The Definitive Guide to Dead Stock Inventory Management
Reliable, Robust 3PL Solutions; Now at your service.
Reliable, Robust 3PL Solutions; Now at your service.
Reliable, Robust 3PL Solutions; Now at your service.
Good inventory management is a multi-layered process: it requires you to take into regard multiple aspects of your operations and ensure that they are running together seamlessly. However, sometimes, even when you do everything right from your end, there are likely to be some problems.
An example of this includes overordering or overproduction of goods – also known as excess stock. Most of the time, excess stock turns out to be detrimental, as it’s not always easy to sell it and get it off your hands. It becomes what we call dead stock, and can lead to some major complications for you as a business.
However, with the right dead stock management tools and techniques at hand, it is neither impossible nor difficult to avoid overordering, utilise excess stock, and ensure that it doesn’t hinder the growth of your operations in any way.
In this guide, you will find everything that you need to know about dead stock: from dead stock management to dead stock management methods!
If you want to improve the dead stock situation at your company, you first need to understand dead stock’s meaning. Dead stock goes by a lot of names: whenever you hear someone mentioning “obsolete inventory” or “dead inventory,” know that they mean dead stock.
Dead stock inventory and dead stock may sound similar. However, you shouldn’t confuse the term with dead stock, since it is a niche-specific term and usually relates to discontinued products or vintage items that aren’t available in the market anymore. So in a way, unlike dead stock inventory, dead stock products like dead stock clothing and dead stock sneakers are actually quite desirable and are sold at sky-high prices. For example, if you search “dead stock meaning shoes” on Google, you may not find anything related to inventory management at all, but it’s simply because that kind of dead stock meaning is a lot different than what we will be talking about here.
But what is dead stock?
If you have ever been left to wonder what the leftover stock meaning truly is, after you are done racking your brains for the main reason behind your surplus inventory, you need to look into what deadstock is.
Ultimately, think of dead stock as the inventory you find to be unsellable. There are many causes behind having such stock in your inventory and we will get into these soon enough. But on a basic level, it is good to know that dead stock is basically the extra products lying around in your warehouse that don’t become a part of the sales cycle. This will include those products that have gone out of fashion and the customer isn’t wholly interested in, but will also include products that didn’t sell as you anticipated to begin with.
Not only that, but dead stock also includes defective, damaged, and incorrect deliveries. For some retailers, it may also include seasonal stock they are left with once the season is over. So, as an example, let’s say that you decide to customise certain products for Christmas. Once the season is over, you still have quite a few of these customised, Christmas themed products on hand. Since you can’t really sell them anymore, this will be considered dead stock as well.
As you can tell, there are many instances, mistakes, and oversights that might lead to you ending up with dead stock. In fact, it may even be safe to say that you may always have at least some dead stock you need to deal with. However, you must try and avoid it as much as possible – and one way to do this is to identify the main causes of dead stock.
Now, let’s look at the main causes of dead stock in depth.
One of the main causes of an increase dead stock is something called product or sales cannibalization. Cannibalization in marketing refers to when one product offered by you ends up resulting in decreased popularity and sales for another product.
So, let’s take Apple, the phone brand, as an example. Apple launches a bunch of new phone models every year, and since the brand is immensely popular with mobile users, its customers more than happily gravitate towards these latest renditions of the iPhone. However, what does this mean for the older iPhones? They go down in popularity – the new iPhones “cannibalise” the older ones.
Although this might result in dead stock for Apple; if the same thing happens to you, it might lead to surplus inventory that you can’t sell. Newer, better versions of a certain product would mean that the older version you still have lying about become obsolete, and then turn into dead stock.
Product cannibalization may also take place if you are selling too many products that are similar, and the customers turn out to prefer one over the other. Essentially, the main thing to take away from this concept is that the popularity of one product can lead to a decline in the popularity of another product.
If you are struggling with the sales of your products, you are likely to experience a surplus of deadstock inventory. Oftentimes, this is linked to your target market not being impressed enough with your products. This could happen for a multitude of reasons. For example, your products are priced higher than what they can find in the market.
Any such elements may drastically bring down your sales, which can lead to dead stock. For this reason, a lot of people believe that the main solution to dead stock inventory is focusing on your sales and being smart about getting rid of products that customers don’t seem to want to buy! But more on solutions later.
Defective products are also a reason behind an increase in dead stock. If there is a caveat in your stock handling and quality check processes, chances are that you will end up experiencing more dead stock around. Needless to say, this is because you can’t sell customers faulty products. Not only is it unethical, but it will also impact your reputation even if you end up selling them by mistake.
