How to reduce dead stock without damaging supplier relationships

Dead stock — inventory that hasn't moved in 6 months or more — is a financial drain that most companies underestimate. It ties up working capital, occupies warehouse space, and often deteriorates in value. Getting rid of it and preventing it are both solvable problems.

First, quantify it. Pull your inventory aging report — how much of your current stock has been sitting for more than 90 days? More than 180 days? Most companies that do this exercise are surprised by how large the number is. In Indian manufacturing SMEs, dead stock commonly represents 15–25% of total inventory value.

Classify before you act. Dead stock falls into categories: slow-moving (it will eventually sell, just slowly), obsolete (it won't sell because the product it supports has been discontinued), excess (you over-ordered), and damaged. Each requires a different approach.

For slow-moving stock: analyse why it's slow. Is it a product you've de-prioritised? A raw material for a seasonal product out of season? Excess purchased on an over-optimistic forecast? Understanding why it's slow tells you whether to wait, discount, or liquidate.

For excess and obsolete stock: liquidation is better than carrying it. Options include: discounting to existing customers, return to supplier (negotiate this — suppliers will often take back excess if you have a good relationship and are willing to accept a restocking fee), selling to a trader at a discount, or in the worst case, writing it off. The emotional reluctance to write off stock at a loss is understandable — but every month you carry it, you're paying to store it and losing the cash you could deploy elsewhere.

Prevention is cheaper than cure. The root causes of dead stock are almost always: inaccurate demand forecasting, buying in quantities larger than needed to get better pricing (without accounting for carrying costs), and no formal review of slow-moving items. Fix the upstream process.