Dead stock is inventory that has stopped moving. Each business sets its own line, often no sale in 90 or 180 days. It ties up cash, takes godown space, and often loses value while it waits.
Where it comes from
- Buying a large lot for a discount that the market did not need.
- A design, shade or size that did not sell, common in tiles, textiles and garments.
- Season stock left over, such as woollens after a warm winter.
- Returns that were put back on the shelf and forgotten.
- Old models after a new one arrives.
What to do about it
- List every item with no movement in 90 days, with quantity and value.
- Decide item by item: sell at a discount, return to the supplier, bundle with fast movers, or write down.
- Stop reordering the item.
The accounting side
Under the accounting standard on inventories, stock is valued at the lower of cost and net realisable value. If a lot of 600 boxes of an old tile series can only be sold at ₹150 against a cost of ₹210, it should be valued at ₹150 a box, and the loss recognised.
A monthly look at slow movers is cheaper than a yearly clearance sale.