In this article, we explore what Slow-Moving and Obsolete (SLOB) inventory is and its components. We will also share our 10 step process to optimize your SLOB inventory. Read on to learn more.
SLOB inventory means Slow-Moving and Obsolete inventory. This term refers to items in a warehouse or stock that are not selling quickly or have become outdated or irrelevant and are no longer in demand.
Example: For example, a retailer's warehouse with 100 units of discontinued smartphones and 50 outdated accessories represents SLOB inventory as these items are no longer in demand and are hard to sell.
Let’s explore the components of Slow-Moving and Obsolete Inventory (SLOB) below:
Items that are still relevant but sell infrequently. This leads to increased holding costs and tied-up capital. For instance, a bookstore has an excess of a particular novel that isn't selling quickly.
Goods that have become outdated, irrelevant, or are no longer in demand due to technological advancements or changes in consumer preferences. For example, an electronics store has a stock of a smartphone model that’s been superseded by a newer, more advanced model. This led to a decline in customer interest for the outdated version.
Use our 10 step SLOB Inventory Management process to maintain optimal inventory levels. Simply follow the steps below:
Identify potential SLOB inventory by regularly reviewing and analyzing sales and inventory data. Pinpoint items with slow turnover rates or those that are becoming outdated.
Example: A review of ABC Electronics’ inventory data reveals that they have 200 units of XYZ smartphone models unsold for over six months and 300 units of outdated laptops.
Separate slow-moving and obsolete items to better understand their status and decide on the appropriate action. This aids in targeted strategy implementation.
Example: XYZ Fashion Store categorizes 150 units of unsold summer dresses from the previous year as slow-moving and 200 units of discontinued jewelry designs as obsolete.
Evaluate the financial impact of the SLOB inventory, including the holding cost, potential markdowns, and the cost of disposal or return.
Example: Gadget World calculates that holding 50 units of older TV models costs $1,000 monthly, while marking them down by 50% would lead to a one-time loss of $10,000.
Decide on the most appropriate strategy to deal with each category of SLOB inventory. Consider markdowns, donations, recycling, or disposal.
Example: AutoParts Store chooses to offer a 70% discount on 100 units of slow-moving brake pads and recycle 500 units of obsolete oil filters.
Implement the chosen strategy efficiently to minimize the financial impact and free up storage space.
Example: Home Decor Inc. hosts a flash sale offering a 60% discount on 75 units of slow-moving wall paintings and donates 30 units of outdated vases to a local art school.
Track the effectiveness of the implemented strategies and analyze the speed at which SLOB inventory is reduced and the financial implications.
Example: Tech Haven monitors that after offering a bundle deal, 80 out of 100 units of slow-selling smartwatches were sold within a month which freed up storage and capital.
Analyze the outcomes and learn from the successes and failures to refine future inventory purchases and SLOB management strategies.
Example: After noticing that 200 units of a particular shoe style remained unsold, Footwear Galaxy decides to reduce orders for similar styles in the next purchasing cycle.
Optimize inventory management processes and systems to better predict and manage the accumulation of SLOB inventory in the future.
Example: Toy Kingdom integrates an AI-based predictive analytics system after noticing 500 units of a certain toy remained unsold last season to better forecast demand.
Review and update inventory procurement and management policies to reduce the accumulation of slow-moving and obsolete items.
Example: KitchenWare Outlet revises its procurement policy to order smaller batches after being left with 300 units of outdated blender models last year.
Incorporate a culture of continuous improvement and regularly review and refine strategies to manage SLOB inventory efficiently.
Example: Beauty Bliss, after incurring a loss from 250 units of unsold lipsticks, adopts a dynamic inventory management approach and adjusts orders based on real-time sales data.
ElectroHub is a renowned consumer electronics retailer that wants to optimize its stock levels. Here’s how they implemented our simple 10 step process:
ElectroHub’s team reviews their inventory and identifies 300 units of Galaxy S21 smartphones that haven’t been sold in the last four months. This regular analysis is crucial to spotting items that are not moving as expected to allow for timely interventions.
At ElectroHub, the 300 unsold Galaxy S21 smartphones are categorized as slow-moving. This classification is made simpler by having identified the items early to ensure that the team knows exactly what they’re dealing with and can tailor their strategies accordingly.
With a holding cost of $2,000 monthly, ElectroHub considers a 40% markdown on the Galaxy S21 smartphones to clear the stock which amounts to a $24,000 loss. This evaluation is essential in weighing the cost implications and deciding the most viable course of action to mitigate losses.
Deciding to offer the Galaxy S21 at a reduced price of $600 from the original $1,000, ElectroHub implements a strategy that aims for a balance between minimizing loss and maximizing the speed at which the stock is cleared.
A marketing campaign was launched, and ElectroHub successfully sold 250 Galaxy S21 units in two weeks. The swift execution demonstrates the efficiency of their strategy and emphasizes the importance of acting decisively to manage SLOB inventory.
Two weeks in, ElectroHub adjusted its marketing focus to emphasize the limited-time offer. This enhances the clearance of the remaining Galaxy S21 stock and ensures that the strategy remains effective and that the SLOB inventory is cleared as quickly and profitably as possible.
ElectroHub’s realization that a better understanding of smartphone trends and consumer preferences is crucial informs their decision to lower initial stock orders in the future. These insights are invaluable in refining their procurement and inventory management strategies.
The integration of predictive analytics helps ElectroHub reduce its slow-moving inventory by 40% in the next fiscal quarter. This optimization step is instrumental in enhancing the efficiency of inventory management to ensure that resources are not tied up in slow-moving or obsolete stock.
Orders for upcoming smartphone models are adjusted to be 30% lower initially. This is thanks to a policy revision informed by the insights gained. This dynamic and responsive approach to procurement ensures a reduced accumulation of SLOB inventory.
With the new inventory management system’s success, ElectroHub initiates a company-wide efficiency enhancement that aims to reduce SLOB inventory-related losses by 60% in the next year.
We hope that you now have a better understanding of what Slow-Moving and Obsolete (SLOB) inventory is and how to implement our process to optimize your SLOB inventory.
If you enjoyed this article, you might also like our article on inventory decoupling or inventory logistics.
