Dead Stock
Also known as: Dead Inventory, Obsolete Inventory, Non-Moving Stock
Definition
Dead stock is inventory that hasn’t sold for an extended period (typically 6-12+ months) and shows little to no likelihood of selling at regular price. It represents tied-up capital, occupies valuable warehouse space, and often results in losses when liquidated.
Causes of Dead Stock
| Cause | Example |
|---|---|
| Overordering | Bought too much based on bad forecast |
| Trend changes | Fashion items fell out of style |
| Seasonality | Didn’t sell during season |
| Quality issues | Customer complaints, returns |
| Competition | Better alternatives available |
| Poor marketing | Product never gained visibility |
| Discontinued | Product no longer manufactured |
Cost of Dead Stock
Direct Costs
- Purchase cost of unsold goods
- Storage/warehouse fees
- Insurance costs
- Eventual disposal or markdown losses
Opportunity Costs
- Capital unavailable for better inventory
- Space not available for faster movers
- Staff time managing slow inventory
Identifying Dead Stock
Metrics to track:
- Days since last sale
- Inventory turns below threshold
- Months of supply above threshold
- Zero sales in 6/12 months
Dead Stock Prevention
- Better forecasting - Data-driven purchasing
- Smaller initial orders - Test before committing
- Regular inventory review - Catch slow sellers early
- SKU rationalization - Fewer, better products
- Supplier flexibility - Return or exchange options
Dead Stock Disposal Options
| Option | Recovery | Best For |
|---|---|---|
| Deep discount | 30-50% | Still-desirable items |
| Liquidation | 10-20% | Bulk clearance |
| Donation | Tax deduction | Usable goods |
| Bundling | Variable | With popular items |
| Employee sale | Cost | Internal clearance |
| Recycling | Minimal | Raw material value |
| Disposal | $0 (cost) | Truly worthless |
Metrics to Monitor
- Dead stock value as % of total inventory
- Dead stock units
- Aging report (30/60/90/180+ days)
- Write-off amounts
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