Most online sellers have a hard time getting enough inventory to meet demand. It is a good idea to buy more than you need and keep some emergency stock on hand. But, buying too much inventory puts your business at risk of having products that lose value before you can market them. Obsolete inventory is when you keep buying products that are not selling anymore. Is it bad for your business? In this blog, we talk about how to avoid, detect, manage, and reduce obsolete inventory.


About Obsolete Inventory

An obsolete inventory is also called “deadstock”. It refers to a product that has reached its lifecycle’s end and will most likely not sell in the future. The reason being there isn’t enough demand or value for it in the market.

Products are likely to become obsolete because of:

  • Innovations that lower the value
  • Technologies changing the way products are made
  • Less product demand
  • Higher market competition


Obsolete Inventory: How Bad Can It Get?

Inventory is bought or made so that it can be sold. There is no way to get rid of an obsolete inventory. Hence, it is a loss and can affect profit margins.

Generally Accepted Accounting Principles say that inventory that cannot be sold must be written off at business fiscal year-end.


Obsolete Inventory: What Does It Do?

Out-of-date inventory can build up for various reasons, from incorrect demand projections to poor inventory management. The following are some common reasons inventory becomes out of date.


1. Unreliable Inventory Forecasting

Some businesses don’t determine how much demand there will be based on previous sales data, industry trends, and other factors. Eventually, they end up with out-of-date inventory because they overestimated demand and ordered too many products. Instead, you can buy products for some months, rather than a whole year.


2. Inadequate Stock Management

Obsolete goods can be caused by poor inventory management, but this isn’t the only thing. Without good inventory planning, it can be hard to raise inventory levels. It includes having the technology and tools to track inventory.

By installing the technology, you can learn about inventory turnover rates, making it easier to do inventory tasks. It can help you find products that might be out of date because of a slower sales cycle.


3. Inventory Visibility

A lack of visibility can allow obsolete inventory to go unnoticed and lead to high-demand goods’ stockouts.

It can be hard to determine how many products you need to refill when you don’t know how many products you have. You can now make the most of your inventory and avoid common inventory problems, meeting demand with time.


4. Lack of Supply Chain Data

Online businesses need a lot of inventory. Therefore, having data about how well their supply chain is working is good for them. To ensure that a business runs and grows, supply chain prediction involves using research and data. It also includes knowing how long it will take to make the product, how much labor it will take, and so on.

People who access supply chain data can use that information to improve supply chain efficiency. It also helps them keep track of their inventory.


Obsolete Inventory: How Do You Deal with It?

There are many ways to keep old inventory from building up. However, it’s impossible to avoid having any dead stock at all. Here is what you should do if you have a lot of things that can’t be sold.


1. Getting Rid of Old Stock

Because old inventory can’t be sold, it is no longer valuable. You can write down your old inventory as a loss of business. Some products have no value and can’t be sold, so they are written off as inventory. It can help you cut down on your tax bill.


2. Putting Products up for Sale

If the products still have value, you can get people to buy them at a lower price. Having too much old inventory can hurt profit margins. Nonetheless, selling products can help cover some costs by attracting people looking for bargains.



Obsolete Inventory: How to Avoid and Cut Down on It?

Obsolete inventory risks can be reduced if you plan and manage your inventory well. Here are some ideas for keeping or cutting down on the old stock.


1. Inventory Demand Can be Predicted

You can figure out how much demand there will be for each SKU by looking at data from the past and making smart decisions. In addition, you must not buy too many products that will be out of date before they can be sold.

Many good inventory forecasting systems are available. You can rely on a third-party logistics partner to give you the information you need to better predict demand without paying extra.


2. Use Inventory Software to Keep Track of Your Inventory

Before you buy any more inventory, you can use inventory management software. It helps you keep an eye on your inventory. You can also look for slow-moving products and figure out how things will sell in the future.

Suppose you use a 3PL’s order fulfillment service. In that case, you get inventory management tools, reporting, and analytics that give you information about demand forecasts, order management, and more. With such services, you can make better inventory management decisions.


3. Routine Inventory Checks

An accurate inventory audit can also help you avoid and cut down on outdated inventory. It will help you figure out how much you’re paying to keep slow-moving products that are on the verge of becoming obsolete.

It can take up valuable inventory space that could be used to store faster-moving goods. You can get rid of old inventory by having regular audits.


4. Get Exact Supply Chain Data

Having access to supply chain data is good for inventory management that happens on time. It shows you how much inventory you have and how long it will take to get it from the warehouse.

Suppose you have access to the right supply chain data. In that case, you can make smart decisions about stock availability and know which products need to be repurchased. The supply chain data will also help you keep a buffer inventory and know when to meet future demand.



How Do 3PLs Assure that Inventory Obsolescence is No Longer an Issue?

You can use a 3PL dashboard, like the NimbusPost dashboard, to split up products and keep an eye on your inventory in real-time. This way, you can manage and avoid obsolete inventory. NimbusPost gives you complete access to your operations by giving you the information, data, and analytics. With such information, you can manage SKUs, manage stock, and refill inventory on time. In addition to this, you never run out of popular market products.

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