What is overstock?

Divide what you hold by how fast it sells. A shop buys 10 cartons of canned sardines, 24 tins each, to get a supplier discount. That is 240 tins. The shop sells about 20 tins a week, so 240 / 20 = 12 weeks of stock. If the supplier delivers in one week, 12 weeks is far more than needed. The same arithmetic is called days on hand when done per day.

At a cost of $1.20 a tin, the shop has 240 x $1.20 = $288 sitting on a shelf. If rent, electricity and other bills are due this month, that cash is not helping.

• Chasing a bulk discount. A 10% saving is no bargain if half the order is still on the shelf in three months.
• Guessing demand. A good holiday week is mistaken for the normal rate.
• Ordering without checking. The shelf looked empty, but there were two cartons in the back room.
• Fear of a [stock-out](/glossary/stock-out). Over-correcting after a gap leaves you with too much.

1. Stop reordering that product until stock falls to its reorder point.
2. Move it to a better spot, such as at eye level or by the till.
3. Run a small promotion or bundle it with a fast seller.
4. Ask the supplier whether unopened stock can be returned.

Overstock that sits for months becomes dead stock, so act early while the product still sells at full price.

The slow movers report shows which products sell the least, and the inventory value report shows how much money your stock represents. Together they point to where cash is stuck.