As a small business owner, you know that selling out your products, restocking supplies and then selling them out again is key to generating revenue. What if it takes months and months before your shelves are completely empty?
What is slow moving inventory?
In the fast-paced world of online selling, “slow moving inventory” is a slow “killer” in business. It’s a common and often recurring challenge for small and medium-sized enterprises (SMEs).
Slow moving inventory refers to products that stay on shelves longer than expected, taking up space while not generating ROI. These items aren’t as popular or in-demand with customers, or they get replaced by newer items, so they sell slower and are outdated sooner. In general, these slow-moving items stay on the shelves for more than six months. If you sell perishable items, you can’t afford to have your inventory sit for over 90 days.
How to identify slow moving inventory: 4 ways to solve low-selling SKUs
Both fast moving and slow moving inventory pose a problem to businesses. Fast-moving goods cause mistakes in a poorly managed warehouse or create order delays to replenish in-demand stock. But slow-moving goods yield waste, which could cost your business more money.
It’s important to keep track of your entire inventory (including transport inventory), making sure you don’t have stock keeping units or SKUs lagging in sales.
1. Check for overstocked items
Seeing piles of old stock in boxes and bags sitting in your warehouse? An obvious indicator of slow moving inventory is the accumulation of excess stock beyond projected sales forecasts.
Pay attention to products that linger on shelves. These overstocks tie up valuable capital and occupy precious storage space, potentially leading to increased handling costs and reduced profitability.
2. Calculate the stock turnover ratio
Check your business’s stock turnover ratio. This ratio is obtained by dividing the cost of goods sold by the average inventory value.
A lower ratio indicates slower-moving items, suggesting that inventory is sitting longer on shelves. In contrast, a higher turnover rate signifies brisk sales and efficient inventory management. By closely monitoring this metric, you identify which products require attention to avoid stagnation.
3. Average the time it takes to sell out inventory
Tracking the time it takes for products to move from acquisition to sale lets you predict how long or how fast it takes for a specific SKU to go out of stock. This insight, which can also be a way to validate other inventory checks, enables proactive measures to address slow moving inventory before it becomes a profitability concern.
4. Forecast supply and demand
Given sufficient data, you can predict demand and adjust inventory levels accordingly.
Leverage historical sales data, market trends and other relevant factors, so your business can anticipate buyers’ changing preferences, satisfy their hunger or demand for more of the same products or services, and reduce the risk of overstocking slow movers.
How slow moving inventory affects your business
Unsold products can have significant implications for your business’s financial health and operational efficiency.
Here are some ways it can impact your business:
- Tied-up capital and slower cash flow
- Additional holding costs (storage, handling, value depreciation, etc)
- Expiration risks or wastage
- Overcrowded warehouses and storage space constraints
- Decreased customer satisfaction due stockouts and delayed orders
What you can do with slow moving inventory
The first step to addressing your business’s low-selling items is finding out which ones are moving slowly. Here are alternative strategies to repurpose or liquidate slow moving inventory:
- Bundle products and items into value packs
- Offer promotions or discounts to generate demand
- Explore secondary markets for resale
- Alter or repurpose products into new items for other audiences
- Donate or liquidate as a last resort
5 Tips to prevent slow moving inventory
Control and manage your inventory right from the start. Here are five ninja tips to ensure your items are flying off their shelves:
1. Optimize inventory management systems
Using inventory management software is crucial for tracking sales trends, monitoring stock levels and analyzing inventory turnover rates.
With features such as automated restocking orders, you can set up reorder points and reorder quantities based on real-time data, ensuring that you always have the right amount of stock on hand without overstocking or running out of popular items.
2. Diversify product offerings
Introduce a diverse range of products to help spread the risk of slow moving inventory.
Offer a mix of fast-moving staple products and new or fresh items in the market to minimize the impact of slow movers on your overall inventory.
Do market research to identify emerging trends and customer preferences, and adjust your product mix accordingly to stay competitive.
3. Implement a just-in-time inventory system
Just-in-time (JIT) inventory management involves ordering inventory only when needed, reducing the need for excess stock and minimizing holding costs.
Coordinate with suppliers by leveraging sales and demand forecasts, so you can optimize your supply chain and improve inventory turnover rates.
4. Review and update product selection
Keep a close eye on sales data, customer feedback and industry developments to identify slow moving items early on and make informed decisions about discontinuing, discounting or refreshing your product offerings.
5. Forge strategic partnerships
Collaborate with suppliers to optimize inventory management and mitigate the risks associated with slow moving inventory. Negotiate flexible terms or return policies to minimize the financial impact of excess stock.
Additionally, explore opportunities to co-develop new products or exclusive offerings that cater to specific customer segments, enhancing your competitive advantage.
Ninja Restock is the way forward
Fast and timely inventory restocking is crucial to your success.
Ninja Restock provides affordable trucking services, ships to anywhere in the Philippines, and streamlines your supply chain via cargo transport to accelerate business growth.
Streamline B2B deliveries with Ninja Van’s efficient distribution logistics, ideal for both small and corporate businesses needing co-loading or less-than-truckload (LTL) shipping for non-perishable inventory. With pallet shipping, your goods remain protected and secured throughout transit, eliminating the hassle of split shipments.
We facilitate transportation for store resupply or inventory pullouts, including warehouse-to-drop-off points, store-to-store and warehouse-to-warehouse deliveries.
With Ninja Van as your partner, your business can maintain well-stocked stores, leverage efficient supply chain management and experience seamless logistics solutions designed to support your business expansion needs.
