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How do you manage inventory for products with high obsolescence risk?

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Inventory management is a crucial aspect of warehouse operations, especially for products that have a high risk of becoming obsolete, outdated, or unsellable. Obsolescence can occur due to changing customer preferences, technological advancements, legal regulations, or environmental factors. If you don't manage your inventory effectively, you can end up with excess stock, wasted space, and reduced profits. In this article, you will learn some strategies to manage inventory for products with high obsolescence risk.

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Shaik Amir

Healthcare Professional
Andrew Kennedy

Logistics Manager at Kitagawa Europe Ltd.
Ayandare Ayanleke

Experienced Product, Project, and Operations Lead | Proven track record in driving successful projects, optimizing…

1 Identify and classify your products

The first step to manage inventory for products with high obsolescence risk is to identify and classify them according to their demand patterns, life cycles, and profitability. You can use various methods, such as ABC analysis, product segmentation, or product life cycle analysis, to categorize your products into different groups based on their importance, sales volume, or stage of maturity. This will help you prioritize your inventory decisions, allocate your resources, and optimize your ordering and replenishment policies.

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Andrew Kennedy

Logistics Manager at Kitagawa Europe Ltd.
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Risk management needs data - if you are working with a 'hot' product it will have an intense but short life span. Hot products are trends or seasonal and can quickly become obsolete. When this happens you do not want a warehouse full of stock you can't move! Market research and demand planning will help. You will need to try and match the predicted demand curve to your stock and lead time. Ensure you have a small safety or 'buffer' stock to cover any delays or fluctuations in supply and demand. As the demand starts to fall reduce the stock levels and stock purchasing numbers accordingly. It can be like spinning plates - you will need to closely monitor all data to avoid being caught out!

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2 Implement a lean inventory system

A lean inventory system is one that aims to minimize waste, reduce costs, and improve efficiency by eliminating unnecessary or excess inventory. By implementing a lean inventory system, you can manage inventory for products with high obsolescence risk by keeping only the amount of stock that you need to meet your customer demand, avoiding overstocking or understocking, and reducing the risk of spoilage, damage, or obsolescence. You can use various tools, such as just-in-time (JIT), kanban, or vendor-managed inventory (VMI), to implement a lean inventory system.

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3 Use dynamic pricing and promotion strategies

Another way to manage inventory for products with high obsolescence risk is to use dynamic pricing and promotion strategies to stimulate sales and clear out old or slow-moving stock. Dynamic pricing is a technique that involves adjusting the prices of your products according to the market conditions, customer behavior, or product life cycle. Promotion strategies are actions that you take to increase the visibility, attractiveness, or urgency of your products, such as discounts, coupons, bundling, or cross-selling. By using dynamic pricing and promotion strategies, you can increase your revenue, reduce your inventory holding costs, and prevent obsolescence.

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4 Monitor and forecast your inventory levels

To manage inventory for products with high obsolescence risk, you also need to monitor and forecast your inventory levels regularly and accurately. Monitoring your inventory levels will help you track the performance, movement, and availability of your products, identify any issues or discrepancies, and take corrective actions. Forecasting your inventory levels will help you anticipate the future demand, supply, and obsolescence of your products, plan your inventory purchases and deliveries, and adjust your inventory policies. You can use various methods, such as historical data, trend analysis, or statistical models, to monitor and forecast your inventory levels.

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Ayandare Ayanleke

Experienced Product, Project, and Operations Lead | Proven track record in driving successful projects, optimizing operations, and leading cross-functional teams.
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Managing inventory for products with a high risk of obsolescence requires vigilant monitoring and accurate forecasting. Regularly assess product demand and market trends to adjust inventory levels accordingly. Employ inventory management tools and technology to track stock in real-time. Prioritize timely sales and promotions to reduce aging inventory, and establish clear disposal protocols for obsolete items. Maintaining flexibility and adaptability in your inventory strategy is essential to minimize losses from obsolescence risk.

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5 Dispose of obsolete inventory responsibly

Finally, when you have inventory that is obsolete, expired, or unsalable, you need to dispose of it responsibly and cost-effectively. Disposing of obsolete inventory will help you free up space, reduce inventory carrying costs, and avoid legal or environmental risks. You can use various methods, such as recycling, donating, selling, or destroying, to dispose of obsolete inventory, depending on the type, condition, and value of your products. You should also document and report your inventory disposal activities, and analyze the causes and effects of obsolescence.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Shaik Amir

Healthcare Professional
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From Diagnostics Laboratory perspective. Maintaining of reagents with high obsolescence risk in Laboratory can be challenging. One approach is to closely monitor expiration dates and prioritize the use of older reagents first. Additionally, consider implementing a first-in, first-out (FIFO) system to ensure proper rotation of inventory. Regularly reviewing and adjusting monthly reorder quantities based on in-hand stock and projected requirements can also help minimize obsolescence.

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How do you manage inventory for products with high obsolescence risk?

1

2

3

4

5

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1 Identify and classify your products

2 Implement a lean inventory system

3 Use dynamic pricing and promotion strategies

4 Monitor and forecast your inventory levels

5 Dispose of obsolete inventory responsibly

6 Here’s what else to consider

Warehouse Operations

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How do you manage inventory for products with high obsolescence risk?

1

2

3

4

5

6

1 Identify and classify your products

2 Implement a lean inventory system

3 Use dynamic pricing and promotion strategies

4 Monitor and forecast your inventory levels

5 Dispose of obsolete inventory responsibly

6 Here’s what else to consider

Warehouse Operations

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