1) Meaning

Slow-Moving SKUs are products in inventory that sell much more slowly than expected, leading to longer holding times and tying up working capital.

  • They don’t generate quick revenue.
  • They increase carrying costs (storage, insurance, obsolescence).
  • They reduce inventory turnover ratio.

Examples:

  • A seasonal item (e.g., winter coats) kept in summer.
  • An outdated tech gadget that has been replaced by a newer model.

2) How to Identify Slow-Moving SKUs

Common criteria:

  • Low sales velocity (few units sold per week/month).
  • High days of inventory outstanding (DIO) = (Inventory ÷ Average Daily Sales).
  • Low inventory turnover ratio = (Cost of Goods Sold ÷ Average Inventory).
  • Aging report shows stock not moved for 90/180+ days.

Example:

  • Product A: 1,000 units in stock, only 50 units sold in 6 months.
  • This is a slow-moving SKU compared to a product that sells out every month.

3) Risks of Slow-Moving SKUs

  • High carrying costs (warehousing, capital tied up).
  • Obsolescence (electronics, fashion, perishables).
  • Stock imbalance (space taken by items that don’t sell).
  • Cash flow issues (money locked in non-performing inventory).

4) Strategies to Manage Slow-Moving SKUs

(a) Prevention

  • Better demand forecasting (use historical data + ML models).
  • ABC/XYZ analysis:
    • A-items: high value, fast-moving → frequent monitoring.
    • C-items: low value, slow-moving → lower stocking priority.

(b) Reduction / Optimization

  • Promotions / Discounts: sell off slow movers to free cash.
  • Product bundling: combine with fast-moving SKUs.
  • Channel shifting: sell on different platforms (e.g., online marketplaces).
  • Supplier negotiation: return or exchange agreements for unsold items.
  • Adjust reorder points: lower reorder point or stop replenishing.

(c) Long-Term Solutions

  • Rationalize product portfolio: discontinue persistent slow-movers.
  • Dynamic safety stock policies: avoid overstocking.
  • Use real-time inventory tracking: detect slow movers early.

5) KPI Example for Monitoring

  • % of slow-moving SKUs =

$\frac{\text{Number of SKUs with sales below threshold}}{\text{Total SKUs}} \times 100\%$

If a company has 1,000 SKUs, and 150 have not sold in 3 months, then:

$\frac{150}{1000} \times 100\% = 15\%$

15% of SKUs are slow-moving.

Bottom line:
Slow-Moving SKUs are inventory items that sell very slowly and tie up capital. Identifying them with KPIs and managing them through discounts, bundling, supplier negotiations, and portfolio optimization helps reduce carrying costs and improve supply chain efficiency.