TECHNOLOGY

What are Dead Stocks?

What are Dead Stocks
Written by Ramit

When running a business, you have got a number of responsibilities in your head that need your attention 24 7. One of these is the effective management of the inventory management system. You are responsible at the topmost level regarding what to order and when to order. It is no doubt that Inventory as a whole or even a little item of product in the inventory takes its space in the warehouse. Therefore, it creates a major hindrance in the normal workings of your business when you have made the orders excessively without thinking about the future. 

What is Dead Stock?

Holding too much stock in the inventory of your business will risk the profit of your company by taking out overstocking costs that are needed to maintain the overstocking inventory. The stock that is considered obsolete and unable to sell is known as dead stock. A company only suffers from a dead stock’s situation when it keeps on holding the same and old inventory for a long time and does not sell it at the right time. 

However, your inventory of the business should be monitored 24/7 and observe which of the stock is being neglected or not being sold through a large period of time so it can be taken care of right away. But when you fail to do this, liquidation of the stock is the best option you got in hand all the time. Selling your overstock inventory at a reasonable price to a liquidator helps you get rid of numerous problems.

Problems that are caused by Dead Stocks:

Let us now discuss some of the major problems that a company has to cope with in terms of overstocking inventory;

  • Profit ratio decreases:

It can be said without a doubt that the profit ratio of any business falls down in case of overstocking inventory. Wonder why? Because when an item is left in your warehouse, you still have the hope to make the sale, due to which you need to maintain it and repair it from time to time before it becomes totally useless. All these repairs, as well as maintenance costs, are taken out from the profit ratio which affects largely the balance sheet of your business

  • High wages of the employees:

When there is a large amount of stock being preserved in your business’s inventory, it is obvious that it will require constant monitoring and checking by the employees. Due to which the employee work is increased because he has to manage the new as well as the oldest inventory also, which in turn makes them demand higher wages. 

  • Holding cost increases:

The major issue of overstocking inventory is that the business has to pay holding costs at every cost. All these costs are paid from the portion taken out by the profit which reduces the return rate of your business. 

  • No room for new inventory:

We are all aware of the fact that when there is already a large amount of stock preserved in the warehouses of the company, how can the new stock enter? This is also a major problem caused by overstocking inventory, that no space is left for the new and trendy items that are demanded by the customers. Therefore, the dead stock should be removed as soon as possible by some effective methods like the liquidation of the inventory. 

How to manage and sell Dead Stock?

You can take a number of important steps in order to manage the dead stock of your company and reduce the overstocking costs being taken out from the profit. Following are discussed some of the effective steps that could help you in terms of eliminating your business’s dead stock;

  • Improve inventory Forecasting methods:

The inventory forecasting methods should be improved as well as automized to get rid of the overstocking inventory. You need to be careful enough while making orders regarding the future. All the prevailing products also last for a specific time, so the orders should be made accordingly to avoid the dead stock preserving situation in the business. 

  • Attempt Liquidation of Dead Stock:

Liquidation of the stock is the best option when you have to get rid of the problems occurring by overstocking inventory. Find and contact a good liquidator and sell all the dead stock of your business at a given price to him. This will create space for the new products to enter as well as also help you to reduce paying the overstocking costs.

  • Use of Automated inventory management Softwares:

Currently, it is the era of modernization and technology. Everything is being automated and designed to help the human in every respect to ease their work. Therefore, using automated inventory management software could help you a lot to avoid the situation of overstocking inventory. 

  • Market your products through Social Media platforms:

Every next person nowadays is involved in social media platforms in one way or another. Remarketing your inventory on different social media platforms like Instagram, Twitter, Facebook, etc could help you a lot to create awareness regarding your product and attract some sales. It will get you out of the problems caused by overstocking inventory.

About the author

Ramit

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