Obsolete inventory and how to reduce it

Abstract

Obsolete inventory imposes a significant challenge for companies, resulting in increased storage costs, inefficiency and undermining a company’s profitability. The purpose of this study is to develop a framework for effectively managing obsolete inventory by identifying reactive and proactive strategies. The research is built on two central research questions: (i) Which reactive strategies can be implemented to manage obsolete inventory? And (ii) Which proactive strategies can be implemented to avoid the occurrence of obsolete inventory? The research is based on a qualitative approach and an abductive method, combining literature review and qualitative data collection. Data was collected through semi-structured interviews with companies within the Axel Johnson International Group. A thematic analysis was conducted for the identification of patterns, in the form of recurring practices, strategies and management of obsolete inventory. The results suggest that the companies, while recognising the negative financial impact of obsolete inventory, approach and address the issue in varying ways. Most companies rely on reactive measures, such as discounts or promotional campaigns, to dispose of goods. The recommendation includes practical tools to prevent obsolescence through improved management in classification, forecasting and cost awareness. A more structured approach is recommended to ensure consistency and long-term effectiveness.