What is End-of-Life Inventory in E-Commerce?
End-of-Life Inventory in e-commerce is an inventory representing an e-commerce retailer’s stock of products that are no longer actively selling, either because the product is no longer being manufactured or due to changes in customer demand. End-of-life inventory includes products that are no longer available for purchase and are being phased out of the inventory.
Significance of End-of-Life Inventory in E-commerce Supply Chain
End-of-Life Inventory (ELI) can be highly beneficial for e-commerce supply chain businesses. Its significant benefits are:
- By proactively analyzing the products reaching their end of life, the business can allocate resources to replenish or replace parts and components in a timely manner. This ensures the continuity of operations and reduces any potential disruptions caused by the unavailability of components.
- ELI also helps businesses to identify opportunities for cost savings by reducing overstocking or purchasing components at lower prices.
- Furthermore, end-of-life inventory can result in higher customer satisfaction due to increased product availability and reliability.
Prerequisites to Calculate End-of-Life Inventory and How It Works
The main elements include the following –
1. Accurate Inventory Records: This includes current and accurate information about the quantity, cost, and location of each item in the inventory.
2. Forecasting Software: Forecasting software is necessary to generate projections of future inventory needs based on past sales patterns.
3. Reorder Policies: This helps to ensure that inventory is purchased and available when needed and that any excess inventory is identified and removed from the system.
4. End-of-Life Tracking Methods: This includes methods to identify and dispose of any remaining inventory and to capture any remaining value from the inventory.
5. Disposal Plan: This plan should include methods for disposing of the inventory in a timely and cost-effective manner.
Use Case With End-of-Life Inventory
Consider a company was specifically selling candy canes for Christmas. Once the Christmas season is over, the company will slowly start phasing out any remaining candy cane stock in order to make space for more relevant goods. Thus, the candy cane stocks will be treated as end-of-life inventory.