Dead stock is stock that has not sold for a long time and is unlikely to sell at its normal price. Every trade has it. Last season's kurtas in a Jaipur garment shop. A tile design that the builder dropped in a Morbi warehouse. Phone covers for a model nobody uses any more in a Delhi mobile accessories shop.
It looks harmless, sitting quietly on a shelf. It is money you have already spent that is earning nothing, taking up space and losing value every month.
01What dead stock costs
The cost is more than the purchase price.
- Money locked up
- ₹8 lakh of dead stock is ₹8 lakh that could pay suppliers, fund a new range or reduce an overdraft at 11 percent interest. That interest alone is about ₹88,000 a year.
- Space
- Godown space has a rent. Shelf space in a shop is where the sellers should be.
- Value loss
- Fashion, electronics, medicines and food lose value fast. Even a steel item rusts.
- Handling
- Staff move, count and dust it at every stock count.
- Wrong decisions
- Inflated stock figures make the business look healthier than it is.
02Define dead and slow-moving for your trade
Pick time limits that suit what you sell:
| Trade | Slow-moving | Dead |
|---|---|---|
| Grocery, FMCG | No sale in 30 days | No sale in 90 days |
| Garments, footwear | No sale in 60 days | Past one season |
| Hardware, sanitary, electrical | No sale in 90 days | No sale in 12 months |
| Tiles, building materials | No sale in 90 days | Design discontinued or 12 months |
| Machine spares | No sale in 6 months | No sale in 24 months |
03How to find it
You need two things for each item: the quantity on hand and the date it last sold.
- List every item with stock above zero, its value at cost and the date of its last sale.
- Sort by the number of days since the last sale.
- Mark items past your slow-moving and dead limits.
- Add up the value in each group.
For a Bhavnagar hardware wholesaler with 1,900 items, a list like this might show 410 items with no sale in a year, worth ₹11,60,000 at cost. Figures of that order are common in hardware, where small slow lines build up over years.
If your records do not show the last sale date, start with the stock count. Anything with dust on the carton is a good place to begin.
04Why it happens
Knowing the cause stops it growing back:
- Buying for the scheme
- A distributor scheme offers an extra 3 percent for a full truck, and half the truck sits for a year.
- Buying by feel
- Orders placed without looking at last season's sales.
- One customer's order
- Special items bought for a customer who then did not take them.
- Range changes
- The brand changes packaging or discontinues a model.
- Returns that were never sorted
- Goods returned by customers and put in a corner.
05What to do with it
Act on the oldest and most valuable items first. Options, roughly in order:
- Return to the supplier. Many brands and distributors accept returns or exchanges within a period, especially for unopened stock. Ask before assuming no.
- Sell to another dealer in a different town where it still sells.
- Bundle it with fast-moving items. A paint shop can add old shades of putty to large orders at a lower rate.
- Discount it clearly, in a clearance section or a season-end sale. A known sale clears more than quiet discounts.
- Use it. A fabrication shop can use old steel sections in its own jobs.
- Sell it as scrap or donate it, and write it off.
Agree the price you will accept before you start. Clearing ₹11 lakh of stock for ₹6 lakh can feel like a loss of ₹5 lakh, but the ₹5 lakh was already lost. The ₹6 lakh is money back in the business.
06The accounts side
Stock is generally valued at cost or net realisable value, whichever is lower. If dead stock can only be sold below cost, its value in the books should come down. Discuss write-downs and write-offs with your CA before 31 March. If you claimed GST input credit on goods that are later destroyed, written off or given away, the credit may need to be reversed, so ask your CA about this too.
07Stop it from building up
- Review slow-moving stock monthly,
- not once a year.
- Set reorder levels
- from actual sales. See reorder levels.
- Check schemes against sales
- A scheme is only worth taking if you would sell the extra stock within its credit period.
- Give one person ownership
- of slow-moving stock, with a target to reduce it each quarter.
08A worked example
Say a Delhi mobile accessories wholesaler with ₹42 lakh of stock runs the list in July. Items with no sale in 90 days come to ₹9,80,000, mostly covers and screen guards for phone models that have gone out of the market.
The owner can take four steps. Unopened stock of two brands, worth ₹2,10,000, goes back to the distributor for credit against new purchases. Covers worth ₹3,40,000 go to a dealer in a smaller town at 55 percent of cost. The rest is bundled with fast-selling chargers and cables at a small extra charge. Whatever remains after 60 days, say ₹1,10,000 at cost, is written off on the CA's advice.
In three months, ₹8,70,000 of idle stock becomes about ₹4,60,000 of cash and credit, two racks are free for new models, and a simple rule stops a repeat: no more than 200 covers for any new phone model until it has sold for a month.
09For larger businesses
With several branches, move slow stock between branches before discounting, since what is dead in Surat may sell in Indore. A manufacturer should also look at raw materials and packaging bought for products that have been discontinued.
In MatruOS, stock on hand is updated by every purchase and sale, so you can look up any item's current quantity before deciding what to reorder or clear.