Four Steps to Managing Dead Inventory (Part 2 of 3)
the previous blog post, we covered the first step involved in reducing
your company's risk of being adversely affected by excess and dead
inventory: Identify. This month, the next two steps – Prevent and Coordinate – will be explained.
sure way to nip the dead inventory problem in the bud is to prevent the
creation of new items that don’t fulfill a true business need; i.e.,
items that get purchased without a customer need backing up that
purchase. Don’t let the Sales department make inventory stocking level
decisions. Utilize the non-stock or temporary item functionality of
your ERP system first. That way, temporary items get created as
non-stock, just like non-stock items. The stock flag on the item /
location serves many purposes. Most importantly, these items will not
come into purchase requirements to be purchased—they will only come into
purchase when a customer order has been placed for them.
Purchasing department should determine stocking levels, using
time-tested methods. One such method is to track items from the first
ABC classes work well, such as creating classes like JAN, FEB, MAR, through DEC.
items into the ABC class for the month first stocked, using a process of
elimination; then re-class after 6-9 periods:
You may want to go further and use two dead items classes:
Last but not
least, do not allow branches to “hoard” slow-moving inventory, and
closely monitor stock levels for your customer-specific inventory (for
As you begin to track more closely, you can more accurately determine: is the item—or the customer—dead? Using sales history reports, compare to customers that were buying the items. Is the customer still active?
all employees in the effort to move dead items. For example, share the
Dead Inventory Report with Inside Sales, and offer deeper commissions
for moving these dead items.
management, Sales, and Purchasing to manage new items, and the
quantities to maintain. Instead of just the salesperson asking to bring
the item in with a stock level, work with buyers and management to
determine if the item(s) bring in true value, what other customers can
be sought out to purchase them, and so on.
In the final installment of this series, we will discuss the Dispose step of dead stock management.
Posted by Neil VanWalbeck, Senior Professional Services Consultant at Epicor Software