Dead stock is money sitting on a shelf. Money you can’t use. Money you’ve already spent.
Every distributor has some dead stock. The question is how much. And what you’re doing about it.
Here’s how to find your dead stock, clear it out, and stop it from piling up again.
What is dead stock?
Dead stock is inventory that isn’t selling. It’s been sitting in your warehouse for months, maybe years. Nobody’s buying it.
Different from slow-moving stock, which sells but slowly. Dead stock doesn’t sell at all.
Common definitions:
- No sales in 90 days
- No sales in 180 days
- Less than 10% of normal velocity for 6 months
Pick a definition and stick with it.
Why dead stock hurts
It ties up cash
Every dollar in dead stock is a dollar you can’t use. You can’t buy products that actually sell. You can’t pay bills. You can’t invest in growth.
If you have $50,000 in dead stock, that’s $50,000 stuck in your warehouse doing nothing.
It takes up space
Warehouse space costs money. Rent, utilities, labor to manage it. Dead stock uses space that could hold products that actually move.
It loses value
Products don’t get more valuable sitting in a warehouse. They get outdated, dusty, damaged. Fashion changes. Technology advances. What was worth $100 might be worth $20 next year.
It hides problems
When you have too much dead stock, you might not see it. Inventory looks healthy. But half of it is stuff nobody wants.
How to identify dead stock
Run a velocity report
Look at every product. How much did you sell in the last 90 days? The last 180 days?
Sort by velocity. The items at the bottom with zero or near-zero sales are your dead stock.
Calculate days of inventory
For each product, calculate:
Days of Inventory = Current Stock ÷ Average Daily Sales
If you have 100 units and sell 1 per day, you have 100 days of inventory.
If you sell 0 per day, you have infinite days of inventory. That’s dead stock.
Set thresholds
Define what “dead” means for your business:
- No sales in 90 days = slow-moving
- No sales in 180 days = dead stock
These might differ by product category. Seasonal items have different rules than everyday products.
Do it regularly
Don’t wait for year-end. Check for dead stock monthly. Catch problems early.
Getting rid of dead stock
Once you find dead stock, you have options.
Discount and sell
Mark it down. 20%, 50%, whatever it takes. A dollar recovered is better than a dollar sitting on the shelf.
Create a clearance section on your site or in your warehouse. Run special promotions.
Bundle with popular items
Pair dead stock with items that sell well. “Buy X, get Y free” or bundled deals.
Customers get more value. You move the dead stock.
Return to suppliers
Some suppliers take returns. You might get a credit or exchange for better products.
Check your agreements. Ask even if it’s not guaranteed. Some suppliers will work with you.
Sell to liquidators
Companies buy dead stock at deep discounts. You won’t get much, but you’ll get something.
Better than throwing it away.
Donate
If you can’t sell it, consider donating. You might get a tax benefit. And you free up the space.
Scrap it
Last resort. If it’s worth nothing and taking up space, get rid of it. Write off the loss and move on.
Preventing dead stock
Getting rid of dead stock is important. Preventing it is better.
Buy smarter
Most dead stock comes from buying too much of the wrong things.
- Don’t overbuy based on optimistic forecasts
- Test new products with small orders
- Look at historical data before reordering
- Be careful with seasonal products
Use reorder points
Set minimum and maximum levels for each product. When stock hits minimum, reorder. Never exceed maximum.
This prevents the “let’s buy extra just in case” thinking that creates dead stock.
Track velocity
Know how fast things sell. If velocity drops, stop reordering before you’re stuck with excess.
Watch trends. If something is slowing down, act quickly.
Manage seasonal items carefully
Seasonal products are high-risk for dead stock. Buy conservatively. Plan to clear remaining stock at end of season.
Better to sell out early than have boxes sitting for a year.
Review supplier minimums
Sometimes minimum order quantities force you to buy more than you need. Track whether this creates dead stock.
Maybe a higher price per unit with lower minimums is better than a discount with dead stock.
Set up alerts
Your inventory system should warn you when products haven’t moved. Before they become dead stock, not after.
Catch slow-movers at 60 days and you might still sell them. Wait until 180 days and options are limited.
How much dead stock is too much?
There’s no perfect number, but here are guidelines:
- Under 3% of inventory value: You’re running very lean. Might risk stockouts.
- 3-5%: Pretty good. Normal for most distributors.
- 5-10%: Room for improvement. Worth focused attention.
- Over 10%: Problem territory. Take action.
Calculate yours:
Dead Stock % = (Dead Stock Value ÷ Total Inventory Value) × 100
If you’re over 10%, start clearing out today.
The dead stock review
Do this monthly:
- Run your slow-moving and dead stock report
- Identify items to discount, return, or write off
- Take action immediately
- Track results
- Adjust buying patterns to prevent repeats
Make it a habit. Put it on the calendar.
The bottom line
Dead stock is normal. Too much dead stock is a problem.
Find it, clear it, and prevent more from piling up. Your cash flow will thank you.
Every dollar you free up from dead stock is a dollar you can use for products that actually sell. That’s how you grow.
Want to spot dead stock automatically? Get a demo and see how Magnofy identifies slow-moving inventory before it becomes a problem.
