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.
More Operations & Supply Chain kpi library
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