Business Glossary
What Is Overstock?
Overstock is inventory that exceeds what can be sold within a reasonable timeframe. It ties up cash unnecessarily, occupies warehouse space, and risks obsolescence. For UK SMEs, overstock is one of the most costly forms of working capital waste.
The Formula
Overstock Value = Current Stock Value − (Daily COGS × Target Stock Cover days)
Worked Example — UK SME
A UK retailer holds £85,000 of stock. Daily COGS = £820. Target cover = 45 days. Optimal stock = £36,900. Overstock = £48,100 of cash unnecessarily tied up in excess inventory.
UK Benchmark
📊 Most UK SMEs carry 20–40% more stock than needed. This typically represents 1–3 months of additional working capital that could be released through better reorder discipline and range rationalisation.
Common Questions
How do I identify overstock?
Run ABC analysis. C-class items (bottom 50% of lines generating less than 10% of sales) are the primary source. Any C-class line with more than 90 days of stock cover is a candidate for reduction.
What should I do with overstock?
Options in priority order: bundle with fast-moving lines, run a time-limited promotion, sell to a clearance buyer, write off if unsaleable. Carrying overstock costs approximately 20–30% of its value annually.
How do I prevent overstock?
Set reorder points based on actual sales velocity not gut feel. Review slow-moving lines monthly. Pay slightly more per unit on lower MOQs rather than tying up cash in excess stock.
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