A retailer’s mark of expertise is shown when they stock items people want to buy and have them in the right quantities to meet demand. But this skill is not an exact science. Even with the tracking and forecasting capabilities of inventory management systems, surveys, and knowledge of the market, mistakes are made. Sometimes stock can’t be sold; sometimes it just goes out of style. And then there’s the factor of safety stock, having a little bit extra to make sure orders can always be filled. While it’s important to have safety stock, there’s a limit to the amount of it a company should carry.
The point is that no company wants to end up holding inventory they can’t sell – obsolete stock. This blog is going to explore how companies end up with this obsolete stock, give suggestions to get rid of any you have, and put forward ways to prevent this overstocking from happening in the first place.
When you’ve ordered a lot more of a particular item than there’s a demand for, or miscalculated the market and added items no one wants to your inventory, you’re left stuck with it. It’s become obsolete because you can’t sell it. Obsolete inventory takes up valuable space that could be used for items that shoppers want. And depending on what it is, it may also need attention, in which case it’ll be taking up your employees’ time without benefit to you.
This situation doesn’t happen overnight. Usually, sales for these items will gradually drop off until they stop altogether. Sometimes it can take years to realize this useless inventory is still there gathering dust; sometimes a retailer may have decided to hold onto something in the hope that they’ll be renewed interest in it at a later date.
Nothing is foolproof, but sometimes people don’t use the data available to them as assiduously as they could. They don’t do enough research on past sales histories, market trends, or customer demands to gauge future needs, and they don’t take enough notice of the metrics they do gather.
Sometimes, retailers are left holding excess stock because they didn’t follow the movement of their stock through the supply chain closely enough. They didn’t exercise inventory management, which provides details on items they’re holding in the warehouse prior to sales and the number of items that are sold, details that are used to make the right decisions when ordering more.
When it comes to omnichannel sales — sales from several different online platforms and physical stores — keeping tabs on the level of inventory that needs to be held is complex but vital. Every sales channel is different, and a product that does well on one may not sell on another. Guesswork has no place in this model — a company has to have the right goods in the right amounts at the right place at the right time, or they’ll end up with that obsolete stock somewhere.
Inventory control describes having a thorough oversight of each item in the warehouse. It differs from inventory management in that it focuses much more on the actual number of each item held in storage, ensures the right levels are there at all times, and keeps on top of purchase orders. If this isn’t done with enough care, overstocking can occur, and there’s a danger of that becoming obsolete.
When it comes to managing inventory, the lead time refers to the period it takes to receive a stock item after ordering it from a supplier. Because these lead times can vary, decisions about what to order when can be a bit of a head scratcher. If the lead time is lengthy, a sales company will have to order way in advance of needing the items, and if demand for those items eases off in the meantime, they could become redundant by the time they arrive. They’ll be obsolete stock.
If bad buying decisions are made, sellers will end up with products no one wants. Conversely, if a company is offering items that can be found everywhere else, there’s a chance they could be stuck with them. Either way, we’re talking obsolete stock.
Make the data work for you. Dig deeper into those past sales histories, market trends, and customer demand. A robust inventory management system like Cin7 Omni can do the heavy lifting for you. The software produces reports, insights, and advanced analytics you’ll find invaluable when making decisions about buying new inventory. When you base your buying decisions on information like this, you have a much better chance of having best-selling items in stock and avoiding those slow movers that can end up being obsolete.
An automated system tracks your inventory, keeping tabs on its levels in the warehouse and maintaining records of the numbers that are sold. And it will do this in real time. With detailed information like this, there’s less chance of your buying decisions coming back to haunt you.
It’s actually difficult to see how businesses that sell on multiple online channels and physical outlets and run several warehouses can function without an automated system to fall back on. Cin7 Omni’s inventory and order management software connects your warehouses, online sales channels, and offline stores into one automated system, tracking the level of inventory at each place and taking note of what is selling where. It’s how you ensure having what you need where you need it without being stuck with too much of anything.
If the different teams in your sales company work in their own separate silos and don’t exchange information, mistakes will be made, mistakes like bad buying decisions. The way to avoid this is by giving every department access to information like purchase and sales orders. This means the warehouse team working with the purchasing team and the purchasing team working with the receiving team. Likewise, the inhouse teams should be working in tandem with suppliers and shippers. It’s supply chain management.
A cloud-based inventory management system like Cin7 Omni can do the coordination for you. It will send those purchase orders to your suppliers and those sales orders to your customers through one system, and the fact that it centralizes its data means that all departments can access information and be in the know.
Here are some tips:
No one wants to be stuck with obsolete stock, but it can happen. Automating with a system like Cin7 Omni can help prevent it.
To learn more about our software and how it can be advantageous for you, click here to schedule a demo with one of our experts.
Some economists are predicting a mild recession in 2022 in the United States as consumer spending slows in response to inflation. As a product-based business owner, you need strategies to help you weather any recession. By leveraging technology to manage your inventory, you can survive any challenging situation. Cin7’s inventory management software is your best […]
This is a guest blog post written by Cin7 partner, Marsello. Learn more about our partner program. Email marketing is a key sales tactic for retailers and product sellers, so it’s important to have an active, responsive database. That means consistent or growing engagement (open and click rates), a high repeat purchase rate, and growing […]
Amazon.com is undoubtedly the number one name in ecommerce. It has dwarfed every other ecommerce platform. Thus, if you are thinking about becoming —or already are — an Amazon seller, you are on the right path to increasing your turnover. How can we help take you further? Here are 12 reasons why using the Cin7 […]