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I’m Bruce Frame and this is your One Minute on Business. This is the second in the wholesaling
series. Today I’m going to talk to you about slow-moving and obsolete stock. This is a
constant conversation with people who are wholesaling. It’s really hard to get your
head around. The products that you sell have a life cycle that you have to work with. You
introduce them. They’re new. They’re exciting and they’re in the early adopters then you
get the early majority then you get the majority and the light majority.
By the time you get to the light majority of that cycle type for that product, you’ve
got to have a way of killing it to get it out of your system. You do this with what
I call slow-moving and obsolete stock rules. The simple situation is you need to work out
what is a slow-moving item and you could say, “Well, anything that we haven’t sold in
the last year is slow-moving.”
But if you’re a coffee shop or something or a coffee shop supplier, something you haven’t
moved in a year is just ridiculous. That is clearly obsolete. So you got to work out the
rules that work for you. But let’s say that you’ve got an item that your rules are you’ve
decided an obsolete item means it hasn’t been ordered for three months. Great. Then
you’ve got to flag it as obsolete, only available by a special order and obviously
there’s a considerably higher price for a special order.
And then it has to be approved by someone in the senior management in the organization.
Then if you’ve got a dead stock type item, then you have to work out what is slow-moving.
I think one third of that time period is what defines a slow-moving item. So if your obsolete
stock is three months, then your slow-moving is one month and a slow-moving stock has to
be handled in a different way.
The best way to do it is to isolate it and have all slow-moving stock carried by one
particular division. Whether it’s one person or a group of people, it’s really up to
you. But it has got to be handled by that very narrow group. Otherwise, it will get
caught up in general production and it’s extremely inefficient. So work out what is
your obsolete stock rule. Work out what is your slow-moving stock rule and that’s how
you manage stock as a wholesaler. Have a great day.