How To Manage, Reduce & Account For Obsolete Inventory

Allison Champion
4 min read
November 15, 2022

For many brands, tracking and managing physical inventory levels is the most important thing and has the biggest impact on the bottom line. When inventory starts to sell slowly—or stops selling at all—a brand needs to take notice and start making changes. 

Obsolete inventory has the potential to disrupt even a very successful brand’s supply chain and fulfillment processes, as well as its profit margins. Learn more about obsolete inventory, why it matters, and what brands can do to decrease and manage obsolete inventory.

What Is Obsolete Inventory?

Obsolete inventory is inventory that a business can no longer sell due to a lack of demand. It’s also called excess or dead inventory. Products typically become slow-moving inventory, then excess inventory, and finally becomes obsolete inventory.

While all products are at risk of becoming obsolete, some industries—such as apparel, electronics, and furniture—are especially at risk, vulnerable as a result of new innovations, technological advances, changing and seasonal trends, and increased competition.

Different types of products have varying lifecycles. Think about the difference between food inventory and clothing inventory. While food products might become obsolete when their expiration date has passed, clothing products might become obsolete when they’re no longer in style.

Why Is Obsolete Inventory a Problem?

Any product that a business can’t sell can cut into profit margins and disrupt the supply chain and fulfillment operations of any brand. What’s more, until a brand unloads the obsolete inventory, the brand might still be incurring storage costs. The longer a company holds on to obsolete stock, the higher the lost cost will be.

As much as 30% of an average brand’s stock can be obsolete at any given time, so devising a plan for handling this obsolete inventory is key to ensuring the disruption to the supply chain and fulfillment operations are minimal.

How to Determine Which Inventory Is Obsolete?

Inventory management is critical to ensuring a healthy supply chain, and it’s incredibly important to determine which products are already obsolete in value and which products are slowmoving and might soon be obsolete, regardless of whether you are handling standard or meltable inventory.

An inventory tracking system that offers real-time and regular updates provides actionable inventory data to help you make informed stock decisions. Flowspace offers industry-leading fulfillment solutions and ecommerce software that powers insights and efficiencies for merchants selling online and ensures effective inventory tracking. The Flowspace platform offers real-time visibility into orders, inventory, and more, and offers easy-to-implement control over supply chain systems.

The real-time visibility offered by excess and obsolete inventory tracking software ensures brands aren’t caught on their heels when dealing with slow-moving and obsolete inventory and can devise a plan quickly to minimize inventory loss.

How to Reduce Obsolete Inventory?

While brands can offload obsolete inventory by creatively remarketing items, selling the excessive inventory at a discount, bundling products with hotter items, liquidating, writing off, or even donating the excess stock, the best way to reduce obsolete inventory is to prevent excess stock in the first place.

A quality inventory management system helps brands accurately forecast inventory needs. The Flowspace platform provides real-time insights and recommendations to help brands make smarter inventory management and allocation decisions. Inventory account accuracy is important to ensure the optimal stock level to fulfill customer demand, without wasting resources on excess inventory that might eventually become obsolete inventory.

Flowspace’s solutions can help a brand determine how quickly products are selling, how many days until a product runs out, and how current demand compares to a previous time frame.

Inventory management can also help brands detect seasonal trends and allow them to get ahead of both high and low demand forecasting for specific products. For example, a beauty brand might notice that demand for products with SPF starts to pick up in the spring and reaches a peak in the summer. While this trend seems obvious, inventory tracking might also help the same brand detect a smaller demand increase around the end of the year when people might be taking tropical vacations.

Keeping track of and adjusting stock for these seasonal patterns can help brands get ahead of obsolete inventory by helping them make sure they have enough products to meet demand when it’s high, but not too much product that the finished goods end up sitting idle on the shelves when the demand has decreased.

The food and beverage industry has unique challenges when it comes to inventory tracking and obsolete inventory, and Flowspace has unique solutions the industry needs. The Flowspace Network is among the largest networks of FDA-registered warehouses in the country, which means that a company can store its physical inventory closer to customers and reduce shipping times. That also means less time sitting in warehouses for perishable products. Flowspace offers full lot tracking and reporting capabilities in line with FDA and ISO regulations and certifications.

Find out how Flowspace can help your brand avoid inventory obsolescence and improve outcomes with connected software and a vast fulfillment network. Whether you have questions about the cosmetic or beauty supply chain, the food and beverage supply chain, or any other business operations, you can get in touch with a fulfillment logistics consultant today.

Written By:

flowspace author Allison Champion

Allison Champion

Allison Champion leads marketing communication at Flowspace, where she works to develop content that addresses the unique challenges facing modern brands in omnichannel eCommerce. She has more than a decade of experience in content development and marketing.