Obsolete Inventory

Obsolete Inventory

Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down and can cause large losses for a company.

Also referred to as "dead inventory" or "excess inventory".

Notes:

Large amounts of obsolete inventory are a warning sign for investors: they can be symptomatic of poor products, poor management forecasts of demand, and poor inventory management. Looking at the amount of obsolete inventory a company creates will give investors an idea of how well the product is selling and of how effective the company's inventory process is.

See also: Carrying Cost Of Inventory, First In, First Out - FIFO, Industry, Inventory, Last In, First Out - LIFO, LIFO Liquidation, Write-Down