The economic slowdown is a global reality, and companies must step up their efforts to determine operating efficiencies and decrease their capital requirements. The game is no longer growing at any cost. Today, the cost of generating sales, returns on assets, and returns on investments carry significant weight. And to do all that, companies must focus on getting rid of slow-moving stock at the end of the season.
Experts recommend companies review their approach to stock and inventory management. Concentrating on this area will produce short-term and significant results.
The majority of companies apply inventory management practices to fast-moving stock items. It is because of the revenue-generating and ROI abilities these stock items have for the company. Suffice to say that organizations have done well managing fast-moving inventory.
However, research shows that the management of slow-moving stock has not been quite as stellar. Most companies have hundreds or thousands of stock-keeping units in their warehouse, costing millions of dollars each year by gathering dust on the shelves until they need these units.
What is Slow-Moving Stock?
What constitutes “slow-moving” varies from company to company. However, you can classify slow-moving inventory as items less than 6-8 months of demand in the preceding 10-12 months.
Consequently, the slow-moving items within the goods inventory, such as grocery items, can’t be classified as slow-moving in other categories. On the other hand, some companies in a maintenance, repair, and operations environment where inventory items, such as spare parts, can be classified as slow-moving items.
Remember, the time series-based forecasting methods and techniques determine this broad criterion. Therefore, slow-moving items are stock units that you can’t forecast in the normal way. Likewise, the need to consider slow-moving inventory and the emphasis given to the item depends on the inventory nature.
In some situations, the appropriate policy on slow-moving inventory is to remove them altogether. For instance, a slow-moving item is out within the fast-moving goods environment. In contrast, it is impractical and challenging to remove such items from the stock altogether that is typical of a maintenance, repair, and operations environment.
Likewise, it is difficult for organizations that support maintenance, repair, and operations customers. Therefore, it is crucial to devise and apply appropriate management methods. The question is: who benefits from reviewing their slow-moving inventory management practices?
Research shows that companies with old inventory management systems and a large number of slow-moving stock items can benefit from reviewing their inventory management practices. Industries, such as defense, automotive, industrial equipment, and spare part providers can utilize slow-moving inventory management.
Ways to Get Rid of Slow Stock
The dynamic nature and characteristics of demand make it difficult for companies to balance their inventory. Too many stock items increase the risks of obsolescence and burdens of stock items that don’t sell.
On the other hand, too little stock increases the risks of stock-outs, leading to ineffective business operations and loss of customers. Follow the tips and tricks given below to control the proliferation of slow-moving stock and get rid of it appropriately at the end of the season. Continue reading!
Control the Stock in the First Place
Inventory management saves you money and enables you to satisfy your customers’ needs. It allows for successful cost control of your business operations. You can manage the supply chain adequately when you know what you have in your warehouse and the number of fast-movers and slow-movers.
Today, companies face an unpredictable economy, making it tempting to stock up on too many materials or finished goods. As a result, forecasting becomes challenging. Therefore, it is crucial to ramp up stock levels slowly and keep close track of sales. Likewise, we recommend monitoring your goods to determine what is selling and what is not.
Review Movement and Stock Profiles
Before you eliminate the weakest performers at the end of the season, it is crucial to identify them. When you regularly monitor movement and inventory profiles that sort all stock-keeping units by inventory profiles and sales volume, you can sort them by stock categories.
It is crucial to identify excess inventory and compare each stock-keeping unit’s current inventory with a targeted inventory. Remember, this strategy depends on your marketing and production plans.
Obsolete or slow-moving inventory are items toward the bottom of the movement and inventory charts, and this 80% of stock-keeping units are responsible for 20% of the sales volume.
Eliminate Excess Inventory
Experts recommend performing careful planning and finding ways to eliminate excess and obsolete inventory. You can use the three R’s. These are re-market, recycle, and remove. For example, you can re-market excess inventory at a lower rate for a quick sale. Likewise, recycle plastic and metal to a recycling company that offers money for it. You can also remove unsellable and old items by:
- Returning it to the manufacturing company for credit
- Donating it to charity and getting a tax credit
- Hauling it to the dumpster
Review Your Slotting Strategies
Reviewing your slotting strategies is an excellent way to develop a solid plan and remove slow-moving inventory at the end of the season. Once you have isolated the slow-moving inventory or products with sales abilities but love inventory turns, audit where you have slotted them in your facility.
In addition, operations without automated slotting programs find slow-moving stock mistakenly slotted in assembly areas or premium storage. If you have implemented a warehouse management system, consider a software program to track slotting decisions based on movement and inventory profiles.
Remember, proper slotting allows you to locate the product in the most appropriate position and storage module. Likewise, you can allocate a sufficient amount of space within this particular module.
Old Inventory Liquidation
Old inventory liquidation is an excellent strategy for some business owners, allowing them to slash the price and making sales to get rid of slow-moving stock at the end of the season. However, it is more strategic, and you must focus on discounting items starting with a smaller price cut and then gradually moving to a higher discount.
Remember, many customers respond to urgency, making flash sales very effective. That way, you can reach a large number of customers in a short period, attract and encourage them to act fast before they lose the opportunity.
Besides, some companies purchase excess inventory from manufacturers, wholesalers, and other businesses. Before you do this, make sure you understand the pros and cons of using these services.
The most significant disadvantage of this strategy is companies will offer you a lower price for the products than you usually desire to change. On the other hand, the benefit of using this strategy is to get immediate payments, allowing companies to take possession of the inventory immediately.
That way, you can free up the storage space. Remember, liquidation companies do not purchase all products you want to sell. That’s why it is crucial to develop a contingency plan and craft a solid strategy to avoid complications.
