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Obsolete Inventory Guide: How to Identify, Manage & Avoid It

What is Obsolete Inventory 

Inventory that a company does not think it can utilize or sell because there isn’t enough demand is referred to as obsolete inventory, also known as “excess” or “dead” inventory in Logistics. After a predetermined period of time, inventory often reaches the end of its useful life and becomes obsolete.

Before a product can no longer be sold, it goes through a number of stages that make it dead or obsolete. Typically, inventory that is sluggish to move becomes excess inventory, and that goes on to become obsolete inventory.


How to Identify the Obsolete Inventory Problem 

Inventory management is essential to ensuring a healthy supply chain. It is crucial to identify which products are already dead inventory  and which are slow-moving and might soon become dead inventory.

You can use active inventory data provided by an inventory tracking system to help you make smart stocking decisions.

Because of the real-time visibility provided by excess and obsolete inventory tracking software, brands aren’t caught off guard when dealing with slow-moving and obsolete inventory and can rapidly come up with a strategy to reduce inventory loss.


3 Causes of Obsolete Inventory 


1. Changing customer preferences 

Not all customer preferences can be predicted. Today, trends keep changing rapidly and a popular item may no longer be in demand.

For instance, if your business manufactures apparels for teenagers, you must stay updated with the current fashion trends to stay competitive. Your warehouse could easily turn into stale inventory if it contains apparels that are out of trend.


2. Technological advances 

Technology is constantly evolving and getting better. A product as a result may become obsolete because newer goods offer improved performance. 

Take the VHS tape as an example. VHS cassettes lost their appeal as DVD and Blu-ray players gained popularity. Streaming services have now outdated those as well. 


3. New competition 

It’s not always necessary for rivals to develop new technologies to render your product obsolete. Your market may be sufficiently disrupted by a new brand that offers better pricing or better marketing. Consumers have a lot of options, so it’s simple for them to choose another product even if yours still fits their requirements.


4 Tips to Avoid Obsolete Inventory 


1. Regularly monitor inventory levels

Implementation of a good inventory management system is necessary as it helps in tracking real time data on the available inventory. Keeping a record of stagnant and slow movement items in inventory is necessary for avoiding any obsolete inventory.


2. Frequent sales and demand analysis

Analysis of sales data for determining the latest trends and demands is necessary, since it helps in determining the demand for a particular product and thus adjusting the inventory levels accordingly. Conducting market research and being updated on the latest trends too help in avoiding obsolete inventory. 


3. Implement a First-In, First-Out (FIFO) or Just-In-Time (JIT) system

The FIFO system helps in selling out the oldest inventory first, as a result helping in goods becoming less obsolete. This method can particularly be used for perishable or time bound goods. 

By only receiving products as they are required for production or sales, JIT inventory management strives to reduce excess inventory. It can assist you in keeping a small inventory and lowering the risk of obsolescence.


4. Discount offerings and bundling products together 

Another way to get obsolete inventory moving is to consider giving discounts or bundling them with the top selling products. This solution helps in the movement of obsolete inventory and also increases sales for the fast-moving products resulting in more profits. 


Wrapping Up

Obsolete inventory is one of the things which leads to loss for a brand if it is not managed in a proper way. A lot of factors like demand analysis , sales analysis and inventory monitoring tools are involved in order to make sure obsolete inventory can be avoided. 

You may lower the risk of storing out-of-date inventory by putting these suggestions into practice and maintaining a proactive approach to inventory management.

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