KPIOperations & Supply Chain

Excess & Obsolete Inventory as % of Total Inventory

Value of slow-moving or obsolete stock as a proportion of total inventory

What is Excess & Obsolete Inventory as % of Total Inventory?

Excess and obsolete inventory as a percentage of total inventory is the share of stock value that is more than needed or no longer sellable. It shows how much money is tied up in stock that may never earn a return.

Excess and obsolete stock often ends up written off or sold at a loss, so keeping it low protects profit and cash.

How this KPI is measured

Function
Operations & Supply Chain
Sub-function
Inventory Management
Industry
All Industries
Type
Lagging
Impact
Financial control
Unit
%
Measurement frequency
Monthly / Quarterly
Formula
(Value of excess & obsolete stock / Total inventory value) × 100

How to calculate it

Divide the value of excess and obsolete stock by total inventory value, and multiply by 100.

For example, if 250,000 of a 5,000,000 inventory is excess or obsolete, the share is 5%.

Define excess, such as stock above a set number of months of demand, and obsolete, such as items with no demand, and apply the rules consistently.

Where it is used

  • Protecting cash

    Free money tied up in stock.

  • Improving buying

    Learn from over-ordering.

  • Managing write-offs

    Plan provisions.

How to improve it

Tips and common mistakes

  • Clear stock before it becomes obsolete.
  • Set definitions by product type.
  • Coordinate with sales on promotions.

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