How a Lack of Inventory Management Causes Dead Stock

Inventory Management

How do you know if a certain product is going to sell? You forecast trends, analyze data, and use your intuition. However, sometimes you just can’t tell what’s going to happen in the future, and you’re left with a product you’re struggling to sell. 

Dead stock can be a big problem for a business, but with the right inventory management, you can protect against it. 

What is Dead Stock?

As the name suggests, the dead stock is stock that you cannot sell. Not only have you spent good money on it that you are unlikely to recover, but it also takes up valuable space that could be used to house a better selling product. Too much dead stock can cause real problems for businesses, which is why companies invest lots of money in the inventory management processes. Proper inventory management can help protect you from the effects of dead stock. 

So, what leads to dead stock?

Forecasting 

You can’t predict the future. You can make forecasts based on data and logical insights, but you can’t say with absolute certainty what’s going to happen down the road. Forecasting your product sales is no different. You might have had a product that has sold well for years, but suddenly the sales dry up, and you’re left with dead stock. This may be because someone invented something that makes your product obsolete, or it could be down to changing trends. 

Many times, your forecasts are going to be accurate, but sometimes there are going to be things you just can’t predict, and they can leave you with dead stock. 

Disorganized Inventory Management 

Sometimes, deadstock can occur because of a simple error. You may have just lost track of how much stock you had and ordered more when it wasn’t necessary. 

Manually tracking stock can lead to inefficiencies in the stocktaking process, which in turn increases the chances of you having dead stock. Having the right inventory management software can significantly reduce the chances of this happening by automating processes and giving you a clearer picture of what’s happening with your inventory. 

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Similar Products

If you have two products that are very similar, then one product can take away all the sales from the other product. If you’re offering your customers two products that essentially do the same job, but one product offers slightly more value, then people aren’t going to buy the inferior product. 

This can cause problems for your business, because you will want to get more stock of the better selling product, but you’re still stuck with lots of stock of the less popular product taking up space in your warehouse. 

Seasonal Products 

Products that are highly seasonal can also be seen as dead stock. For example, if you sell items that are only used in the deepest weeks of winter, the chances are, you’re not going to sell many of them in the summer. That stock will sit around during the summer months, and you have to wait for next winter to come around before you can hopefully start selling them again. 

 

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