Slow moving inventory is a situation which almost every retailer has to deal with at some point. The good news is that you can prepare for slow moving inventory if you focus on proper inventory management practices. Managing these circumstances carefully saves capital and keeps your profit margins stable.
Defining Slow Moving Inventory
There are actually a few different ways to define what slow moving inventory means. For example, some define it by the number of overstocked items. But the most inclusive definition concerns the amount of time a product remains on the shelf before it is eventually restocked. This definition paints the clearest picture in terms of investment and profit over a period of time.
Causes of Slow Moving Inventory
As previously mentioned, slow moving inventory is something that can be handled with thorough preparation. In fact, the most common causes of slow moving inventory can be addressed before it becomes an issue. It basically comes down to developing a consistent inventory management system:
Sales cycle
This is crucial. Knowing what items sell, how many of them sell, and when they sell is a great predictor of how much product to stock. If you sell $10,000 of product “A” every six months, you can safely invest each month until you reach that mark. Keep in mind that product cycles can be seasonal, so product “A” may only sell during the first six months of the year and not much after that.
Older model items
If you’re in the tech industry, this is something you need to pay major attention to. Popular items may sell fast, but they may not sell for long, and certainly not at the same pace as when they are first placed on the shelf. This can make predicting sales somewhat difficult, but experience should be an indicator of how long an item will remain in demand.
Pay attention to demand: There’s no need to stock an item if you’re not selling an item. Listen to what your customer is telling you and adjust your inventory accordingly. It’s also important to understand the reasons behind fluctuating demand. This information will help you prepare for similar circumstances in the future.
Managing inventory is a skill that takes experience, planning, and even a bit of trial and error. When you’re just starting a business, there’s almost no way to tell what items will sell faster than others. But understanding the causes of slow moving inventory will inevitably lead to solutions—and preparation is imperative when stocking products.
APS Fulfillment, Inc. has the knowledge and experience to properly manage and ship inventory. We work with a variety of clients, from manufacturers to retailers, to get the right amount of products to the right location as quickly as possible.
Contact us today to learn more about our inventory management systems.
