The merchandise in a factory that is empty and has no chance of being sold because it has become obsolete or out of style is referred to as dead stock, killed stock, or excess stock.
For a better understanding let’s see some examples of dead stock.
What is dead stock?
Any unsellable inventory or stock in a firm is known as deadstock. Companies experience dead stock because they manufactured or ordered an excess amount of products. Not only this, dead stock can include any malfunctioned, defective, or damaged inventory.
For example
Some firms provide deadstock products at low prices with both the purchase of another item or sell them at a cheaper price to discount merchants. Firms strive to reduce dead stock since it incurs negative expenses.
Companies must enhance their sales estimates to do this. A greater understanding of what people want and how much can be sold. Firms could also employ information systems to receive timely notifications regarding possible parts of the deadstock in order to save related expenses.
Example of deadstock waste
If we consider the textile industry then dye samples, trial fabrics, and end-of-roll scraps or left-over fabrics that were over-bought for a certain collection or include prior season designs or logos that were discarded for reuse, known as deadstock waste.
Using deadstock cloth is rational in terms of waste. Every year, $120 billion in useless textiles are tossed into landfills, burnt, or laid to rest in warehouses. This is avoided by transforming this so-called garbage into fresh wearable things.
It does not just utilise fewer resources than making new, virgin textiles, but because the fabric already exists, it may be delivered faster, with lead times reduced by as much as six weeks, and therefore is frequently inexpensive.
Two examples of deadstock
Example 1:
Ethnic Art is a business that specialises in handcrafted items manufactured by Local Latin Americans. It just launched a store in the United States and expected that the wood sculptures would be the best-selling goods. The store initially acquired 20 sculptures with the expectation of selling them in 3 months.
Customers, meanwhile, did not take to the merchandise, and after three months, the business had sold just three out of twenty. The remaining 17 sculptures were subsequently designated as deadstock by the store manager.
As a consequence, the corporation reduced the price by 40% in order to make them more appealing to tourists, but the tactic failed miserably.
After two months, there were still ten statues as deadstock. Meanwhile, other popular goods necessitated the space held by the statues. After some thought, the management opted to give one sculpture away for free in exchange for a specified amount of money.
Example 2:
Seasonal products that are no longer in demand are the most typical instances of dead stock. They are difficult to be sold before their expiry date in some situations, and hence go to waste. As a result, they just take up precious storage units that could otherwise be used for fast-selling items.
In the weeks coming up to Christmas, for example, festive merchandise rush off the shelves. But as soon as the holiday is over, they come to a halt. So stockpiling Christmas cards in July is pointless.
Two examples of deadstock in business
Example 1:
Assume you’re a food distributor who ordered 250 bags of potatoes to resell. Your inventory prediction indicates that you should be able to sell them within 2 months.
However, demand for wholesale items fell abruptly, and you may only sell 50 bags in those 2 months. Because of a new health food trend, updated prediction suggests that sweet potatoes have taken the majority of potato demand. As a result, you won’t be able to sell the leftover 150 relatively soon.
This remaining inventory is now deemed obsolete. These potatoes are now a burden on your warehouse and they may spoil before they can be removed. Furthermore, you may have created a bottleneck for your vendors, causing them to possess an excess of potatoes as well.
Example 2:
Canned foods are another example. You opted to overorder non-perishable food goods during the big shopathon that followed the COVID-19 lockdown, where many chose to start stocking up. Sadly, individuals aren’t anymore purchasing in quantity, and you find yourself with dozens of cans of cooked legumes. To make things a bit harder, they’re about to run out of time. How are you able to clear them without spending any money? This is only one of the numerous examples of dead stock.
Final thoughts
The excellent thing is that, no matter how horrible deadstock appears to be, it is avoidable. If it does occur to your company, there are several methods to deal with it around. Hence, be intelligent about your supply and don’t panic if you have dead stock; you can resolve the issue.
