Slow-Moving Stock: Spot It Early and Free Up Cash

Every business has a few products that nobody has asked for in months. They still sit on the books at full cost, take up shelf space, and quietly absorb cash a faster seller could use. The longer they sit, the fewer options you have.

This post shows how to measure slow stock with two numbers, sort it into age bands, choose between four ways to release the cash, and compare those options on a 600-unit example.

Two Numbers That Show the Problem

You do not need a full report to find slow stock. Two figures per item are enough to start:

•       Days of stock: on-hand units divided by average daily sales. An item with 600 units that sells 4 a day holds 150 days of stock.

•       Age since last sale: the number of days since the item last left the warehouse, which catches items whose average hides a long silence.

Compare days of stock with the item’s replenishment time. If it would take five months to sell what you hold and the supplier delivers in three weeks, the stock is far ahead of demand. Working both figures out by hand for every item is slow, and on its inventory page, HashMicro aging and slow stock reports are listed beside stock valuation reports and stock movement history. Ask to see how the bands are configured when you attend a demo.

Sorting Stock Into Age Bands

Bands turn a long list into a short to-do list. A simple split by days since the last sale looks like this:

•       0 to 60 days: healthy, so no action is needed.

•       61 to 120 days: watch list. Check whether a promotion or a season explains the slowdown.

•       121 to 180 days: slow. Decide on an action this month.

•       Over 180 days: at risk of becoming dead stock, so act now.

Set the bands to suit your products, because perishables and fashion items need much tighter bands than spare parts., and any item that moves into a worse band should trigger a review.

Four Ways to Release the Cash

Transfer it

Another site may still be selling the item at a healthy pace. Moving the stock costs little and keeps the full price.

Discount it

A planned markdown moves units quickly. Keep the price above cost where you can, and decide the end date before the promotion starts.

Return it

Some suppliers accept returns, often at a reduced credit. Check the terms early, because many agreements set a time limit.

Write it off

When stock is obsolete, expired, or damaged, a write-off ends the carrying cost and clears the shelf. It also removes inflated value from your records.

A Clearance Case in Numbers

Take 600 units that cost $15 each and sell for $25. They sell 4 a day at full price, so 600 ÷ 4 = 150 days of stock, with 600 × $15 = $9,000 of cash tied up. Here are three options:

  1. Hold at full price: the stock clears in 150 days and earns 600 × $10 = $6,000 in margin.
  2. Discount by 20% to $20: assume sales rise to 10 a day, so the stock clears in 60 days and earns 600 × $5 = $3,000 in margin.
  3. Return to the supplier at 80% of cost: $7,200 comes back at once, which is a $1,800 loss against cost.

Holding earns the most margin but keeps $9,000 locked up for 150 days. The discount clears the stock 90 days sooner at half the margin. The right choice depends on what that cash could earn elsewhere. The figures are illustrative, so use your own prices and sales rates.

Keeping It From Coming Back

Slow stock is usually the result of a buying habit rather than bad luck. These habits tend to cause it:

•       Ordering in large quantities to win a supplier discount that is smaller than the cost of holding the extra units.

•       Reordering by habit instead of by recent sales.

•       Keeping every variant of a product in stock when only a few sell.

•       Buying ahead of a promotion that then underperforms.

A monthly review of the age bands catches most of these early. Treat it as a standing meeting rather than a one-off clean-up.

If you are choosing a system to support that review, a look at inventory management tools used in Singapore can help you shortlist before you ask for demos.

Review Before It Ages

Slow stock is cheapest to deal with while it is still only slow. Pull the days of stock for your ten largest holdings this week, and decide an action for any that far exceed their replenishment time.

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