![]() Download my free Excel SLOB calculation spreadsheet.If you would like to reduce your slow-moving and obsolete inventory, make sure that you follow those steps : You can set a limit depending on your overall stock turn, average lead time, reorder point, and safety stock levels.įinally, you can set several limits for different families of products if they vary a lot in terms of stock turn. Of course, just adapt this number to your business. ![]() Then we can set the limit to 40 days, meaning that 5 of my products would now be considered slow-moving inventory. Let’s say in our example that we want to set the limit a little higher than the overall stock turn of our products, which is 35 days. You can also modify the limit you consider the stock turn to be in excess. Your slow movers are not necessarily obsolete: in this example, products 9 and 4 which are in excess, are ‘active’ products. When you have run the formula, and you can see your results, you must decide what product you should focus on as a priority. You must know what the inventory turnover is for every single product by dividing the value of the stock by the sales, multiplied by the period (indicated in a number of days in column H). To calculate the slow-moving inventory, we need to start by calculating the Inventory Turnover (or Stock Turn) in column H. Think about running promotions to see your SLOB level drop faster. You must track this particular KPI weekly to ensure it is reduced over time. In this example, the total cost of the obsolete stock is $4.450, which represents 10.7% of the total inventory. This calculation can be done manually by highlighting every obsolete inventory line and dividing it by the total inventory cost. Step 2: Calculate the value of your obsolete inventory.Ĭolumn F shows you the value of your inventory and can be used to calculate the value of your obsolete stock.Anything in date will be considered ‘New,’ and anything out of that will be flagged and highlighted as ‘obsolete.’ By setting up today’s date on the Excel spreadsheet and entering the start and end date of your products on each line to the table, you will automatically see if a product is active or obsolete thanks to the formula that I have set up. These dates will define whether your product becomes obsolete or not. However, it can be done automatically in Excel by setting up dates to save time.Īll goods are bound to specific dates, especially in the food or pharmaceutical industry. Step 1: Define which products are part of your active inventory and which goods are obsolete.Start by downloading my free Excel (if you haven’t done so already) to implement the SLOB KPI now : Download SLOB inventory in Excel Calculating obsolete inventory Implementing the SLOB Inventory KPI in your company Then To ensure that you are ordering the optimal stock, check my articles EOQ Formula with examples in Excel and Safety Stock Formula & Calculation: 6 best methods. The excess inventory is a problem and costs the business money.Ĭalculating your company’s inventory turnover ratio is essential if you wish to eliminate your slow-moving and obsolete stock. However, the current inventory is 24 quantities. In this example, the optimal stock would be 4 quantities to secure 98% of the service. Having excess inventory means that you might need to pay extra for product storage or that you will soon need to discount your excess inventory to switch to new collections. It refers to products that are needed (they are NOT old stock or previous collections) but are in excess. ![]() Slow-moving inventory can also be called Excess Inventory, Aged Inventory, or Leftover Inventory. Obsolete inventory significantly impacts a business’s finances, as it loses 100% of its value or more (costs of destroying goods also have to be taken into account). They can be products that need to be destroyed because they cannot be sold any longer, donated, or that will need to be heavily discounted. ![]() Obsolete inventory refers to products that are not needed anymore, are out of date, or are old collections. Let’s start with the beginning : what is the difference between slow-moving and obsolete inventory? Obsolete Inventory Slow-moving and obsolete inventory (SLOB): what is it? Today, however, we will focus specifically on the SLOB, the slow-moving and obsolete inventory. Before we start talking about inventory, make sure that you have checked my article Inventory Turnover ratio: Formulas & Calculation in Excel, which deals with inventory turnover ratio and how to manage and calculate this very important KPI. If you want to have a profitable supply chain and business, you must focus on these three pillars : Service, Costs and Inventory (cash).
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