Obsolete inventory refers to products that have reached the end of their lifecycle. It is also known as “deadstock” because it’s no longer sellable and most likely will not sell in the future due to a depreciation of value and demand. According to the period of time there can be detected three types of stocks: slow-moving (more than three months without usage), excess (more than six months) and obsolete (more than one year).
These types of inventories have to be written-down or written-off and can cause large losses for a company.
Most common reasons for accumulating obsolete inventory:
• Inaccurate inventory forecasting: Businesses may fail to accurately forecast demand based on historical sales data, market trends, and other factors. For that reason, they might predict a much higher demand and end up ordering an excessive amount of inventory.
• Poor inventory management: Optimizing inventory levels can be a challenge without proper inventory planning, including the tools and technology to help track inventory in real time.
• Lack of inventory transparency: Along with inventory management, having visibility over the inventory at all times is the key. Without inventory transparency, it will be hard to understand how much of each product is needed to restock and when.
With more visibility, there can be found ways to optimize inventory to meet demand and avoid common inventory issues, such as overstocking.
• Lack of supply chain data: Inventory is at the heart of any business, so it’s important to have access to data that provides insights into how well the supply chain is performing. Supply chain forecasting involves using data and research to make predictions and to ensure the business runs smoothly and continues to grow. This includes having insights into order fulfillment production lead times, labor needs, warehousing, and shipping. Having access to supply chain data can help improve supply chain efficiency, including how well inventory is managed.
Whatever the reason, as a company you want to get rid of obsolete stock. There are some alternatives to get rid of this obsolete stock. As a company, you can write off your obsolete inventory or you can sell them.
• Writing off obsolete inventory: In this case, the obsolete inventory can be written off as a loss on the financial statements. An inventory write-off involves taking the inventory off the books when it is identified to have no value and, thus, reduce the tax liability.
• Putting items on sale: If the products still have potential, they could be also sold at a discount by running a promotion, such as a flash sale. Obsolete inventory can still impact ideal profit margins, putting items on sale can be helpful by attracting bargain shoppers.
Because there are so many companies having obsolete stock, Eastlink has a new feature of Obsolete stock. This new feature will reduce the company’s financial stress, and improve the cash flow. In addition, it’s also better for the environment.
