Detecting slow-moving products is essential to maintaining operational and financial efficiency in inventory management. These products, often referred to as “slow movers” or “dead stock,” can take up valuable warehouse space and generate additional costs. Here is a procedure based on good logistics practices to identify these products and the actions you should take.
Procedure to detect non-rotational products
1. Analysis of Historical Sales and Inventory Data
Description: Use the ERP or WMS system to analyze historical sales and inventory data. The objective is to identify products that have had no outbound movements (sales, shipments, transfers) during a defined period of time, which can be three months, six months, one year, etc., depending on the typical life cycle of the product.
Tools: Inventory turnover reports, ABC analysis, and inventory aging reports.
2. Product Classification (ABC Analysis)
Description: Performs an ABC analysis to classify products according to their level of rotation and value. Products that fall into category C are generally those with lower turnover and lower value.
Objective: This analysis helps to prioritize inventory management efforts, focusing on the products that have the greatest impact on the business.
3. Safety Stock Policy Review
Description: Review safety stock policies to ensure that no more inventory is held than necessary. Adjusting safety stock of slow-moving products can prevent excessive accumulation.
Result: Identifies products whose safety stock may be out of date or unnecessarily high.
4. Physical Verification
Description: Perform a physical verification of identified slow-moving products to confirm that the recorded inventory matches the physical inventory. This step may also reveal damaged or expired products that should be disposed of.
Objective: To ensure that the information in the system accurately reflects the reality in the warehouse.
5. Continuous Monitoring
Description: Implement a continuous monitoring system that automatically notifies when a product has exceeded a non-movement time threshold. This allows corrective actions to be taken more quickly.
Technology: Automated alarms or reports in the ERP or WMS that are generated periodically.
Actions to be taken with products without rotation
Discounts and Promotions
Description: Offer aggressive discounts or special promotions to liquidate stock of slow-moving products. This tactic can attract bargain-seeking customers and free up warehouse space.
Strategy: Consider specific campaigns, such as “inventory clearance” or “last units”.
Bundling:
Description: Combine slow-moving products with other more popular products in bundling offers. This encourages customers to purchase additional products along with the items they want.
Benefit: Helps move non-moving inventory while driving sales of other products.
Supplier Returns
Description: Negotiate with suppliers to return products that are not in rotation or exchange them for others that are in higher demand. This may depend on contractual terms and supplier relationships.
Result: Reduction of non-rotational inventory without the need for discounts or promotions.
Donation or Recycling
Description: Consider donating products to charity or recycling them, especially if they are close to their expiration date or if internal policies do not allow selling products at a discount. This can generate tax benefits and improve the company’s image.
Benefit: Free up warehouse space and possible tax deduction.
Inventory Policy Adjustment
Description: Re-evaluates and adjusts replenishment and purchasing policies to avoid future accumulation of non-rotating products. This could include changes in safety stock level, smaller purchase orders, or stricter review of demand trends.
Impact: Prevention of future accumulation of slow-moving inventory.
Inventory Transfer
Description: If the company has multiple locations or warehouses, consider transferring slow-moving products to other sites where they may be in higher demand.
Strategy: Geographic sales analysis to identify where these products could be best sold.