Slow-moving inventory are the items that have a longer turnover and therefore stay a lot longer in the warehouse. Usually, slow-moving items are stored for at least three months, because they are harder to sell.
A lot of factors can lead to slow moving-inventory, for instance: inaccurate forecasts, slowdowns on the market or strategies from competitors. So, you need to evaluate your marketing and supply chain strategy to identify such items and implement an action path.
The major problems related to slow-moving inventory is that it reduces the total sales and bottom line and also uses warehouse space that could be utilized for better selling items. Then, for business managers, it’s important to find ways to get rid of those types of items.
In this article, let’s explore more the nature of slow-moving inventory and how you can identify and deal with them.
What exactly is slow-moving inventory?
As established, slow-moving inventory is stock and items that stay longer in the warehouse. You need to consider the specifics of each market and products to be sure if you can consider slow-moving.
Products that stay too long on warehouse block cash flow and impact profits. If you are able to minimize that inventory, it will increase positive cash flow and return of investment.
So, one way to prevent slow-moving inventory is implementing a better forecast method. Basically, if you can predict with more accuracy your stock needs, you won’t keep as much congestionat products.
That means looking for ways to analyze your historical data and for demand and sales. BI, or business intelligence tools, can provide you insights from your whole supply chain. They are good not only to define better ways to forecast, but also optimize how you organize your inventory.
How to identify slow-moving inventory
There are different methods of identifying slow-moving inventory; but one necessity for most of them is to categorize the types of items and stocks to better cost management and space organization of the warehouse.
You can classify items through several methodologies, for example, you can use an ABC Analysis to set categories based on the yearly consumption value of each item. That way you can define the importance of each item and by that prioritize orders of the ones you need more.
Another possibility is a FSN Analysis, that differs from the first, classifying based on quantity, consumption rate and frequency of use. FSN stands for Fast, Slow and Non-moving and designated different strategies for each one.
Finally, you can use the SDE Analysis, a method based on the supplier capacity of each item. So, how fast you can order and receive them and the scarcity of each one. The classification of SDE is, S for scarce items, D for difficult and E for easily available items.
Although there are multiple ways of dealing with slow-moving inventory, the best solution is to have a solid plan of inventory management. So, forecasting your necessities and optimizing your stock and always maintaining attention to how your demand is changing through time.