Dead stock identification: the metrics that reveal slow movers

Dead stock silently drains your business

Dead stock sits in your warehouse, invisible but expensive. It ties up cash that could be invested elsewhere. It consumes storage space. It ages toward obsolescence. And because it doesn’t cause immediate pain, it often goes unaddressed for far too long.

Identifying dead and slow-moving stock is the first step to freeing trapped capital.

Defining dead stock

Dead stock is inventory that isn’t selling and likely won’t sell at current prices.

Zero-sale threshold:

Products with zero sales over 90+ days are clearly dead. No demand exists at current conditions.

Near-zero threshold:

Products selling only 1-2 units over 90 days are effectively dead. The sales rate is so low that years of inventory sit on hand.

Category context matters:

A slow-selling seasonal item might not be dead—it’s just off-season. A slow-selling core product is genuinely problematic. Consider product type when defining dead stock.

Slow-moving stock versus dead stock

Slow movers sell, just not fast enough.

Slow mover definition:

Products selling significantly below category average. If similar products turn 6x per year but this product turns 1x, it’s a slow mover.

Why slow movers matter:

Slow movers tie up disproportionate capital for their sales contribution. They might not seem problematic individually, but collectively they trap significant cash.

The continuum:

Think of inventory on a spectrum from fast movers to slow movers to dead stock. Each category needs different treatment.

Key metrics for identification

Several metrics help identify dead and slow-moving stock.

Inventory turnover by product:

Calculate turnover for each product. Rank from highest to lowest. Products at the bottom of the list are your slow movers.

Days of supply:

Products with extremely high days of supply (365+ days) are either overstocked or dead. If you have two years of inventory on hand, something is wrong.

Age of inventory:

Track how long each unit has been in inventory. Products with old average age are slow or dead.

Sales recency:

When was the last sale? Products that haven’t sold in 60, 90, or 180 days are candidates for dead stock classification.

Building a dead stock report

Create a systematic view of problem inventory.

Report contents:

Product name and SKU. Current inventory quantity and value. Last sale date. Sales over last 30, 60, 90 days. Inventory turnover. Days of supply at current rate.

Sorting and filtering:

Sort by severity—highest inventory value with lowest sales velocity first. These are your biggest problems.

Regular review cadence:

Review the dead stock report monthly. Problems don’t improve with neglect.

Calculating the cost of dead stock

Dead stock has real costs beyond the purchase price.

Storage costs:

Warehouse space isn’t free. Calculate the storage cost per unit per month. Dead stock accumulates these costs indefinitely.

Opportunity cost:

Cash locked in dead stock could be earning returns elsewhere. At minimum, consider the return you’d get investing that cash in faster-moving inventory.

Obsolescence risk:

Products lose value over time. Fashion becomes dated. Technology becomes obsolete. Some products have expiration dates. The longer inventory sits, the less it’s worth.

Eventual markdown:

Most dead stock eventually sells at a discount, if it sells at all. Factor in likely markdown when calculating total dead stock cost.

Root cause analysis

Understanding why stock became dead helps prevent future problems.

Demand forecasting errors:

Did you overestimate demand and order too much? Forecasting improvements prevent future dead stock.

Product-market fit issues:

Did customers not want this product? Wrong style, poor quality, or misaligned with customer needs?

Pricing problems:

Is the product priced too high for perceived value? Might it sell at a different price point?

Marketing and visibility:

Was the product properly marketed? Does it have good product page content? Sometimes slow movers just need exposure.

Actions for dead and slow stock

Once identified, take action to recover value.

Markdown and promotion:

Reduce prices to stimulate demand. A 50% margin loss is better than a 100% loss from eventual write-off.

Bundling:

Bundle slow movers with popular products. Customers get perceived value; you move problem inventory.

Alternative channels:

Sell through discount channels, marketplaces, or wholesale. Different audiences might value what your primary customers don’t.

Donation or write-off:

For truly dead stock, donation (with potential tax benefit) or disposal might be the best option. Stop paying storage costs on unsellable goods.

Prevention strategies

The best dead stock strategy is not creating it.

Conservative initial orders:

For new products, order conservatively. Test demand before committing to large quantities.

Better demand forecasting:

Improve forecasting accuracy using historical data, market trends, and realistic assumptions.

Vendor return arrangements:

Negotiate return or exchange terms with suppliers for products that don’t sell.

Shorter planning horizons:

Don’t order a year’s supply if you can order quarterly. Smaller, more frequent orders reduce dead stock risk.

Tracking improvement over time

Measure progress on dead stock reduction.

Dead stock percentage:

Dead stock value as a percentage of total inventory. Track this monthly. It should decline over time.

Slow mover percentage:

Value in slow movers as percentage of total. This broader measure captures emerging problems.

Inventory health score:

Create a composite score combining turnover, age, and sell-through metrics. Track overall inventory health.

Metrics for dead stock identification

Focus on these dead stock metrics:

Products with zero sales over 90+ days. Products with below-average turnover. Days of supply by product. Inventory age distribution. Last sale date by product. Dead stock value and percentage. Slow mover value and percentage. Cost of dead stock (storage plus opportunity cost). Root cause categorization.

Dead stock is a solvable problem, but it requires attention and action. Build the visibility to identify problem inventory, take action to recover value, and implement prevention strategies to avoid creating new dead stock.