Why Deadstock Inventory Can Cost Your Business
Posted on 17 Dec, 2019
Trends change. What’s hot-selling today will lose the buzz eventually and turn into a dead stock soon, costing your business lots of money. Dead stock, also known as non-moving inventory, refers to products which couldn’t find takers before being removed from sale.
How does a Good Inventory turn into a Dead Stock?
Businesses, quite often, even the ones which are well-managed, commit mistakes which leads to non-moving inventory. Talking about that, the three major reasons which cause dead stock are:-
1. Incorrect Market Predictions: Incorrect forecasting = increased risk of ending with dead stock. Once a product hits the end of its life cycle, it won’t sell anymore.
2. Poor Quality And Design: Products designed poorly or don’t match the quality expectations of the customers, will soon lose the demand and turn into a non-moving inventory.
3. Bad Inventory Management: Lack of a good inventory management system is one of the biggest reasons that inventory turns into a dead stock.
4. Inefficient Supply Chain: Inefficient supply chain leads to longer lead time. Needless to say, long lead time leads to accumulation of inventory which loses their life cycle and never goes back for sale.
5. Lacking A Dead Stock Management Plan: Hoping the obsolete products would sell causes stocks to pile up, which isn’t what efficiency sounds like. Instead, an inventory management plan to mitigate the risk to improve the inventory process avoids obsolete stocks from accumulating.
How does Dead Stock cost your Business?
Non-moving inventory or dead stock has very low chances of getting back on the shelves again. Thus, holding on to them isn’t a good idea. It’s only costing your business more money, leading to loss which is beyond recovery. Here’s how obsolete or non-moving inventory is costing your business.
1. Wasting Money in Dead Stock Management: Capital invested in non-moving inventory leads to further loss. If you’re holding up to your dead stock, you’re wasting your money towards its management. Dead stock occupies space which can be used to store other products which are still in demand. The potential loss increases in case the business depends on rented inventory space.
2. Finance & Insurance: Businesses often buy raw products on credit. The longer they hold the stock without liquidating it, the more interest is accrued, increasing the total debt obligation. In addition, products stored in the inventory are secured using insurance - and excess stocks result in higher premiums, which is a substantial additional expense.
3. Paying Employees: Pulling out the dead stock from shelves requires employees, and paying them for doing the said task is only adding up to the loss. Warehouse personnel are paid by the hour, and it takes at least a few hours to count and arrange the non-moving inventory. Besides, the longer the inventory is held more it would be moved around, and the administrative cost would keep on adding to the burden.
How to get rid of Dead Stock without any further loss?
Dead stock is a lost cause. Ditch any plans which lead to no profit. While reusing it a good way to convert the loss into profit, some businesses don’t have the option. Selling your dead stock to those who need it is smart, but finding the potential takers is the challenging part. Hence, there’s a need for platforms which make the task of finding a fitting buyer easier; to solve the problem.
Talking about platforms, Hotshelf, which allow businesses to list their dead stock on their website can be a blessing in disguise. Hotshelf connects business interested in getting rid of their non-moving inventory with potential buyers, ensuring a better bargain.