Dead stock analysis: which inventory has frozen your cash

The most expensive part of a warehouse is often not the fast-moving goods but the goods that have not sold a single unit in months. Such stock takes up space, ties up cash, and in the report looks like an ordinary balance. To see dead stock it is enough to group items by when they were last sold. The analysis is not complicated; you can do it in Excel in a day.

Grouping by age

For each item take the date of the last sale and count the days since then. Then split the items into groups and add up the stock of each group at cost. For example, say total stock is 400 million so'm:

• 0-30 days: 210 million so'm, or 52.5 percent.
• 31-90 days: 100 million, 25 percent.
• 91-180 days: 48 million, 12 percent.
• 181-365 days: 28 million, 7 percent.
• Over 365 days: 14 million, 3.5 percent.

The 91-180 day group counts as slow, while items that have sat for over 181 days are stagnant: 28 + 14 = 42 million, or 10.5 percent of stock. Suppose holding costs 20 percent of cost per year (the price of money, rent, the risk of loss). Then those 42 million cost 8.4 million so'm a year just for sitting there.

Adjust the group boundaries to your own goods: for food and pharmacy the periods are shorter, for building materials and spare parts longer. For goods with a shelf life, the remaining part of the term matters more than age. Break the result down by category and supplier too: if most of the stagnant stock came from one supplier or one purchasing manager, the cause is not chance but the way decisions are made.

Cleaning the list

To trust the result, check the list first:

• Use the date of the last sale, not the date of receipt. Do not label a newly received item that has simply not had time to sell as dead stock: for it, count age from the receipt date.
• Do not treat a seasonal item as dead stock out of season. Winter clothing does not sell in summer, but it is not dead stock.
• Find items entered twice. If sales go through one record and the balance sits on another, the second looks "dead".
• Identify items that exist in the records but not on the shelf by counting. Sometimes "dead stock" has in fact long been lost, and that is a shortage.

The last point matters most: before trying to sell dead stock, make sure it is really on the shelf.

A decision for each group

• 91-180 days: stop new orders, put the goods in a visible place, run a small promotion.
• 181-365 days: sell at a discount or build bundles with a complementary item.
• Over 365 days: decide on returning to the supplier, selling wholesale or writing off.

Set a floor for the discount. An item with a cost of 50 000 so'm and a price of 70 000 so'm sells for 56 000 so'm at a 20 percent discount, and a profit still remains. At 30 percent the price is 49 000 so'm and you lose 1 000 so'm on each unit, but cash and space are released. If 200 units sit at 10 million so'm, selling at 56 000 brings back 11.2 million and at 49 000 brings back 9.8 million so'm. Selling at a loss can also be a decision, as long as it is deliberate and calculated.

Preventing new dead stock

Before buying a new item, look at the share of goods in that category that have sat for more than 181 days: if it is high, reduce the order. Take a new item the first time as a small trial batch and raise the volume only once sales confirm it. Set a limit for the share of stagnant stock, say 5 percent, and track it in the monthly report alongside other figures. Each quarter, record the total value and share of dead stock in a single row: the trend says more than a one-month snapshot.

Conclusion

Dead stock analysis answers one question: what part of the money is lying idle. The result is reliable only if it rests on goods actually on the shelf. CountLab confirms balances through stock counts and, with discrepancy analysis and ABC/XYZ analysis, separates genuine dead stock from record errors.