Dead stock: how to find it, what it is really costing you, and how to clear it

Every distributor has stock that is not moving. Almost none can say how much, which items, or what it is costing.

The money is usually larger than people expect, and it is almost always concentrated: a small number of SKUs holding a large share of the dead value.

A definition you can actually use

"Dead stock" is vague. Two numbers make it concrete.

Days of cover. Units on hand divided by average daily sales over the last ninety days. If you sell two a day and hold sixty, that is thirty days of cover.

Days since last sale. How long since a single unit moved.

Together they separate the four cases:

	Sold recently	Not sold recently
Low cover	Healthy. Watch for stockouts.	Slow but thin. Ignore.
High cover	Overstocked. Stop reordering.	Dead. This is the list.

The item you care about is high cover and no recent sales. Something with two years of cover that still sells a unit a week is overstocked, which is a different and less urgent problem.

Set your own thresholds. For fast-moving FMCG, ninety days of cover is already a lot. For slow hardware lines, a year is normal. The thresholds matter less than applying them consistently.

What it actually costs

The money tied up is the obvious cost and the smallest part of it.

The cash. ₹4 lakh in dead stock is ₹4 lakh you cannot use to buy things that sell. If you are also borrowing at 14 per cent, that is ₹56,000 a year to hold goods that are not moving.

The space. Godown rent is per square foot regardless of whether the boxes turn.

Obsolescence. Packaging changes, models supersede, and a competitor launches. Dead stock rarely gets more valuable.

Expiry. In pharma and food this is a hard wall, and batch and expiry tracking is what turns it from a write-off into a supplier claim, and the write-off is total.

The decision cost. The largest and least visible. Every rupee in dead stock is a rupee not in the line that is selling out every fortnight — and stockouts on a fast line cost you the customer, not just the sale.

Finding it without a system

If you have no software, you can still do this once with a stock list and three months of sales:

1. List every SKU with units on hand and cost per unit.
2. Add units sold in the last ninety days, valued at what the stock actually cost you rather than at the printed rate.
3. Compute cover: on hand ÷ (sold ÷ 90).
4. Sort by cost value descending, filter to cover above your threshold and zero sales in sixty days.
5. Stop at the top twenty. That is almost always most of the money.

It is an afternoon. Most distributors have never done it once.

Clearing it without wrecking your prices

The instinct is to discount hard and move it. That is sometimes right and often expensive, because a deep public discount teaches your retailers to wait for the next one.

In rough order of preference:

1. Return it to the supplier. Many distribution agreements allow returns of unsold stock, especially near-expiry pharma. Ask first, always. It is free money and people forget it exists.

2. Bundle it. Attach the dead item to a fast mover as a scheme. The retailer takes it because the deal is good; your headline price on neither item has moved.

3. Offer it to the retailers who bought it before. Someone stocked it once. Pull the list of who bought that SKU and call them. A targeted call at a modest discount beats a broadcast at a deep one.

4. Move it between your own locations. If you have more than one godown, dead in one may be short in another.

5. Discount, quietly and with an end date. Specific retailers, a stated deadline, not a public price change.

6. Write it off. For expired or obsolete goods this is the honest answer, and doing it promptly is better than carrying a fiction on your books. Take the loss in the month it became real.

Stop buying it again

Clearing dead stock without changing how you buy just means doing it again next year. Two habits:

Look at cover before you reorder. Not units on hand. Cover. Sixty units means nothing on its own.

Watch the schemes. A large amount of dead stock arrives as a supplier scheme that was genuinely good value on a line that does not move for you. A 30 per cent discount on something you sell four of a month is not a discount, it is a year of cover.

The reason nobody does this

The arithmetic is trivial. The data is not.

Days of cover needs accurate stock and ninety days of sales history per SKU. Days since last sale needs every sale recorded against the right product. If purchases are typed in when someone has time and sales are recorded on a pad, neither number exists, and the whole exercise collapses into a walk round the godown pointing at boxes that look dusty.

That walk finds the large obvious cases and misses the expensive quiet ones — the item with eleven months of cover that nobody notices because there is only one carton of it.

Where Dhela fits

Dhela keeps stock current because purchases come in from a photo of the bill rather than being typed, and sales are recorded as they are issued. From that it can tell you cover and last-sale date per product, rank dead stock by money rather than by units, and put the number in front of you rather than waiting to be asked.

It also flags the other side: lines that keep running out, and retailers who have gone quiet.

Free plan, no card. dhela.in