A successful online store runs effectively when the stock that comes in goes out just as fast. And for that, understanding and minimizing inventory aging is essential.

But how do you achieve this? You need robust inventory management strategies and a better understanding of inventory aging. That’s why in this blog, we’ll discuss what inventory aging is, how to calculate it, and the best practices for managing it effectively. Let’s start!

What Is Inventory Aging and Inventory Aging Report? 🤔

Inventory aging is tracking how long your products have been sitting in storage. The longer the products stay, the more space they occupy, the more you have to pay for them. As an eCommerce seller, knowing your inventory’s age helps you spot items that need attention before they become costly shelf-warmers.  You also use an inventory aging report to narrow it down.

An inventory aging report is a document that tracks how long products have been sitting in storage, breaking them down by age categories (e.g., 0-30 days, 31-60 days, etc.). This report helps eCommerce sellers identify which items are moving quickly and which are sitting idle, allowing you to take action on older stock before it ties up cash or takes up valuable space.

An inventory aging report usually includes details such as each SKU or product type (for example, a specific style, size, and color in apparel), the quantity available per SKU, and the average age of those units.

Well, but why exactly you need to know aging inventory or use aging inventory report? This brings us to the importance of assessing aging inventory more closely.

Aging Inventory: Identifying Opportunities and Risks 📊

When it comes to aging inventory, every day counts. Like fresh produce in your fridge, products can lose value over time. However, aging stock isn’t always bad news—it can present opportunities for creative marketing campaigns or bundle deals that increases AOV. Perhaps a discounted sale, a buy one get one free campaign, etc.

On the other hand, just as your bank statement reveals your financial health, an inventory aging report highlights the vitality of your stock. This report breaks down your inventory by age categories. It helps you identify which products are moving quickly and which are gathering dust.

In short, understanding and using the aging inventory metric and aging inventory report helps you monitor the current status of your eCommerce inventory and take timely actions. This could mean applying discounts to specific products or making adjustments to move stock more efficiently.

Here is an inventory aging report example!

Let’s walk through an example of a practical inventory aging report. Imagine you run an accessories store:

🔹 0-30 days: New arrivals, accounting for 40% of your inventory. These are typically well-stocked and ready to meet current demand.

🔹 31-60 days: Regular stock, comprising 30% of inventory. Monitor these items closely to ensure they continue moving at a healthy pace.

🔹 61-90 days: Aging items, making up 20% of inventory. Consider running a promotion or discount to encourage sales.

🔹 90+ days: Items requiring immediate attention, at 10% of inventory. It may be time for markdowns or a clearance sale to free up space.

This breakdown helps you quickly assess where action is needed, enabling you to prioritize items for restocking, markdowns, or promotions. But first you should make the calculation correctly! Let’s explore the inventory aging formula.

How to Use Inventory Aging Formula?

All business calculations have formulas to make it easier. And so here we have the inventory aging formula. Here’s how to calculate it:

For example, if your average inventory is $50,000, and your quarterly cost of goods sold is $100,000:

(50,000 / 100,000) × 90 days = 45 days average inventory age

Perks of Monitoring Inventory Aging

Here are the benefits of monitoring inventory aging, presented in a clear and straightforward manner:

💸 Free Up Cash: By spotting and removing slow-moving items, you can release cash that’s tied up excess stock. This allows you to reinvest in more profitable areas of your business.

📉 Reduce Storage Costs: Keeping fewer slow-moving items helps you avoid unnecessary storage expenses. Products that linger too long not only take up space but also incur additional costs.

📦 Smarter Purchasing Decisions: Knowing which items sell well and which don’t helps you understand customer demand better. You can avoid overstock and make more realistic inventory plans for your eCommerce store.

📊 Maintain Optimal Stock Levels: Controlling aging inventory increase the inventory visibility and you can better manage stock levels. This balance allows your business to meet customer demands efficiently while maximizing profits.

Even though using inventory aging is beneficial, it also brings several challenges.

Challenges of Using Inventory Aging and Other Important Metrics for eCommerce 🤔

It’s not enough to just rely on aging inventory for optimized inventory operations. If you have a growing eCommerce store, you’ll need to consider many other metrics and features alongside inventory aging.

First, it’s important to accurately calculate parameters like inventory accuracy, economic order quantity, and maximum and minimum inventory levels and more. Relying on manual solutions like Excel can hurt your efficiency. Why? Because it takes a lot of time to use such formulas and is prone to human errors in data entry. As a result, the metrics you gather might not reflect the reality at the end of the day.

Another aspect to consider is that peak demand periods, like Black Friday and Cyber Monday (BFCM), require a different approach. Using demand forecasting to create long-term plans for peak seasons is much more effective than focusing on just one metric.

Plus, you can use solutions that automatically and in real time calculate all these metrics, allowing you to manage your eCommerce store more efficiently. If you haven’t found the right application yet, you can achieve all with Fabrikatör!

Why Choose Fabrikatör for Managing Inventory Aging?

Fabrikatör is an inventory management solution designed for growing eCommerce stores. You can use Fabrikatör to identify many significant metrics like inventory aging accurately and quickly.  With its real-time inventory management, Fabrikatör ensures that your inventory aging data is always up-to-date, allowing you to focus on growing your business instead of dealing with manual inventory concerns.

Fabrikatör can help you 📊 gain insights into which products are aging and need attention, enabling you to make smarter decisions to optimize your stock. Besides, by forecasting demand based on historical trends, you can align your inventory levels with consumer needs more effectively.

Do you have questions on your mind? You can discover how Fabrikatör supports eCommerce stores in managing aging inventory and more in only 30 minutes. See it in action right away!

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