Aging inventory report is one of the most important reports to keep track of when it comes to inventory management. The report lists your total stock on hand and segregates it by age into “age buckets“. These buckets can be every 30 days, but typically they are listed every 90 days and would look like this:
- 0-90 days (i.e below 3 months)
- 91-180 days (3-6 months)
- 181-270 days (6-9 months)
- 271-360 days (9 months to 1 year)
- 361-540 days (1 yr to 1.5 yr)
- >540 days (above 1.5 yrs)
The stock on hand is measured at cost value of the stocks. Then another field would reveal the percentage of each bucket to the total stock on hand.
What is Aging Inventory?
Aging inventory is the inventory that has been received and trading for a long period of time (typically 6 months & above for fashion). The reason age is tracked is because once the threshold of that period is reached (e.g 6 months) this merchandise needs to start being marked down at higher rates, in order to be able to clear it and bring fresh merchandise in place.
How To Read the Aging Inventory Report?
When you look at your inventory aging dashboard, you examine each age bucket (e.g 3-6 months) and how much it contributes to your total stock on hand.
Ideally you want to have most of your stock in the first 2 buckets, i.e below 6 months. This means you have more fresh stocks than aged stocks, and also means that most of your stock is selling at full price or higher margins.
It should also be noted that your stock keeps shifting into older buckets as time goes by. Therefore, having the visibility of how much stock you have under each bucket will also give you a heads up on how much inventory is about to get aged and enter the next bucket within 3 months.
You then start to look at the buckets at higher age and how much they are contributing to your stock mix and use this knowledge to manage your aging inventory.
How To Manage Aging Inventory?
Once you have identified the aged stock from the aging inventory report and the age buckets of this stock, you will start marking down your products based on the age bucket they belong to.