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Particularly in these days of elaborate e-commerce and multi-faceted retail industries, there’s a lot more nuance to inventory management than ever before. Businesses can face a wide number of inventory issues and management needs, and new strategies and solutions seemingly arise every day to meet these needs.


Whatever step along the distribution cycle you work in, whether you’re a direct retailer, a distribution center, or simply a supply chain middle man for a larger storefront, you’re going to need to keep up with the ever-changing world of distribution. To get started, here’s a few common inventory terms we think you’ll need to know, and how they can impact your business:


Stock On Hand: “Stock on hand” is probably the most common (and least-surprising) term you’ll encounter here, and likely one you’ve already worked with. But even with a term as common as this, it’s still important to know exactly what it is and how to work with it.


In order to manage inventory as effectively as possible, you first need to understand what you have on hand. And when you need to measure your stock, you need to count everything: finished products, materials, new stock, old stock, everything. It’s the best way to start with any sort of inventory count or cycling, and any other inventory management terms you encounter on here will largely depend on a correct counting of your stock on hand.


Overstock: Made famous by a number of large e-commerce retailers, ‘overstock’ refers to when a product is kept in storage in quantities much larger than what is needed. The easiest and most common way to count overstock is to look at historical sales trends and compare these to current stock on hand – if you find yourself with a lot more of a particular item than you’ve traditionally been able to sell, this might be considered overstock. You can use this information to make sure you don’t order more of a product than is needed or to come up with ideas for sales or marketing campaigns to move these products faster.


Understock: On the flip side, it’s just as crucial to make sure you know when you have too little of a given product. If a product has a very long lead time from the supplier, or if something is selling fast and you’re generally left low on stock, you might want to start ordering more frequently (or at least more ahead-of-time to keep up with demand) to maintain proper levels to meet demand.


Deadstock: As the ominous name indicates, deadstock is the one most retailers really work to avoid. “Deadstock” is any stock that is no longer being sold and presents a loss to your business. Did you have overstock on a product that is no longer being sold? At this point in the product’s life cycle it’s just sitting there, taking up valuable warehouse storage space that can be better used by more in-demand products. If something has become deadstock, it isn’t a total loss – but you’re going to have to really work to sell it at a steep discount or find a market for it, whether it’s another one of your retail branches, a wholesale retailer that specifically purchases deadstock, or anywhere better than just collecting dust on the shelf.

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