Consumer belt tightening has been a reality for some time now. One of the consequences is that many once popular items are now collecting dust in DCs across the supply chain spectrum. Before you know it slow moving SKUs begin to accumulate in active inventory positions reducing picking productivity as well as slotting capacity for new items. It’s not uncommon for some of these SKUs to have zero sales for a prolong period of time.

While there are many reasons (excuses) for the accumulation of products in the DC that have lost their luster, there are few strategies for mitigating their negative effect on inventory turns and productivity.

Buyers, marketing, and finance personnel are often not aware, or simply do not pay attention, to the increasing level of SKU inactivity. On the other hand, logistics managers could do a better job of communicating profiling and velocity data on a regular basis, which could serve as a catalyst for these other functions to look at the problem more closely and maybe eliminate some obviously dead SKUs altogether. Unfortunately, even if they take some action it won’t eliminate all of the problems with slow movers, but it may result in the DC getting some relief over time.

Rethink Slotting

One obvious use of the profiling data is to rethink your current slotting decisions. Many companies maintain a fixed picking position even for slow movers, taking up valuable space that is poorly utilized.

Companies that do not have an automated slotting optimization program find that they often have some slow movers slotted in premium pick areas. Seasonality can play a big role here. A seasonal SKU can see lots of volume for awhile, but then dramatically drop off out of season – yet, it remains in a high moving storage and/or picking zone.

While sophisticated slotting software is helpful in automating this analysis and making recommend changes as to where slow movers should be stored, using basic excel spreadsheet and access data base software type analysis (as an inexpensive alternative) can often lead to better slotting decisions that can improve DC flow and productivity.

Consider Dynamic Slotting

Your WMS may support dynamic slotting, or if not your IT resource may be able to develop this capability. When an order is released that includes a slow moving SKU without a dedicated pick face, a temporary pick slot is created by the WMS, and that slot filled with product from reserve storage to meet that need (alternatively, some companies may even pick slow movers direct from reserve).

Some companies find that automating slow moving SKU slotting management can pay off.

For example, slow moving inventory is placed into an automated storage system that creates high density/efficient product storage without a dedicated pick face for each slow moving SKU. When a pick of one of those SKUs is required, the storage system “serves up” the SKU to a pick face. When order fulfillment is complete the automated storage system places that SKU back into high density storage.

This is simply an automated form of the dynamic slotting approach mentioned above.

Some companies may also choose to use carousels to handle slow movers. It is noteworthy that carousels are used extensively in service parts distribution – an environment often characterized by huge numbers of mostly slow moving SKUs.

Coty Inc., the world’s largest fragrance company, found that while its 900 slowest moving SKUs amounted to only about 2 percent of total volume, they led to substantial bottlenecks in order processing.

Coty deployed two 65 foot long, five-shelf, light-directed horizontal carousels, which led to much more effective picking operations and storage density for those slow movers.

Getting Rid Of the Product Morgue

Slow moving merchandise ends up costing more and more each day it remains in your DC. Someone needs to be assigned to attack the problem. Here are a few ideas that can help you move "stagnant" inventory out of your operation?

EBay – There are thousands of auctions found every day with the keyword "Wholesale". Sign up to become a seller and list your wholesale inventory on eBay. While your excess inventory might not be selling well to your customers, eBay attracts millions of potential wholesale buyers who are searching daily for just about anything in bulk quantities.

Liquidation.com - Here is an auction specifically designed to help retailers, wholesalers, liquidators, manufacturers and others move bulk items. The website boasts several categories of merchandise and just might be the solution you are looking for.

Surplus.net - Offers a way for you to send out what is known as a "Blast" email to all liquidation members explaining the merchandise you have for sale in quantity. Fill out the form describing your inventory and you could have several liquidators’ contact you with cash offers to purchase!

Aside from the three links above, many closeout companies will buy excess merchandise in quantity. When you visit wholesale and closeout websites make sure you look for a link offering to buy inventory.

Or, you can just donate it - By donating overstock and/or slow moving merchandise, your business can qualify for a federal income tax deduction, under 170(e)(3) of the U.S. Internal Revenue Code. Although this deduction has been available for +30 years, there are few corporations taking advantage of it. C corporations may deduct the cost of the inventory donated, plus half the difference between cost and fair-market value. Deductions may be up to twice cost – not a bad deal.

Final Thoughts

Regardless of how you do it, actively managing slow movers and freeing up needed warehouse space is definitely beneficial. Whether you own your warehouse or are renting space, storing product can be expensive. Insurance, utilities, labor and shrinkage all factor in. In the final analysis, it just doesn’t pay to hold stagnant inventory that isn’t earning its keep.

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