This is a self-explanatory term.
“Aged” Inventory means old.
Old inventory is a silent killer for any Progressive Retailer.
What is the current practice?
Depending upon the industry you are in, the approach can vary!
from “What can I do,”
“I have done everything what I can do”
If you are in the jewellery industry, the typical approach is “Gold appreciates in Value”, so I am not bothered about ageing.
In fact, it is an asset..
But, it is a silent killer, like a Heart Attack.
Let me explain..
What does “aged inventory” mean?
This Aged inventory was not built in a day.
It took a lot times to become “aged”.
May be 3 months, 6 months, 1 years and sometimes many years!
Do you know, what is the oldest piece of inventory in your store? 6 months or 6 years! Do a check and I will take a bet, it is older than you thought! If you won, I owe you a free coffee! Next time we meet..
Like a heart attack, aged inventory does not happen one fine morning on say Jan 1st.
Bad habits built over time, poor eating habits, lack of exercise or even stress or just plain carelessness to a healthier lifestyle.
Thus the aged inventory will not disappear in a day either.
Aged inventory is a silent killer of Cash flow.
Aged Inventory is like a mirror, showing you that there is a problem in the buying process.
What does it cost you?
Take the Purchase value of the inventory is over 6 months in the store. A few lakhs or maybe a few crores?
Has it become part of your store like the furniture and lighting fixtures? It bother nobody? Especially, not the employees, we are not either paying them for it or penalising them for it right?
If you had that much value of money in cash, can you lend it out in the market for say 2% per month easily i.e. 24% per year right?
Now, just calculate the amount of “interest” you lost because of that aged inventory?
Make us suddenly want to find a solution right?
What else is it impacting?
Aged inventory is preventing you from buying new products!
Preventing you from making more money from that sale! (just look at the non conversions and you will agree).
What can I do now!
Take action on time.
That is better rather than wait for some miracle in market – There is always some customer who will buy in future attitude.
Here are examples of what you can do..
This will help for reduced Aged inventory
- Ask your supplier to take return one out of three ordered.
- Collect data of 12 month aged inventory and make a sales event, keep in fast selling display box.
- Make a cross-selling or up-selling offer with other items with some good offer.
Long Term action
- Order product stock with a proper “open to buy” based on your sales plan only.
- Thus you will never buy too much or too little.
- Implement the First In First Out (FIFO) principle
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