What is a dead stock?
Businesses can’t sell all of their inventory. The stock left behind is known as dead stock. In simple words, the stock that doesn’t sell is known as dead stock. Dead stock is one of the worst situations in wholesale businesses as we know that wholesale businesses are all about trading in bulk quantities. The investments of wholesale merchants are wasted due to dead stock.
Dead stock is a big headache for a warehouse. It can remain on the shelves as a forgotten or useless inventory.
dead stock It is just an expense for the company. They cannot recover the dead stock’s cost because the stock was either purchased from another company or manufactured in-house.
Dead stock in Inventory Management
Dead stock is a primary concern of inventory management. If a company has no proper plan for handling the dead stock, it can be in danger.
Dead stock needs regular attention. If a company manages its inventory by making correct decisions, dead stock can be handled easily.
Why is dead stock not good for business?
When you consider obsolete stock in terms of cost, dead stock is terrible for the business. Since the company is not generating a profit from this stock, it’s taking a loss.
The dead stock is not in circulation, which means there is no chance to make a profit. It is just occupying space that can be more beneficial for lucrative products. Dead stock is also responsible for increasing holding costs in a company.
Reasons behind dead stock Sometimes it is tough to handle dead stock. It can put financial stress on a company. If dead stock occurs, it is challenging to recover the cost of unsold inventory. The only way to get rid of dead stock is by knowing the reasons behind dead stock it. Some of the reasons are shown below:
When an order is taking place, inventory will be deducted from the record. After monitoring the current log, it may be possible for a company to start new production for the stock. But due to some reasons, the order gets canceled and inventory is coming back. This withdrawn stock can lead to dead stock.
Inaccurate Demand Forecasts
Sometimes you order or produce more goods than your demand. This happens due to a vague understanding of your demands. This extra stock can lead to dead stock.
Lack of Communication
When there is a communication gap between store and warehouse, dead stock can occur. Lack of communication between marketing and sales departments or sales and production units can also cause dead stock.
Sometimes inventory may not be sold because of the poor quality. Defective products can be a cause for order cancellation. Inadequate merchandise increases when proper quality checks are not being done. It is labeled as the primary cause behind dead stock.
Lack of an Inventory Management System
Manually updating products can lead to a loss of inventory control. In this scenario, companies don’t have recent updates regarding stock and accidentally place orders for production. That’s why inventory management systems are there to monitor your stocks.
How to Avoid Dead Stock?
Rather than formulating new approaches to handle dead stock, we recommend implementing these simple tipsdead stock:
Make sure your company has a smooth communication flow. Each department should be in touch.
Test your idea first
Suppose you want to launch a new product in the market. Test it before producing or purchasing in bulk. If people are excited, you can accurately estimate the demand for this product. Afterwards, create or buy it in bulk.
Always offer quality products
If your company wants to prevent too many order cancellations, always offer quality products. Perform quality assurance analysis before launching them for sale.
Creative ways to manage dead stock
Make an Effective Plan
The first and most important way to manage dead stock involves diligent planning. However, the dead stock problem cannot be solved overnight. But still, you can get rid of dead stock by setting reasonable goals. All you need to do is make the best plan to handle it.
Make decisions from your sales history
If a company is facing a lot of dead stock situations, it needs to analyze its sales history. Carefully examine your sales history to make an informed decision about your future.
Return goods to the supplier
This is a simple method for resolving a dead stock case. Contact a manufacturer to see if you can return any finished product. They may not be able to give you a full refund, but they might be willing to repurchase stock at a lower price.
Donate the dead stock to a charitable company in order to help society. This can also promote your company’s profile.
Also, donating dead stock can be seen as a tax write-off when you file your accounts
Ways to revive dead stock
Gifts for customers
When selling goods, giving customers a gift deepens the relationship and offers customers an incentive to buy again from you.
Alternatively, a company should use a gift to surprise and delight customers. This would give them a good customer experience and increase the likelihood of them purchasing from you again.
Clearance sales and closeouts
These are the most effective strategies that make some use of dead stock. At least you can recover some of your costs.
You can host a sales event where you show all of your dead stock on the website and make sure it’s available in your physical stores. Also, be sure to market the event in order to inform buyers about the deals.
Communicate with your suppliers
You should ask the suppliers for a return if you have a decent relationship. Suppliers may be able to repurpose complete items, repurpose some of their portions , or sell them to a different business. This will allow all parties to profit from the return.
Use an effective inventory management system
If you’re manually managing inventory, it’s time to utilize inventory management systems to make better decisions.
Some systems allow you to schedule reminders about stock items close to expiration. Inventory alerts also let you know how much stock is left before you run out. You can also automate the entire order-to-cash workflow, including product allocation, sales/purchase orders, delivery, and invoicing.