Dead stock or Slow-Moving Stocks are referred as stocks which are not moved or laid for long term in warehouse and over the period of time those stocks will be become obsolete and useless. If you have a closeout overstock situation in your warehouse it is always recommended that you reach out for help from businesses that buy liquidation stock and specialize in selling and buying closeouts. It has been suggested that even well-run companies have anywhere from 20-30% of inventory as dead stock. Dead stock is the stock in the warehouse that has been not used for a long period of time. It is calculated by multiplying the dead stock and the current price. If total usage is zero they are termed to be no moving rather dead materials. Dead stock is the obsolete stock which you cannot use further. Slow moving items are the materials which are consumed less or not at all over a long period of time. Closeout websites and closeout brokers can be helpful in eliminating or at least reducing the amount of dead stock sitting in your warehouse.
Finding out the slow moving stocks and no moving stocks will be extremely useful in reducing the inventory carrying costs because you can determine which stocks are not required and, if necessary you can remove them. Getting rid of old inventory and clearing stock from the warehouse helps in two ways. First, you get rid of closeouts that are taking up space. Second, you convert dead stock into cash. Dead inventory is also known as inventory obsolescence, surplus inventory, closeouts, closeout overstock and excess inventory. In the case of bars and restaurants it is something that every bar inventory manager will have to deal with, and can be a drain on storage space and resources. Not to mention, dead stock can also decrease profits and tie up the capital needed to invest in new products or other areas of your bar or restaurant. In your bar, this would include wines, beers, liquors and mixers in you bar inventory that aren’t moving as quickly as you had expected. It can even include limes, oranges, olives and other garnishes - small inventory costs can still have a big impact on your profitability when they don’t move.
Typically, dead stock is a result of overbuying, poor forecasting or not aligning sales strategies with stock on hand. In other words, an effective bar inventory management strategy can help solve the issue. There are businesses you can turn to who only buy liquidation stock from stores and restaurants. They specialize in buying closeouts, discontinued merchandise and obsolete inventory. Unlike regular inventory, which will convert to cash (and hopefully profits) when sold, dead stock will sit on your balance sheet until it is written off or sold to closeout websites or closeout distributors. If you are unable to sell it, chances are you will have to completely write it off. After all, there’s no use for expired booze. To write off dead stock, you will have to credit your surplus inventory account and debit your loss on your old inventory expense account - or your cost of goods sold (COGS) account, depending on how you have set up your accounts. This will increase expenses and reduce your net income. The good news is that alcohol, which is the largest and most expensive stock in your bar, takes a while to go off. That gives you more time to creatively unload it to reduce lost profits and wasted product. You can recoup a percentage of your cost when selling this inventory.
The term “dead stock” refers to excess inventory that is no longer selling, or selling so slowly that it is at risk of obsolescence, or reaching the end of its product life cycle, rendering it unable to be sold. This inventory may also be referred to as closeout overstock or obsolete merchandise. With the dramatic shrinkage of product life cycles due to modern-day technology and the competitive e-commerce landscape, inventory obsolescence happens much more frequently, requiring merchants to act even quicker to sell these slower-moving products. It can be sold to closeout websites, closeout brokers, dollar stores, discount stores and wholesale closeout buyers that specialize in buying closeouts. To understand dead stock and inventory obsolescence fully, it’s helpful to think about how excess inventory is accumulated and why it risks turning into dead stock. Excess inventory is often caused by supply exceeding demand, resulting in slow-moving inventory that can incur expensive holding costs. High 3PL warehouse costs can lead to dead stock costing too much money to store and further leading to warehouse liquidation and shutting down warehouse operations. While excess inventory also involves holding large amounts of unsold inventory, excess inventory usually represents an opportunity for businesses to implement a selling strategy, whereas dead stock represents a liability if companies don’t act fast on this excess stock. Companies that buy liquidation stock can often throw a lifeline to failing businesses.
Simply put, if a business lets inventory sit idle for too long, they risk inventory obsolescence. The longer a product sits in storage, the higher the cost of holding it becomes, which turns excess inventory from an opportunity to a liability for your business. Wholesale closeouts can be liquidated to overstock buyers in an effort to reduce warehouse costs and make room for new products. As another pandemic holiday season approaches, warehouses close to the ports are at max inventory capacity due to record levels of inventory being imported into the US as post-pandemic sales surge. Warehouses across the West Coast and Northeast have an estimated vacancy rate of 4.5%, creating challenges for SMB’s to find enough space and affordable storage rates in warehouses close to ports.
Due to the reduced capacity of the current supply chain and the rapid growth of the eCommerce market, premium storage rates have increased by 5.59% and, according to a Warehousing Cost and Pricing Survey, 61% of warehouse operators report increasing their rates in 2021. Amazon sellers and ecommerce businesses have been hit especially hard by excessive storage fees and are shutting down operations, closing 3PL warehouses, moving warehouses and downsizing to smaller warehouses. Within the retail industry alone, estimates indicate that dead inventory costs nearly $50 billion year-over-year. With growing rates for 3PL warehouse storage and record lows in vacancy rates, SMB’s should be strategic about the types of inventory they’re holding, where they choose to hold it, and how much inventory carry costs affect their bottom line. Slow-moving inventory or a high percentage of dead stock could be costing them valuable warehouse space, dragging down their profits, and resulting in lost sales opportunities. Therefore, merchants must not only absorb the purchasing cost and carrying cost of dead stock, but also the opportunity cost of not having sold the product and missing the opportunity to profit at all.
Merchandise USA is a wholesale closeout liquidator in business more than 38 years. We specialize in buying closeout housewares, overstock pet products, toys, sporting goods and excess inventory of lawn and garden products. We are closeout distributors and inventory liquidators that buy and sell overstock or obsolete products whether you are closing your business by the end of the year, or just moving warehouses.