Defective products don’t always include damaged products. They may also include products that haven’t passed the quality checks for one reason or the other, don’t meet packaging or product specifications, and are different from what you offer your clients usually.
The meaning of this is that you end up accumulating all of these defective products as dead stock. With nowhere for them to go, there is no option for you but to keep them in your warehouse.
Since dead stock is essentially just excess stock, another reason behind a surplus in this kind of activity is ordering inconsistencies. So, basically, if you are ordering too many items at once or ordering your stock at the wrong intervals, you could be signing yourself up for excess stock. Ordering inaccuracies can lead up to the stocking up effect which can then lead to dead stock.
This is why your communication with your suppliers matters. If you are not frequently interacting with one another, there is more potential for things to take a turn for the worst and for you to lead yourself to more dead stock.
Lastly but most importantly, bad inventory management leads to more dead stock. Inventory management is all about keeping track of your stock and ensuring that everything is fine across the supply chain. If you don’t have this process in check, you will have to deal with more dead stock. Bad inventory management can lead to a stocking up problem, which means that you will be increasing your surplus inventory.
Moreover, in the 21st century, the only “adequate” inventory management system is an automated one. If you rely on manual methods to get your inventory sorted, you are not only slowing down your processes but also increasing the chances of you having to deal with dead stock.
But why worry about dead stock at all? Afterall, isn’t it just excess inventory?
Well, as a business, every single product you keep in the warehouse has an impact on quite a few things, which is why dead stock, no matter what quantity it is found in, is problematic! In this section, you will understand why too much inventory is bad and how it can impact your business.
Let’s have a look at some of the major concerns that come to the forefront when you are dealing with a dead stock inventory management problem.
No business wants to spend more money, especially when it comes to the upkeep of their inventory and warehousing. However, you aren’t really left with much choice if you have dead stock lying about.
Firstly, more dead stock means more money lost – dead stock reflects that although you have spent time, money, and resources purchasing/proceeding a certain product, it hasn’t been sold. Not only does that mean no profit, but it simply means no return on investment whatsoever; an aspect that can prove to be quite troublesome for any business.
But that’s not all. More dead stock also means that you will see a rise in employee wages. This is because when you have more stock in your warehouse, it requires more labour to organise. Whether it involves the transportation of these goods, reshuffling, or counting items, it will require your employees to put in more work and effort, which means more work hours, which ultimately means higher wages.
More stock obviously also means that there will be less inventory space in your warehouse and storage centres. This aspect is also connected to money – the more you have to store and take care of, the higher your holding cost will be.
However, lesser inventory space also means that you are compromising on the storage of other, better-selling products. This in itself is not a good thing because if you stop managing the selling products properly, you are negating the impact they might have on your revenue.
Making profits is the ultimate goal of any business. However, if you constantly have to deal with dead stock, then even a break even can be out of your grasp! The more dead stock you have, the more you go away from a good profit. This is because even if you manage to get dead stock off your hands, it is still going to be at a loss.
Also, if you are occupied with having to figure out what to do with dead stock, you are essentially depriving yourself of the valuable time to focus on items that actually contribute towards your revenue positively.
By looking at these reasons and in fact many more, you can grasp why it is bad to have too much inventory in your warehouse.
Enter your details to book a demo of the Canary7 WMS, built for 3PLs, and fulfillment houses.
With a dead stock problem hindering the progress of your business and negatively impacting your sales, it is not uncommon for business owners to feel lost, disheartened, and overwhelmed. After all, dead stock is a major indicator that something you’re doing isn’t right, and this can take a toll on the confidence you have in your business operations.
However, the thing about dead stock is that not only is it avoidable, but it can also be managed. All you need to do is have a better grasp on your inventory management processes, and you are good to go.
First, let’s discuss what dead stock management is. For the most part, this is a process that involves analysing your operations and identifying what gap is leading to a surplus in inventory. For example, this could be ordering inaccuracies, or a problem of cannibalization.
Once you identify the problem, you then have to look for methods to avoid it. By incorporating such tactics in your operations, you are ensuring that dead stock never becomes a problem in the first place.
However, even if you manage to pull all of that off perfectly, there still may be some problems that lead to an unanticipated inventory surplus. In that case, dead stock management and good inventory management steps in to save the day! So, even if you find yourself drowning in dead stock, you can still manage to get it off your hands.
