Inventory obsolescence occurs when products or materials lose their usability or market demand, making them unsellable or unfit for use. This typically results from changes in technology, customer preferences, regulatory updates, or product lifecycle transitions. Obsolete inventory ties up working capital and incurs storage and disposal costs, negatively impacting financial performance. Proactive inventory management practices aim to minimize obsolescence by implementing accurate demand forecasting, just-in-time inventory strategies, and regular SKU rationalization. High obsolescence risk items may be flagged based on shelf life, usage patterns, or historical demand decay, allowing businesses to reduce procurement or promote clearance in advance. Inventory optimization tools use predictive analytics to assess obsolescence risk and suggest targeted actions such as markdowns, redistribution, or discontinuation. By managing obsolescence effectively, organizations can reduce write-offs, improve cash flow, and align inventory with market demand more closely. This is particularly critical in industries like electronics, fashion, and pharmaceuticals, where product cycles are fast and inventory agility is vital.
