Dead stock
Also called obsolete inventory
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is dead stock?
Dead stock is inventory that hasn’t sold for a long time and probably won’t sell at its normal price. It ties up cash and warehouse space and ends up returned to the supplier, discounted, moved to another branch or written off.
How it works
Each distributor sets its own cutoff, such as no sales in the past 12 months. Slow-moving stock is the step before: items that still sell, but too rarely to justify the quantity on hand. Lowering their reorder points or transferring them to a branch that sells them keeps them from becoming dead stock.
Dead stock example
An annual review turns up $40,000 of a discontinued thermostat line with no sales in 18 months. The buyer sends most of it back under the manufacturer’s stock rotation program.
Related terms
- Stock rotationA stock rotation is a supplier program that lets a distributor return slow-moving stock for credit, within a limit and against an offsetting new order.
- Inventory turnsInventory turns is the number of times a distributor sells through its average inventory in a year: annual COGS ÷ average inventory at cost.
- ABC analysisABC analysis is a way of ranking inventory items by importance, such as sales or gross profit, and sorting them into classes A, B and C.
- Inventory carrying costInventory carrying cost is the total cost of holding inventory over time: the cash tied up, space, insurance, taxes, handling, damage and obsolescence.
