Dead stock is inventory that has remained unsold or unused and is unlikely to move through normal demand. It ties up cash and storage capacity and may incur markdown, disposal or write-off costs.
How is dead stock identified?
Businesses usually define an inactivity threshold by product category, such as no sales or consumption for 180 days. The review should also consider seasonality, launch dates, contractual commitments and whether the item supports a service obligation.
Illustrative dead stock exposure
| Calculation step | Amount | What it means |
|---|---|---|
| Units with no sales for 180 days | 1,200 | Quantity under review |
| Landed cost per unit | $18 | Recorded inventory cost |
| Gross cost exposure | $21,600 | 1,200 × $18 |
| Expected recovery at $7 per unit | $8,400 | 1,200 × $7 |
| Illustrative loss | $13,200 | $21,600 − $8,400 |
The example is illustrative. Accounting treatment depends on the applicable policy and evidence of net realizable value.
Dead stock vs. slow-moving inventory
Slow-moving inventory still has measurable demand, although turnover is below plan. Dead stock has little realistic prospect of normal sale or use. The boundary should be defined by category rather than applied as one universal age.
What causes dead stock?
Common causes include over-ordering, weak forecasts, product changes, minimum order quantities, quality problems, lost listings and poor catalog visibility. Root-cause analysis should connect the item to the original sourcing and replenishment decision.
How can it be reduced?
Use smaller initial orders, reorder points, aged-inventory reviews, supplier return terms and clear discontinuation rules. Recovery options can include bundles, secondary channels, rework, parts harvesting, return or responsible disposal.
