{"id":17279,"date":"2024-02-23T09:00:32","date_gmt":"2024-02-23T09:00:32","guid":{"rendered":"https:\/\/breadstack.com\/?p=17279"},"modified":"2024-02-24T00:59:49","modified_gmt":"2024-02-24T00:59:49","slug":"what-is-dead-stock","status":"publish","type":"post","link":"https:\/\/breadstack.com\/insights\/marketing\/what-is-dead-stock\/","title":{"rendered":"What Is Dead Stock? Turning Inventory Challenges Into Opportunities"},"content":{"rendered":"\t\t
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The key to efficient inventory management<\/a> is a well-balanced combination of demand forecasting, business intelligence, and in-depth customer analytics. However, even the most organized businesses go through the problems of over ordering stock that leads to inventory that cannot be sold, also known as \u201cdead stock\u201d.<\/span><\/p>

Dead stock not only takes up valuable warehouse space but also seriously harms a company’s cash flow and sales. In severe circumstances, it may jeopardize the company’s long-term viability. This article will discuss ways to reduce the possibility of collecting dead stock as well as providing useful advice for managing and reusing excess inventory.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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What is Dead Stock?<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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“Dead stock” is the term used in the e-commerce industry to describe merchandise that is no longer able to be sold and is usually taking up space in warehouses. These products may become unsaleable for a number of reasons, such that they are out of season, old, expired, or of poor quality. Keep in mind that dead stock is not in the same category as returned products because these items have never been purchased by customers.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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How Does Dead Stock Impact a Business?\n<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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For any business, dead stock may be a major financial burden. Not only does it hold back available cash flow, but it also immediately affects sales and raises the expenses of inventory holding. It also takes up valuable real estate that may be better used in warehouses or on retail shelves.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Financial Loss: <\/b>Companies spend money to buy inventory with the hope of making a profit, therefore having dead stock becomes a financial loss. This investment becomes pointless because these products are a loss in sales.<\/span><\/p>

Warehouse Costs:<\/b> Storing inventory requires warehouse spacing. These costs are frequently correlated with labor costs, insurance, and amount of storage space.\u00a0<\/span><\/p>

Higher Labor Costs: <\/b>Labor costs associated with high inventory means more management, such as inventory inspections, rearrangement, and more. In the end, labor costs associated with getting rid of dead stock increase costs without bringing in any money.<\/span><\/p>

Opportunity Costs:<\/b> When dead stock is finally sold, it’s usually sold with major discounts resulting in a loss. This affects the company’s ability to break even or turn a profit because the resources could have been used to manage successful products instead.<\/span><\/p>

Space Restrictions:<\/b> Warehouses have limited space, therefore dead stock takes up valuable shelf space making it difficult to store more profitable items.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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How To Calculate Costs For Dead Stock\n<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Finding the money lost from inventory that you are unable to sell is the main concept behind dead stock calculations. Here are several methods for calculating dead stock.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Calculating Dead Stock Value<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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You can first calculate the value of dead stock using the same formula you would use to calculate the value of sellable inventory.<\/span><\/p>

Dead Stock Value = Total Units in Stock x Unit Price<\/span><\/p>

Example: If you had 100 units of dead stock, for instance, and each unit would have sold for $20, you would compute the value as follows:\u00a0<\/span><\/p>

Value of dead stock: 100 units x $20 each = $2000<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Calculating Sunk Costs For Dead Stock<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Knowing the initial cost of acquisition is an important part of dead stock. Since there is no revenue from dead stock, this expense is regarded as a sunk cost since it reflects money spent cannot be recovered through sales.<\/span><\/p>

Every company has different costs associated with purchasing inventory, determining the sunk cost of dead stock differs from company to company.<\/span><\/p>

You must total all of the direct costs from the production of the dead stock in order to calculate the sunk cost for your inventory. Usually, these costs consist of:<\/span><\/p>