Inventory Health

Slow-Moving Inventory: Identify and Clear Dead Stock Before It Kills Profit

You bought 50 units of a fabric color three months ago. You've only used 2. The remaining 48 sits on your shelf, tying up $300, occupying space, and gathering dust. Every day it sits, it costs you money in carrying costs. This guide teaches you to identify slow-moving inventory, calculate its true cost, and execute strategies to clear it before it destroys profit.

The Hidden Cost of Waiting

A textile maker has 12 slow-moving SKUs (colors, materials not selling). Combined value: $4,200. Annual carrying cost (5% of inventory value): $210/year. But there's more: shelving space ($40/month × 12 = $480/year), accounting complexity ($100/year), risk of obsolescence/damage (25% write-down potential = $1,050). Total true cost of holding slow-moving inventory: Over $1,800/year.

How to Identify Slow-Moving Inventory

Method 1: Turnover Analysis

Material	Purchased	Used (3 mo)	Turnover Rate	Status
Navy dye	20 units	18 units	90%	Healthy
Burgundy dye	15 units	12 units	80%	Watch
Gold metallic dye	25 units	2 units	8%	Slow-Moving

Rule of thumb: Materials with less than 25% turnover in 3 months are slow-moving. Calculate: (Units used ÷ Units purchased) × 100.

Method 2: Days on Shelf

Days on Shelf = (Current Quantity ÷ Average Monthly Usage) × 30

If you bought 50 units and use 2/month:

Days on Shelf = (50 ÷ 2) × 30 = 750 days (25 months!)

Flag: Anything over 180 days is slow-moving

Method 3: Date-Based Tracking

Tag materials with purchase date. Every 6 months, review items with dates older than 12 months. These are candidates for clearance.

Calculate the True Cost of Holding

Cost Factor	Calculation	Annual Cost
Carrying Cost	Inventory value × 5%	$4,200 × 5% = $210
Storage & Space	Shelf/rack cost × 12 months	$40 × 12 = $480
Insurance & Handling	Materials insurance + staff time	$150
Obsolescence Risk	Inventory × 25% depreciation risk	$4,200 × 25% = $1,050
TOTAL ANNUAL COST		$1,890

That slow-moving inventory you're holding costs nearly $1,900/year. Every dollar sitting in inventory could be working for you elsewhere.

4 Strategies to Clear Slow-Moving Inventory

Strategy 1: Discount & Bundle

Create "clearance" products using slow-moving materials. Bundle the burgundy dye into a "Limited Autumn Collection" at 20% discount. Move inventory + recoup partial value.

Strategy 2: Donation or Bulk Sale

Donate to local schools/art programs (tax deduction). Or sell bulk to craft supply stores at 30-40% of cost. Better than letting it sit.

Strategy 3: Reposition for New Products

The gold metallic dye sits unused for your current products. But it could work for a new product line. Create a new design around the slow-moving material.

Strategy 4: Accept the Loss

Write off the material as a loss, dispose properly, and move on. Tax-deductible loss + freed cash beats letting it decay on the shelf.

Prevention: Reorder Discipline

Set Reorder Points (Not Guess Quantities)

Based on actual usage + lead time, not "feeling like I need some." Over-ordering creates slow-moving inventory.

Test New Materials in Small Batches

Don't commit 50 units to a new dye color. Buy 10, test demand, then scale if it sells.

Review Inventory Monthly

What's moving? What's not? Act fast on items that stall early, before they become dead stock.

You might also be interested in these related articles about artisan business management.

Setting Reorder Points: Never Run Out of Inventory Again

Use demand signals to reorder effectively.

Invalid Date

The Cost of Overstock

Understand the true cost of excess inventory.