Dead and excess inventory – that is, your stocked products that haven't sold for a certain length of time (usually a year).
turning excess inventory into cash is good. But before you put considerable effort into a dead stock liquidation program, be sure that you are currently "buying right" – that is, be sure you are ordering the right quantities, of the right items, at the right time.To show you how "buying right" does more for your profitability than liquidating dead stock, we'll look at an example. We ranked the items for one of our distributors. The ranking process identifies those products that provide the most opportunity for your company to earn a profit. We begin the process by sorting all stocked products in a warehouse in descending order, based on cost of goods sold (COGS) during the past 12 months.
Sure, liquidating dead stock is important. But it probably won't contribute as much to your overall profitability as the process of ensuring that you are buying the right quantities of fast-moving products at the right time. This distributor has a long way to go to achieve his inventory-related goals, but he's off to a good start.