It is essentially a report, otherwise known as a Stock Aging report which provides key metrics on how quickly an inventory moves. A list of items on hand grouped by a number of different stock days segments, since the day those items have been purchased.
In the case of Appliance Products, it is a common practice to anticipate a Depreciation Process by Product Type based on the Stock Aging.
🧪 Example of Stock Aging
For instance, a specific TV Model has been purchased on 05th January and 20 pieces have been received for a value of 100,000, on 05th April only 5 pieces have been sold and 15 pieces remained in Stock, there are 15 pieces which are having a Stock Aging of 90 Days.
Retailer would have allocated a monthly Depreciation % for this TV to anticipate the loss of value of this TV as the Selling Price will need to be reduced and will be sold at a Discounted Selling Price.
To avoid a high impact on margin when the TV will be sold, Finance Team will apply every month a stock value depreciation percentage which will increase over time until the stock is sold.
If the stock is sold with a higher value than the depreciation value then the differential will have a positive impact on margin.
❓What is used for
Staying on top of the age of products sitting in stock is important. Therefore, it’s important to keep tabs on how much stock is sitting on the shelf or in Storage and for how long. This will give insight into which products customers are buying and not invest in products that will be sold slowly or will never sell.
The Stock Aging report provides businesses with insights, such as:
- Highlighting Slow-moving items
- Identifying Non-moving items
- Understanding the length of time products sit in stock
- Quantifying and anticipating stock depreciations for specific categories such as Appliances or Textile.