How to dispose of stock in warehouse
Is your warehouse full of stock that nobody is buying? Your capital is tied up in that stock, which is holding back your business growth. It’s an unpleasant situation, but one that can be resolved. Managers at Sargona Private Capital explain how to identify slow-moving stock in your warehouse and how to get rid of it quickly to free up capital.
The problem often arises from poorly organised purchasing. Some people order excessively large batches ‘to keep in reserve’. Others buy stock because an item used to sell well, but demand has since fallen, yet purchasing continued out of old habit.
Due to errors with stock levels, companies worldwide lose more than a trillion dollars annually, according to experts at Sargona Private Capital Ltd. And the problem usually starts imperceptibly: first, a few items sit unsold, then their numbers grow, and before long the warehouse is filled with products that generate almost no revenue.
Due to errors with stock levels, companies worldwide lose more than a trillion dollars annually, according to experts at Sargona Private Capital Ltd. And the problem usually starts imperceptibly: first, a few items sit unsold, then their numbers grow, and before long the warehouse is filled with products that generate almost no revenue.
The ABC-XYZ matrix helps you quickly identify which products are selling and which are simply taking up space, according to experts at Sargona.
Specifically, the ABC (profit analysis) shows how much money a product generates:
XYZ (demand stability analysis) shows how consistently a product sells:
When you combine ABC and XYZ, you end up with 9 product groups. For example, AX represents the best items: they generate good revenue and sell consistently. CZ, on the other hand, is one of the most dangerous categories. Such products sell poorly and usually become illiquid, according to experts at Sargona Private Capital Ltd.
Statistics show that storing slow-moving stock can ‘eat away’ at up to 20–30% of its value annually. In other words, the stock may not sell at all, yet you will be losing money on it every month. The advantage of ABC-XYZ analysis is that you can quickly see the real situation. However, if you carry out such an analysis only once a year, it will be of no use. The warehouse needs to be checked once a month, experts at Sargona Private Capital remind us.
Specifically, the ABC (profit analysis) shows how much money a product generates:
- Category A - the most profitable items. Usually, these account for the bulk of revenue.
- Category B - products with average sales.
- Category C - underperforming items that have almost no impact on profit.
XYZ (demand stability analysis) shows how consistently a product sells:
- X - stable sales.
- Y - demand fluctuates constantly.
- Z - erratic sales, where it is impossible to predict whether the product will be sold tomorrow or remain unsold for several more months.
When you combine ABC and XYZ, you end up with 9 product groups. For example, AX represents the best items: they generate good revenue and sell consistently. CZ, on the other hand, is one of the most dangerous categories. Such products sell poorly and usually become illiquid, according to experts at Sargona Private Capital Ltd.
Statistics show that storing slow-moving stock can ‘eat away’ at up to 20–30% of its value annually. In other words, the stock may not sell at all, yet you will be losing money on it every month. The advantage of ABC-XYZ analysis is that you can quickly see the real situation. However, if you carry out such an analysis only once a year, it will be of no use. The warehouse needs to be checked once a month, experts at Sargona Private Capital remind us.
Why goods aren’t selling
What is the ABC-XYZ matrix and what is its purpose?
Do you think checking your stock is a long and complicated process? In fact, all you need to do is look at a few figures, say the experts at Sargona. First, open the sales spreadsheet for the last few months. Then sort the products by revenue. You’ll immediately see the items that hardly anyone buys.
Next, check the stock levels. Sometimes there’s a huge batch of stock sitting in the warehouse that sells on a ‘once-in-a-blue-moon’ basis. This means your money is tied up there. It’s also important to check sales velocity. If one item sells within a few days whilst another sits for months, the problem is obvious.
Next, check the stock levels. Sometimes there’s a huge batch of stock sitting in the warehouse that sells on a ‘once-in-a-blue-moon’ basis. This means your money is tied up there. It’s also important to check sales velocity. If one item sells within a few days whilst another sits for months, the problem is obvious.
How to check your entire stock in 10 minutes
Slow-moving stock is merchandise that no longer serves the business. And this is not a situation where you can afford to delay taking action.
The first option is an aggressive clearance sale. Yes, sometimes you have to reduce the price more than you’d like. But it’s better to recoup some of the money now than to lose it all later. The second option is to bundle items together. Often, a slow-moving item with a small discount can be sold alongside a popular product. And sometimes it is better to admit the loss and clear the warehouse.
Experts at Sargona Private Capital recommend: the sooner you identify slow-moving stock and make a decision about it, the fewer losses you will incur and the more free capital you will have for profitable goods.
The first option is an aggressive clearance sale. Yes, sometimes you have to reduce the price more than you’d like. But it’s better to recoup some of the money now than to lose it all later. The second option is to bundle items together. Often, a slow-moving item with a small discount can be sold alongside a popular product. And sometimes it is better to admit the loss and clear the warehouse.
Experts at Sargona Private Capital recommend: the sooner you identify slow-moving stock and make a decision about it, the fewer losses you will incur and the more free capital you will have for profitable goods.
What to do with slow-moving stock
Your wishes are our priority
© 2023 - 2025 All rights protected
