Track Inventory To Identify Unmovable Products

This is the second part of a four-part article about dead stock.

It’s essential for distributors to have systems in place to identify dead stock so that they can better control and manage their inventory. When distributors aren’t monitoring their inventory closely, dead stock has the ability to run rampant and take a huge bite out of profit.

Many distributors have warehouse software in place to track their inventory turns. Not all distributors, however, use their software to its maximum potential. Distributors who use the software effectively are able to manipulate and extract data to pinpoint a product’s profitability. They know exactly when a product is dying.

Jon Schreibfeder, president of Effective Inventory Management Inc., in Coppell, Texas, suggests that distributors run inventory reports each month and watch for products with little to no sales in the last 12 months. These products are dead.

When running these inventory reports, distributors quickly see how expensive it is to keep dead inventory on hand. Once dead stock is identified, distributors should separate it from the good-selling product, moving the dead stock to a quarantine area in the warehouse for ease of movement.

But merely separating dead stock from the good stock isn’t enough. Distributors who use automatic replenishment software should also take the next step of freezing the purchasing controls for those products. Doing so prevents dead stock from being mistakenly reordered unless done on a special-order basis. Even dead products have the ability to reproduce. Many distributors learn this the hard way.

“What can happen is somebody buys the product and all of a sudden the system is triggered to buy more and you’ve just shot yourself in the foot,” says Bader.