Bundle Items Together
Bundling items together is an effective marketing technique, allowing you to group a few product categories and sell them for a lower price. The purpose is to attract more customers and get rid of your slow-moving inventory, stock, or products.
However, it is crucial to group the complementary products in a bundle, such as a shaving kit, a woman’s beauty or facial kit, and toiletries. Focus on combining trendy products with slow-moving stock items. So, bundling involves taking a specific group of products and selling it with another products group for a lower price.
Pairing slow-moving inventory with high-demand products is a popular way of using the bundling strategy. Research shows that consumers view them as an excellent deal if they get multiple products at a discounted price.
Likewise, you can pair low-margin products with high-margin products to streamline your pricing strategy. So, bundling is directly proportional to an improved price management strategy when you want to get rid of slowing inventory at the end of the season.
Moreover, placing large amounts of a specific product into a discounted offer is another sophisticated bundling technique that can help you move a large number of products in a short period. When you put together complementary products, you can make the deal more attractive to your customers.
Sell Your Products Online
If you have a brick-and-mortar store and slow-moving inventory, you can create an online store or business website to sell your products. It is an excellent technique to get rid of your slow-moving products at the end of the season.
On the other hand, if you don’t want to spend money on creating a website, SEO, marketing, and related strategies, you can sell them on eBay, Amazon, and other online platforms.
Besides doing business with liquidation companies, you can choose from various B2B platforms to sell excess stock at a reasonable price. For example, most companies use overstock.com and liquidation.com to get rid of their slowing moving inventory.
You can also create a business seller account on eBay to sell your slow-moving stock. We recommend going through the requirements of online platforms before you do business with them or sell your products because they may have fees.
Donate Your Slow Moving Products
Donating your slow-moving good or products is an effective way to prevent your company from experiencing complications, such as financial destabilization. Many non-profit organizations offer tax receipts, allowing you to write off your donations as deductions.
Likewise, some non-profit organizations accept large shipments. The purpose is to get rid of items that would otherwise be challenging for you to eliminate. Make sure you discuss the matter with your accountant to develop a donation strategy and focus on maximum tax deductions.
Experts recommend taking a proactive approach to avoid problems like excess inventory. Stock in an effective inventory management system enables you to lower your operating expenses and eliminate expensive inventory.
Offering rewards are another way to eliminate slow-moving goods or products. However, it is crucial to establish a sophisticated reward strategy and offer this opportunity to your long-term or loyal customers. That way, you can increase your brand awareness and establish your business loyalty.
Although you may lose some money, nothing is more important than making your customers happy and increasing their satisfaction level. Remember, you must think about the long-term positive effects of offering rewards to your loyal customers.
Not only does the reward strategy allows you to maintain customer retention rates, but you also increase the likelihood of word-of-mouth marketing. So, this can generate positive results in the future and allow you to generate higher returns on investments (ROIs).
Customer loyalty is directly proportional to better product-market fit, boosted sales, customer retention, and increased sales. A well-designed and well-executed reward program can help you get rid of your old or slow-moving inventory and retain your existing customers.
Rewards also encourage your existing customers to spread the word, attracting new customers, reducing turnover rates and drive higher profits. So, it is a result-driven strategy if you want to eliminate slow movers from your warehouse.
Consider Options for Pallet Storage
Research shows that companies should control the 80% of low turn stock-keeping units under control. Once you keep them under control, you can examine the assortment of pallet storage options. Remember, you must focus on the throughput and the ability to hold facings while using a minimum amount of space.
Some studies show that manufacturing processes are more convoluted as modules storing raw materials and work-in-progress inventory requires to occupy minimal space. That’s why companies keep in close proximity in needed places to avoid unnecessary delays.
Look Beyond the Stock Value
Stock value is a significant figure on your company’s balance sheet. Therefore, it is a logical place to start measuring your inventory performance. However, the question is: what does this figure tell you?
Some management teams find it challenging to see past the stock or inventory value. As a result, businesses have no idea about the amount of excess or slowing inventory. It means inventory or stock value tells you nothing.
Even if your management team knows the stock value from the previous year, the number is too vague to tell your management team about the composition of goods in your warehouse. If the stock value is not a key performance indicator (KPI), you may ask, what is? In that case, you should consider the following:
- Inventory value versus stock turn
- Week of stock or inventory
- Stock value per phase of the product lifecycle
- Stock value per product group or classification
When you track these KPIs, you can gain more data to make informed decisions about your slow-moving inventory. For example, when you lower stock on end-of-life stock or near it, you can reduce the risk of excess or slow-moving inventory.
Use An Affiliate Marketing Program to Push Your Products
Affiliate marketing is a strategy used to increase sales and revenue. Businesses get websites and influencers to promote their products. In return, the business pays a commission for every sale that was referred by the website or influencer. It’s low risk as you only pay when someone buys something. You can incentivize your affiliates with a bonus commission or increased rates on the products you need to shift.
Slow-moving inventory is harmful to your business, but obsolete inventory is even worse. Remember, it is a parasite that consumes your finances, takes up space in your warehouse, and damages your business operations.
That’s why we recommend getting rid of slow-moving inventory. However, you have made a massive investment in these products, and accepting that this inventory is a slow mover or does not offer any value is a hard pill to swallow.
The good news is that you can follow the strategies or techniques given above to get rid of your slowing inventory at the end of the season. You can also physically remove the stock because the presence of these products in your warehouse can deceive your team and let them believe the inventory or products will eventually sell-through.
So, it is wise to remove these items from your warehouse and store them in an out-of-the-way place to avoid distractions. Likewise, when you use the above strategies to remove items at the end of the season, make sure to remove them from your systems.
For example, once you have identified the slow-moving stock, you will want to remove them from your warehouse and management systems. Lastly, follow the tips and tricks above to streamline the entire process and protect your investment.inventory management