Whether due to spoilage, shifting marketplace trends, or advancements in technology, there comes a time in every product’s life when it hits the decline stage. In a product’s life cycle, the decline stage is defined as the period when sales or demand starts to level off or decrease. When a product has reached its shelf-life, it is either because it ceases to stack up to the newer products on the market, or because of reduced demand for the product overall. Of course, another way products decline is if they are perishable. These products reach their decline stage faster than non-perishable and/or more durable products.
No matter what the reason is for the decline, as the product loses value it gradually becomes a burden to the seller. Proper inventory management is required at all times, but it’s especially important for keeping track of inventory approaching, or already hitting, the decline stage.
Here are three strategies companies may incorporate once they become aware of products reaching their decline stage:
- Maintain the product (in the case of non-perishable items) hoping that competitors still exist. Companies will also often reduce the cost of products in their decline stage or try to find new uses for them.
- Harvest the item and gradually reduce marketing supports until they are no longer profitable.
- Discontinue the item when there is a successor.
Ways to Handle Inventory in the Decline Stage
It is important to have a strategy in place to handle your inventory when it is in the decline stage. The four practices listed below will help you build a system manage the flow of these declining products.
Maintain a record. It is crucial you maintain your inventory record in a software program and update it on a regular basis. A qr coding system is a great option, especially for larger organizations, to help determine which items are reaching or are already at their decline stage. Depending on the frequency of your estimated inventory changes, you will need to do cycle counting reports either daily, weekly, quarterly or yearly.
List items at their decline stage. Update a list of products that are already in their decline stage on a regular basis. See if other departments in your company need or can use them and make them available accordingly. Transferring stock for internal use is one of the best ways to handle inventory in the decline stage.
Set a deadline to turnover inventory. This is especially applicable for perishable items. For example, you can set a deadline of 30 days to turnover items that decline in quality as they age. Information about the movement of inventory can help you set the timeline. To save yourself from turning over the products, you can try to unload the aged inventory by putting it on clearance or selling it off to discount stores before it reaches its expiration.
Organize an immediate push. Your marketing department can help you organize an immediate push of products reaching decline or maturity stage. Some of the ways to do this include sales promotions like buy-one-get-one-free, deep discounts, and clearance sales. The goal is to unload the inventory as soon as possible. You can even offer special incentives to your sales people to push those items off-the-rack.
No matter how hard you try to manage the inventory at decline stage sometimes it can be too late. This is especially true for perishable items. If you find yourself in this predicament, it is always recommended you choose to maintain your brand’s reputation over attempting to salvage some sort of profit. Contact your supplier and stop order of any product as soon as you are aware it has reached its decline stage.
Examining the order and sales levels of previous months can be a great resource when trying to gauge whether a product is declining in demand. If you still want to continue ordering the item, remember to tweak your orders and balance your sales demand with proper inventory management.
Do you have any creative ideas for how to push items off the floor that are in their decline stage? Have you had success managing inventory in the decline stage? We would love to hear from you.