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Aging Inventory

Aging inventory measures the length of time items remain unsold to reveal risk of markdowns, write offs, and cashflow pressure

Aging Inventory
Photo by Jean-Luc Duchêne / Unsplash

Cheat Sheet

Item Detail
Purpose Detect stock that moves slower than expected and quantify risk.
Category Inventory performance.
Used by COOs, CFOs, planners, demand teams, merchandisers.
Data needed On hand quantity, receipt date, sales velocity, aging buckets, cost value.
Related terms Dead stock, slow movers, obsolescence risk, DIO.

Definition

Aging inventory tracks how long each SKU has remained in stock by grouping on hand units into time buckets such as

  • 0 to 30 days
  • 31 to 60 days
  • 61 to 90 days
  • More than 90 days.
Inventory aging histogram Histogram showing inventory divided into four aging buckets by percentage of stock. Inventory aging buckets Distribution of on hand stock by days since receipt 0% 10% 20% 30% 40% 40% 30% 18% 12% 0–30 days 31–60 days 61–90 days > 90 days Share of on hand stock Oldest bucket, higher markdown

The distribution shows how quickly inventory converts into sales.

Why it Matters

It reveals where cash is stuck. It helps quantify future markdown exposure. It drives decisions on replenishment, clearance, and assortment focus. It supports financial planning by flagging stock that may require write downs.

How to Measure

  1. Capture on hand units and when it was received
  2. Assign each unit to an aging bucket based on days since receipt.
  3. Calculate cost value within each bucket.
  4. Track percent of total inventory in each bucket.
  5. Compare movement across weeks to identify improving or worsening trends.

Red Flags

• More than 20 - 30 % of stock are older than 90 days.
• Buckets shifting upward week over week.
• High aging concentration in long tail SKUs.
• Aging patterns that exceed product lifecycle norms

Common Mistakes

• Ignoring receipt date accuracy.
• Using broad buckets that hide risk.
• Failing to link aging to sales velocity.
• Treating all categories the same despite different lifecycle lengths.
• Reviewing aging only at SKU level instead of style, category, or supplier.

What to do if the metric looks bad

• Freeze replenishment for affected SKUs.
• Run targeted clearance actions for the oldest buckets.
• Review demand assumptions and adjust forecasts.
• Reduce assortment depth where aging is systematic.
• Work with suppliers to shorten lead times or adjust pack sizes.
• Reallocate inventory across channels or stores to improve sell through.


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