How to avoid dead stock is the first question you need to ask yourself if you want your business struggling because of obsolete, unsellable products. This is because if you master this part of dead stock management, you don’t have to worry about much else. Essentially, you will be combating the problem by looking at the root cause and fixing it from that end.
There are quite a few ways you can avoid dead stock; let’s turn to these now:
One way that businesses could have a go at tackling the dead stock problem is by first putting out new items in small quantities. This will help you perceive how purchasers respond to the particular product, and hence provide you with a little “test the water” period before you actually dive into presenting your product to the market.
So, you will basically be waiting to get a tangible, actual positive response from the customers before you go ahead and produce/purchase more of the product. This will definitely help you avoid dead stock, since you will be doing your best to only put out products that you know your customers will enjoy.
A tip: Survey customers as frequently as possible. Not only does this give your business an interpersonal edge, but it also ensures that you are aligning your product launches, upgrades, and improvements in accordance with what your customers want. You will generally be gathering definitively what the customer wants, and not wasting your money on things that they don’t want.
We’ve already discussed that bad quality is one of the most common reasons behind dead stock problems. Quality checks that aren’t carried out properly or products that aren’t properly manufactured to begin with are likely to cause an increase in inventory. This is problematic for a few reasons.
First, when clients find that the quality is less than impressive, they will quit purchasing which will lead to a negative impact on your reputation overall. Second, less quality products that don’t even pass the quality check on your end are a liability, and cause tensions between you are supplier.
Luckily, the way to avoid this is actually quite simple. All you have to do is ensure that you and the supplier reach a consensus on the quality you are looking for, and the quality they aim on providing. Then, the manufacturing process should be carried out accordingly.
As you can assume, this is a fool proof method of ensuring that the products that are leaving your warehouse are of amazing quality, have been manufactured with attention to detail, and are going to help you retain more customers!
Tou avoid dead stock, you need to know exactly which of your products are deadstock to begin with! In this regard, it is important to closely analyse your system and inventory management processes, so that you can easily identify the products that are dredging up your sales and have the potential to become dead stock. Watch your framework as it banners up items that are not selling great.
As we discussed in the Causes of Dead Stock section of this guide, inadequate inventory management can lead to a dead stock problem. This is how: without an inventory management system (an automated one) it becomes quite hard, if not impossible, to identify which products are low-selling or unselling. Even when you do finally grasp which ones these are, it is likely that it happens a little too late!
On the other hand, using an inventory management system that helps you constantly stay on track of everything would mean that you can quickly identify which products are likely to end up as dead stock, which would moreover lead to equally speedy tackling of those issues. With the help of an inventory management system, you will have access to data such as consumer behaviour, sales trends, and sales volume: all of which can help you understand which products are going to be shelved and which ones aren’t.
We briefly mentioned this aspect above, but the importance of being on the same page as your customers if you want to see your business evolve and operate completely free from a dead stock problem. In this regard, it can be stated quite confidently that the key to knowing what your clients need is regularly communicating with them!
One way that this can be done is social media engagement, frequent surveys on your website, maybe even a few calls here and there to ensure that the customers are happy with your services. Even research market projects undertaken to grasp consumer behaviour are a good option to achieve this aspect.
Essentially, the idea is that the more data you collect from your target audience, the more exact your purchasing choices will be. The important data collected from this practice will help you be aware of any issues that might appear as dead stock issues going ahead for example change in popularity or problems with the quality of your products.
In the 21st century, it is important for a brand to take some social responsibility. In fact customers are very picky when it comes to this – they only want to shop from companies that are socially responsible, and take into consideration the situation of the world. So, this will definitely be a point of concern before they decide whether to buy from a company or not. This is upheld by research, with 52% of customers accepting the fate of the planet is the obligation of businesses.
No matter what the nature of your business is, you can always make the choice to donate your dead stock to charities. This is especially true for fashion retailers, as they have a particularly decent open door with regards to giving deadstock to noble causes! It’s not hard donating the clothes you can’t sell, and they might really help those in need. Other than that, it is a good way for you to tell your clients that not only do you care but you are also socially responsible.
You can always find a charity organisation you can pair up with! Just collaborate with them and ensure that any dead stock you have can be delivered to them regularly.
Another way to get dead stock off your hands is to collaborate with other brands and influencers. In fact, any current connections you have with other businesses can prove to be handy in this regard. Something that isn’t selling that well at your marketplace can always be sold off at another channel. Work with the other brand to examine the most ideal ways of utilising a dead stock product.
