How to use the dead stock ratio calculator
List what is sitting in the warehouse with its inventory value and the number of months since it last sold, and the calculator works out what share of your inventory has stopped moving. How many months should count as dead varies by industry, so the cutoff is an input you set yourself: a month or two for fresh goods, one season for apparel, a year for spare parts.
The dead stock ratio is the inventory value of items idle for at least the cutoff, divided by total inventory value. Multiplying that by your annual holding cost rate shows what another year of carrying it costs. The holding rate should cover warehouse rent and insurance, the cost of capital tied up in the goods, and the value lost to obsolescence, so enter a figure you have checked for your own operation rather than a generic one.
The table sorts items by how long they have been idle, longest first. Items at the top are the ones to review for markdowns, supplier returns or write-offs. Writing inventory down feels expensive, which is why the decision gets postponed, but seeing the annual holding cost next to it makes the trade-off concrete.
Frequently asked questions
There is no standard figure; match it to your turnover cycle. If a typical item normally clears in two months, a cutoff of six to eight months, roughly three or four turns, is a reasonable starting point. Work backwards from your own turnover rather than copying a number.
Warehouse rent and staffing, insurance, the interest or opportunity cost of the cash tied up in stock, and the value lost as goods age, all expressed as a percentage of inventory value. It varies widely between businesses, so a figure you have added up yourself will be far more accurate than a rule of thumb.