21 mistakes adding cost and killing productivity in your warehouse #5

5. Hanging on to old, slow moving or non-selling stock

Hanging on to old stock thinking that it is valuable is classic hoarding behaviour.  Usually this stock is the result of poor planning processes, overenthusiastic bulk purchasing or a new stock line that never took off in the market.  Somewhere, someone is too embarrassed to admit a mistake, or the stock represents a large amount of money on the books that senior management cannot bring themselves to write off.  It is always better to quit the stock, take the hit and move on as delay is only adding insult to injury as storage cost make the loss ever larger the longer it is left.

Slow moving and obsolete stock is usually identifiable long before it becomes totally unsaleable.  The major issue is that most businesses are at a loss as to what to do with it so they don’t watch for it.  Pretty soon it shows up on the annual stocktake (again!, “hey, wasn’t that there last year”).

• Even with the best forecasting and S&OP process you will still have some slow moving stock that you are unable to sell.  There are two things you can do:
• Decide what you are going to do with stock that you are unable to sell.
• Throw it out? Sell it on eBay or other discount or over-stock sales channel?  Donate it to a relief program?  It doesn’t matter what you decide so long as you decide and develop the over-stock exit channels as a normal business process.
• Find it early and move it out.
• Most business systems will have an inventory FIFO (First in First Out) date that reflects the date the stock was received.  There should also be at least an aged inventory report of some sort that you can use to review stock that is older than say, six months which may be at risk move on.

Keep an eye on our website for the forthcoming "SLOBS Calculator".  This is a spreadsheet that will do the work of identifying your slow moving and obsolete inventory for you.  It will also help you to calculate how much it is costing you in storage costs, opportunity costs and depreciated value so you can wake up your accountant and finally move it on.  Subscribe to the blog or send me an email and I will keep you posted.  

Just like the "Expiry Risk Calculator" it will be free for a while to those who want to try it out and give me some feedback, but after that it will cost you $99. "Ninety nine bucks for a spreadsheet!" I hear you cry.  Yes, it should be much more than that given how many thousands of dollars it will save you, but I am trying to keep it real.  If you don't understand the value of a good spreadsheet just ask your accountant how many hours they spent developing theirs, - trust me its cheap.

This is post is taken from an ebook that is now available as a bonus to members of the Warehouse Performance Initiative (WPI*).

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