Dead Stock in Factories: How to Identify and Liquidate It

Every factory has dead stock. The question isn't whether — it's whether you know how much. In most SME operations, between 8% and 15% of inventory value is functionally dead: materials or finished goods that haven't moved in six months and almost certainly won't. That capital is parked, depreciating, occupying space that working stock needs.

The painful part isn't the existence of dead stock. It's that most owners discover it during a stocktake, write it off in one painful entry, and then watch the same problem rebuild over the next eighteen months.

Define Dead Stock Before You Hunt It

Pick a threshold and stick to it. A common working definition: any SKU with zero movement in the last 180 days, or movement under 10% of its average historical turnover. Use the threshold consistently — moving the goalposts to make your numbers look better is how dead stock survives audits.

Surface It With a Single Report

Rank every SKU by days-since-last-movement, descending. The top of that list is your dead stock. The middle is your slow-moving stock — the early warning signal. A two-minute weekly look at this report does more for working capital than any five-day planning workshop.

The Four Liquidation Paths

First: reuse internally. Can the material substitute for a higher-demand SKU with minor processing? Second: return to supplier. If the relationship is strong, suppliers will often take material back at 60–80% of original cost rather than lose you as a customer. Third: sell to a secondary market. Industry-specific brokers exist for almost every category — they pay 20–40 cents on the dollar, but it's recovered cash. Fourth: scrap or write off. Painful, but better than warehousing it for another year.

Stop the Rebuild

Dead stock is almost never a one-time event — it's the residue of a process problem. The usual culprits: over-ordering driven by quantity discounts, BOM changes that orphaned components, customer specs that changed without inventory follow-through, sales forecasts that nobody re-validated. Pick the top three causes from your last liquidation and fix the upstream process, or the next stocktake will surface the same problem with new SKUs.

Make It a Quarterly Discipline

A 60-minute dead stock review every quarter — surface, decide, act — keeps the problem in the single digits. Skipped reviews compound. The factories that run this discipline tightly maintain dead stock below 3% of inventory value. The ones that don't oscillate between 12% and 18%, write off catastrophically once a year, and treat it as unavoidable. It isn't.