Dead Stock: How to Find It, Decide on It and Stop It Coming Back

What is dead stock, and how do you find it?

Dead stock is material that has had no issue to production for a long time, usually 180 days or more. You find it by ageing your stock: for each lot, count the days since it was received and since it was last issued, then list everything that has stopped moving.

Every plant has a corner where old things sit. A spare for a machine sold years ago. A batch of a grade no longer used. Material bought for an order that was cancelled. Nobody planned to keep it. It simply stayed.

The cost is real. The cash has already been paid. The space is used. The item must be counted every year. And with time, it loses value.

Three kinds of slow stock

These limits are examples. Each plant can set its own. What matters is that the limits are written and checked every month.

Why dead stock happens

• Buying in bulk to get a better rate, without checking real use.
• A cancelled or changed order, after material was bought.
• No first in, first out. If the oldest lot is never issued, it ages into dead stock, and it may rust or expire.
• No one owns the decision. Everyone says "keep it, it may be useful."
• Wide range of items, each one with a small safety stock.

None of these is a worker's mistake. They are system gaps.

Step 1: Age the stock

Make one list with these columns: item, quantity, value, received date, last issue date and movement class. Group the value by age: up to 90 days, 91 to 180, 181 to 365 and over 365.

For this you need good records. Every receipt should have a GRN date, and every issue should have an issue slip. Without those two papers, no ageing is possible.

Example only: a stores value of Rs. 9 lakh. Four non-moving items make up Rs. 1.5 lakh. That is about 17% of the stock value, and none of it is likely to be used in the normal way.

Step 2: Put money next to it

Owners act when they see money. For each slow lot, work out the cash it holds. Then convert that cash into yearly interest cost, and the profit margin it eats up. If your sale cycle is about 45 days, cash locked in slow stock for six months is cash that could have turned over several times.

Step 3: Give each item a decision

Hold a 30-minute monthly stores review. Invite the owner, stores, purchase, production and design. For each non-moving item, choose one action.

1. Use it in another job, a fixture or a trial.
2. Return it to the customer who cancelled the design, if the agreement allows.
3. Exchange it with the supplier for the current grade or size.
4. Sell it to another buyer.
5. Scrap it and record the loss.

Write the owner and a date for each. Review progress next month.

The most expensive decision about old stock is the usual one: "keep it, it may be useful."

Step 4: Stop it coming back

• Buy for the work order and the minimum stock level, not for the best rate.
• Issue the oldest lot first, and mark lots with the receipt date.
• Check the stock before every purchase requisition.
• Review slow-moving items every quarter, before they turn into dead stock.
• When an order or design is cancelled, check what material was bought for it the same week.

How to start in your plant

1. Make a list of every material with its code. Without it, ageing cannot start.
2. Walk the stores with the storekeeper and mark every item that has not moved for six months.
3. Value it. Put the total on one page.
4. Hold the first 30-minute review. Decide on the top five items by value.
5. Repeat every month. Do not wait for the year-end stock-taking.