When items in the e-commerce store do not sell like hot cakes and stay on the shelf for a long time, it drains down the profits and affects the long term plans of the company.

Warehouse and employee management expenses as well as time of the employees get wasted in this process. More the product stays on the shelf, the less chance of getting it sold!! Strategies to clear the old stock and bring in fresh merchandise need to be deployed. This stresses the importance of the inventory aging report, which provides the key metrics about the status of the inventory.

This dashboard tracks the stock on hand (SOH) and monitors this measure for age buckets of varying sizes – [0 – 3] months, [4 – 6] months, [7 – 12] months, [13 – 24] months and more than 24 months. Businesses want the majority of their stocks to be in the first few buckets as they can be sold at original prices and can bring in more revenue. The dashboard helps the business in achieving the below goals:

  • Tracking and predicting the duration of products on the shelf

  • Identifying slow/non- moving items

  • Determining the warehouse maintenance/ storage cost

  • Designing/ Modifying the Pricing strategy

  • Inventory Planning - Warehouse stocking and management

Aging dashboard helps in optimizing the inventory preventing overstocking and understocking and also helps in making the inventory purchase decisions. Thus, it plays a vital role in inventory planning.

Key Terms:
  • Aged Inventory refers to stock that is past its prime selling point and is piling up on the warehouse shelves.

  • SOH or Stock On Hand is the total amount of a product currently present in the warehouse. It includes products not available for sales also. It is the most important metric for stock management.

Goals Questions to ask Dashboard views
Designing/ Modifying the Pricing strategy


Inventory Planning
How much does each band contribute to total Stock On Hand?

How much of the inventory is going to get aged?
Bandwise Summary
Determining the warehouse storage cost For the inventory aged over a year, how is it varying over time? Stock Aging Trend
Inventory Planning Compared to the base month, how has the SOH value changed for all the age bands in the current month? Base vs Current SOH Value
Warehouse stocking and management Which warehouse has more fresh stocks (or aged stocks) piled up?

For a selected age limit, what is the SOH value % less than and greater than the age selected for a warehouse/store?
WH & STORES
Tracking and predicting the duration of products on the shelf

Identifying slow/non- moving items
Which product is fast moving (more fresh stock) and which is slow moving (more aged stock) ? Product wise Summary


Product wise SOH details across brands

  • The bandwise summary plot gives the exact contribution of each age band to SOH value. If the majority of the stock on hand is not in the first two bands, it would mean the company has more aged stock than fresh stock. It is an indicator that the current pricing and marketing strategy needs to be revisited. Also, the idea about how much inventory will get aged in the next few months helps in inventory planning.

  • WH & Stores graph tells about which warehouse has inventory piled up and where there is a shortage. The months filter in the visualization allows the user to view stock on hand value of inventory greater than selected months. This data could help the business in deciding on shifting the stock from a warehouse with overstocked inventory to an understocked one.

  • Stock clearance sales, discounts and offers are tools used to deal with the aged inventory. Stock aging trend graph gives an idea about how the inventory aged over a year varies with time and this is crucial for deciding when to roll out offers and discounts.Business could also try to analyse the reasons for the products remaining on shelves for more than a year and try to prevent this in future.

  • Product wise SOH details across bands shows the stock on hand quantity and value of each product across the age buckets. This gives an idea on the aging pattern of the products and helps in making inventory purchase planning decisions. Inventory optimization is important for lowering the warehouse storage costs.

  • When a product stays on shelf for a long time, it can be bundled with a fast moving product, creating profitable combo offers or sold at a low price by offering discounts. Product wise details helps in identifying slow moving and fast moving items, thus making it easy to formulate these offers.

  • Also, if a product is fast moving in a location and slow moving in another location, it can be shifted to the former location, thereby reducing the shipping costs and increasing customer satisfaction as the wait time reduces.

  • Having fresh products in inventory is also important for customer satisfaction. For a particular product, if the inventory has more aged stock than fresh stock, it is an indicator that steps to clear off the excess aged inventory need to be taken.

KPIs
  • Total SOH value
  • Age band wise SOH Value & Quantity
  • Current period SOH vs Base period SOH
  • Warehouse stock SOH Value
  • Product wise SOH Value & Quantity
Conclusion

Insights from the Inventory aging report helps the business to improve their inventory purchase decisions, pricing strategies and even helps in deciding the time for flash sales and discounts. It also helps in focussing on the slow moving projects and further drilling down to the reasons for the lack of customer interest on the product.

About the Author

Associate Consultant Intern @Devika Hari

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