Other than that, social media influencers can also help you sell off your dead stock. You can send this stuff to them as PR or even as a part of the brand deal, and when they are seen flaunting these items, you may be able to get a few sales from their followers! Either way, you will be improving your sales as a whole.
Perhaps the main problem leading to dead stock is the fact that you are only opting to sell your products on a single channel. This is not ideal as it really limits your audience and hence is likely to aggravate your dead stock problem rather than minimising it. Multi-channel sales is a business model that is gaining more traction day by day, and opting for it can really help you improve your business operations by far.
In this regard, try considering as many eCommerce platforms as possible. Amazon, eBay and Etsy can be a decent spot to sell your stuff! All you have to do is set up your web stores on these pages properly – make sure to add the right SKUs, images, and product descriptions to ensure that the customer knows exactly what they are getting. Every platform has its own set of best practices, so don’t forget to align everything with the rules and regulations of each platform before you switch up your sales model.
So, to summarise everything: the first step when it comes to deadstock management is to make sure that you are doing your best to avoid surplus inventory to begin with. There are quite a few methods that can be employed to make sure that this is the case, and you must pick a method that actually aligns with the well-being of your business.
However, if things still don’t go your way and you still have a dead stock problem at hand, the best way to go about it would be to employ tactics that help you get rid of dead stock as soon as possible. Again, there are many ways that you can do this one, but as long as you are choosing the option that fits in well with your business, you are good to go!
Looking for the ultimate solution that doesn’t only help you manage your dead stock but also make sure that there is as little dead stock as possible? A dead stock inventory management software is the answer.
A dead stock inventory management software can help you amalgamate all the aforementioned best practices, so that you can establish a robust system of dead stock inventory and can effectively avoid having surplus inventory in place to slow things down.
We have already discussed at length how bad inventory management is one of the biggest reasons behind dead stock in inventory management becoming a problem. With inadequate inventory management mechanisms in place, you cannot expect your business operations to evolve without the presence of dead stock.
In the 21st century, it would not be wrong to say that “bad” inventory management is more or less synonymous with manual, physical inventory. This is because the competitiveness and the fast pace that the business world operates on in today’s day and age can only require companies to rely on technology and automation as far as they can.
So, the best option for you is to go for an inventory management software that will not only help you deal with dead stock, but also ensure that your operations remain competitive and can give your competition a run for their money.
Save yourself from bad inventory with a good inventory management software and watch your dead stock problem simply disappear!
Other than that, there are many other benefits of automated inventory management software:
For these reasons and many more, it becomes important for you to look into automated inventory. You will be making your job easier as well as ensuring that you are not leaving a loophole for the dead stock in inventory management situations to get out of hand.
However, picking the right inventory management software is not as easy as it sounds. This is mainly because there are many options available in the market and it can be quite a hassle when it comes to deciding which one aligns the best with your operations.
To make things easier for you, here’s a step-by-step guide to pick just the right inventory management software that can help you deal with surplus inventory as well as ensure that the other aspects of inventory management are also properly streamlined:
As mentioned earlier, there are many options available in the market when it comes to inventory management. As such, there are hundreds of features that you can find in the market. However, the trick, when it comes to finding a software that helps you deal with dead stock in inventory management, is to look for features that align with your business.
For example, if you are a large-scale business with multiple kinds of products going in and out of your warehouse, you should focus on finding a solution that can give you real-time visibility of a lot of stock at once. Similarly, let’s say you figure out that the main problem you are dealing with as a business is ordering inaccuracies. Ideally, you should look for a software that deals with that issue and helps you place your orders more efficiently.
In this regard, it is quite important for you to ensure that the software is advanced enough to deal with your operations. For a large scale business, this would mean that you should look for a more technologically evolved solution. However, since a small business is not likely to have a very complicated supply chain, for them, it would be better to look for a solution that is simple to use but offers scalability.
For the right price, you can get whichever inventory management system you like. But in order to ensure that you are actually investing in a long term solution that can be used regularly to fix your inventory management solutions, you must look for a software that fits your budget.
A good inventory management software is an investment, but it’s better to stay within your financial constraints instead of going over the top in terms of your budget, since that is not feasible long term.
Dead stock in inventory management is a real problem that can get the best of even well-established businesses! However, with the right dead stock inventory management in place, you can easily tackle this problem and ensure that surplus inventory is not slowing down your business processes.
Canary7 is a software solution designed to help you deal with the dead stock problem. Try a free demo today, and see how it can help you!