Employing inventory forecasting and management best practices plus technology delivers dual benefits: You keep large amounts of excess inventory from piling up and help leaders spot slow-moving stock and figure out how to sell it before it loses all value.īusinesses that sell physical products, as well as those in the maintenance and repair industry, need to track obsolete inventory.Companies can limit the need to write off stock by monitoring inventory in real time and regularly measuring inventory turnover, days of inventory on hand and other key metrics down to the SKU level.These are root causes of obsolete inventory. Poor forecasting, faulty design, imprecise purchasing and outdated inventory management systems yield poor inventory visibility.Organizations should immediately review their balance sheets to see if obsolete inventory is negatively impacting their finances.Minimizing both is a function of inventory best practices and analysis techniques. It usually starts as slow-moving inventory, then becomes excess inventory and finally turns into obsolete inventory. Products that become obsolete or dead go through multiple steps before they become unsellable. Inventory usually becomes obsolete after a certain amount of time passes and it reaches the end of its life cycle. Obsolete inventory, also called “excess” or “dead” inventory, is stock a business doesn’t believe it can use or sell due to a lack of demand. It’s worth the effort, though, because solid inventory management is good for cash flow with the right data and technology, businesses can limit the amount of stock they need to write off and free up that money for growth initiatives. One way companies can beat the inventory odds is by minimizing the volume of unsold or unused goods or raw materials they have on hand, but that requires mastering inventory management. manufacturers and retailers were holding approximately $1.33 of inventory for every $1 in sales. Census Bureau says that at the end of July 2020, the total business inventory/sales ratio, based on seasonally adjusted data, was 1.33. Inventory ties up the most cash for any product-based business-thus, it’s also an area with plenty of opportunities for savings. East, Nordics and Other Regions (opens in new tab)
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