack of communication from the warehouse about the finer details of the product. For instance, if they are trying to sell a new, expensive gadget but haven’t explained all of the benefits of the gadget, it will be very hard for the sales team to sell effectively.

Broken or defective merchandise

Dead stock can occur when something is broken or malfunctions. This could happen when a manufacturer accidentally puts size medium tags on a whole box of size large shirts. If the customer orders a medium but receives a large they will not be happy. In this situation, when the manufacturer is at fault, they will usually credit you for the defective dead stock and pay for the shipping back to their manufacturing plant.

How to avoid dead stock

In order to avoid dead stock, it’s important to understand what you can do to improve your inventory management tactics. One of the best ways to streamline your warehouse is to invest in online inventory management tools that allow you to track stock movements.

Online inventory management software is a great option for understanding everything that is going on in your warehouse. The system can track inventory in real-time and provide a closer look into how fast products are moving. Online inventory management can send the warehouse team alerts about certain products, including alerts such as identifying both fast and slow moving stock; if turnover rates are non-existent, the online inventory management system will identify this promptly.

Stay informed and up to date with your inventory stock in order to prevent dead stock from happening to your business.

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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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