How to Manage Slow-Moving Inventory & Turn it into an Asset?

The products or stocks that occupy the warehouse or storage room for a definite period are called slow-moving inventory. However, the categorisation of slow-moving is based on the industry or products that are considered slow-moving. In most industries, stocks not shipped within 90 days are considered slow-moving.

It is a challenge to manage slow-moving inventory as it physically occupies space. Tying up capital for slow-moving inventory can slow down cash flow, and this can affect your business. Slow-moving inventory can happen due to several factors such as market slowdown, forecasting of wrong sales, saving in cost per unit for ordering more volume, or for other company’s aggressive promotion.

How to identify slow-moving inventory?

Although there are several ways to identify slow-moving inventory, the best way is to better categorise items about cash management. Applying various analysis methods helps to categorise the inventory.  Another technique that industries use for determining slow-moving is to rank the items depending on their month-on-hand. The quantity of current inventory divided by monthly average usage helps in calculating the total months-on-hand. Slow-moving items generally have higher months on hand.

How to manage slow-moving inventory?

Slow-moving inventory can quickly turn into a liability. Business capital is tied up in slow-moving inventory, and it also captures resources that one can use for business growth. Therefore, it is essential to manage slow-moving inventory. The different ways to manage slow-moving inventory are the following:

1. Calculate the slow-moving inventory

Various industries apply different techniques to calculate the slow-moving inventory. But, the three most accurate methods that are used frequently by the industries are:

• The most commonly used method is to calculate the overstocked items. When a product lies in the warehouse for more than 12 months, and there is no demand for this product for more than 6 months, this product is considered slow-moving.
• Calculate other stocks and then determine if its inventory is slow-moving or not. The accuracy rate of this method is usually good.
• Calculating the frequency of shipment is the most accurate method among the other methods. When a definite product has not been shipped for 120 to 150 days, then the product is considered as slow-moving inventory.

2. Try to make your slow-moving inventory work

When you come to know that you have slow-moving inventory, rather than cutting down its price and sell, you can follow the below steps:

• Check whether the products are smoothly visible on your webpage or not. Many people are still looking for slow-moving inventory.
• And if it is smoothly visible, then check its image quality. Is the image up with high quality? Try to post a good-quality image with an accurate product description. This trick will help to get maximum traffic to your webpage for your slow-moving inventory.

3. Put your slow-moving inventory on sale

If you fail to manage your slow-moving inventory by following the above two ways, then the best way to put those items on sale.

• Indian customers are always looking for SALE! To generate customer needs and allow them to seize products at a cheaper price, you can announce SALE for your slow-moving inventory. You have to cut your cost price a bit, but this will not make a huge loss in your business.
• Another excellent idea for selling slow-moving inventory is to announce the sale of the products for the Deal of the Day. Buyers will take instant action after this announcement to buy the products.

4. Consider liquidators for your slow-moving inventory

When none of the above-mentioned ideas is successful, and you are sure that you will have to face losses for your slow-moving inventory, then you must consider liquidators for your products. You can clear your inventory with the help of the liquidators at a certain price.

How does slow-moving inventory turn into an asset?

Businesses try to do their best to optimise inventory management with their efficient and cost-effective business policies. However, it is the time that decides the rise and fall of businesses. Slow-moving inventory is a common nightmare for most retailers. But you should never think that slow-moving inventory can bring down your business because still, you can earn profit from your slow-moving inventory. The reasons are mentioned below:

1. Evaluate your marketing strategies

The first thing you need to do is to evaluate the marketing strategies that you implemented in your business. Try to find out which strategies are effective and which are not effective. Make sure that your target audiences are potential buyers or not. Update all your product photos and try to make them attractive for prospective buyers. After that, you can start marketing again for your products through email marketing on social media or the Google Display Network. Try to target those customers with creative content who checked your unsold product previously.

2. Use various sales tactics

When you have large numbers of slow-moving inventory, you should go for heavily discounted sales. Announce 50%-60% off discount for these products through various sales tactics.

• Flash Sales - Notify your customers about the limited period of sales for your stocks. You can set up a banner on your website to show urgency.
• Clearance Sales - Clearance sales can be offered to the customers twice a year. In this sale for 3-6 months, old unsold stocks are sold. Using social media, you can notify people about this clearance sale.
• Seasonal Sales - Try to sell your stocks during festive seasons. Holidays are the right time to announce sales for the slow-moving inventory. You can announce seasonal sales during Christmas eve, pre-winter days and pre-summer days, etc.

3. Change the display of your slow-moving inventory

To sell your slow-moving items, you can change the display of your store. You can put the items in such places where it is easily visible such as on front shelves, near the cashier or in the place where customers pass through and see.

4. Combine the slow-moving items

When you combine two or three slow-moving items, shoppers will get easily attracted to buying the products. You can apply this effective way also to sell your slow-moving items.

Conclusion

All businesses sometimes may face these types of problems. So, the business owners need to learn from every episode and adopt a preventive measure for the same. Try to avoid inventory stocking as it may create problems in your future. Nowadays, various processes of slow-moving inventory such as buying, processing, storing, and selling can be easily managed through different apps.

Also read:

1) Capital Gains Explained: Definition, Types, Exemptions & Tax Saving
2) PoS Machine: Types, Benefits for small businesses & more
3) Foreign Direct Investment(FDI) 101: A Complete Guide
4) Business Idea: How to Sell Furniture & Home Decor Online?
5) OkCredit: Simple, Paperless & Secure solution for businesses

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FAQs

Q. What is the easiest way to determine slow-moving inventory?

Ans. Months on hand is the easiest way to determine slow-moving inventory. The higher the month means the stock is slow-moving.

Q. How many types of inventories are there?

Ans. There are four types of inventories: components/raw materials, finished goods, WIP, and MRO.

Q. What is the simple way to identify obsolete inventory?

Ans. The simple way to identify obsolete inventory is leaving the count tags of physical inventory on the entire inventory items after completing the annual physical count.

Q. What is excess inventory?

Ans. When product stock level and buffer stock level exceed the forecasted demand, it is called excess inventory.

Q. How can we know that the item is slow-moving?

Ans. If an item is not sold for more than six months, then it is considered slow-moving.

Q. What is the meaning of slow-moving?

Ans. Slow-moving means the stock is showing relatively little progress in selling.