How to optimize inventory? Strategies for Identifying and Managing Slow-Moving and Obsolete Parts

According to my experience working with the variety of OEMs, Its very essential for every single OEM to target slow-moving and obsolete parts. Targeting slow-moving and obsolete parts in your inventory is essential to reduce carrying costs and improve overall inventory management. To identify and address these items, Below are typical steps followed:

Inventory Segmentation: Categorize your inventory into different segments based on criteria like demand rate, lead time, and profit margin. Slow-moving and obsolete items typically fall into the lowest-demand categories.

Usage History Analysis: Review historical usage data for each part to identify those with consistently low demand or declining usage trends. Focus on items with little or no recent sales.

Age and Shelf Life: Consider the age of inventory items. Parts that have been in stock for a long time are more likely to become obsolete. Also, evaluate the shelf life of items, as certain parts may expire over time.

Supplier Input: Communicate with your suppliers. They may have insights into which items are becoming obsolete or have been discontinued. They can also provide information about potential replacement parts or alternative solutions.

Demand Forecasting: Utilize demand forecasting models to predict future demand for your parts. Items with consistently low forecasts may be candidates for obsolescence.

Price and Margin Analysis: Evaluate the pricing and profit margins for each item. Items with low margins may not justify their carrying costs, especially if they are slow-moving.

Collaboration with Sales and Operations Teams: Collaborate with sales and operations teams to understand any upcoming changes in product lines, customer requirements, or market demand that might impact the relevance of certain parts

Obsolete Parts Review Board: Establish a cross-functional review board responsible for evaluating and making decisions about obsolete parts. Include members from inventory management, procurement, sales, and finance.

Liquidation or Disposal Strategy: Develop a strategy for disposing of or liquidating obsolete parts. This might involve selling them at a discount, returning them to suppliers (if possible), or recycling them.

Prevent Future Obsolescence: Implement better demand forecasting, monitor inventory levels regularly, and establish clear procedures for reviewing and managing slow-moving inventory to prevent future obsolescence.

Regular Reviews: Conduct periodic reviews of slow-moving and obsolete parts to adjust your strategies as needed.

By implementing these steps, you can effectively identify slow-moving and obsolete parts, reduce carrying costs, and improve the overall efficiency of your inventory management process. But, can you streamline this process using AI automation? The answer is yes. Our Installed Base Intelligence platform possesses the flexibility to be configured according to your needs. It not only provides recommendations for identifying slow-moving and obsolete parts but also seamlessly integrates with your CRM and other systems to generate leads automatically.