![]() Tracking gross profit over time is one way to keep track of unfavorable events that harm your business. Inventory that turns slowly leads to expensive operating efficiencies as quickly as it reduces your revenue. The price of storage, depreciation, labor, upkeep, insurance and security can all be included in your inventory holding costs. Holding costs is a term that refers to the price a company pays to store its inventory. ![]() An item is often regarded as slow-moving if there has been a demand for less than six months in a 12-month period. ![]() The typical days to sell your inventory will differ from industry to industry and product to product. However, it’s possible that certain products sell out and require repeated reorders while others don’t even reach the point of being sold out. Average days to sell inventoryĪverage days to sell inventory is a blended financial metric that estimates the typical number of days needed to generate sales equivalent to the value of the inventory. In the long run, even small adjustments that seem insignificant at the time may require management attention. You can find trends in your inventory by analyzing both recent and historical data over long and small periods of time. This should enable you to forecast future client demand and, as a result, identify slow-selling products. Rely on your POS system to find out which inventory items are selling and which aren’t. If your turnover rate is poor, you might be ordering too much of a certain item, which would cause slow-moving inventory and operational inefficiencies. Inventory turnover rate is calculated with the following formula:ĬOGS / (Beginning Inventory + Ending Inventory)/2 = Inventory Turnover RatioĪ high inventory turnover rate indicates that your company is selling goods as rapidly as they are received, whereas a low inventory turnover rate indicates that goods are moving off the shelves more slowly. Here are 5 ways you can accomplish this: Calculating inventory turnover The first step towards clearing your excess stock is to identify slow-moving items. Even if you heavily research your market and accurately forecast sales, nothing ever goes exactly as planned. The problem of slow-moving and excess inventory happens to every retailer.This applies to drop shipping eCommerce businesses as well. Whether it’s the opportunity cost of not being able to bring in fresh inventory or the cost to rent shelf or warehouse space, you’re paying for that dust-collecting inventory. Holding on to old and excess inventory is costing you.If items haven’t moved in this amount of time, it’s time to get rid of them. Inventory should usually be sold within 90-120 days.Selling an item at a very low-profit margin or even at a loss is better than it taking up shelf space. ![]() Cash flow is the lifeblood of your business.Here are a few things to keep in mind when it comes to slow-moving and excess inventory: Rather than clinging onto these items in hope that someone will suddenly purchase them, it’s best to find ways to clear your stock as quickly as possible. Analyze Your Inventoryĭowntime for sales often occurs in the early months of the year, as well as at the end of seasons when new products come into demand. Whatever the reason, reducing slow-moving inventory results in greater ROI and a positive cash flow.įollowing this simple guide, you will be armed with the tools you need to sell excess inventory during those slower months. This problem can be brought on by a number of things, including inaccurate sales projections, a slowing market, aggressive competitor promotions, etc. This type of inventory can be problematic since it takes up physical space and uses up resources, which can negatively affect your company’s cash flow. Slow-moving inventory refers to stocked products (including raw materials and finished goods) that have little to no customer demand. Yet, even the most successful eCommerce stores still run into problems every year getting lower-demand products off of their shelves. Inventory management requires constant attention and is incredibly important to your business’s success.
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