Obsolete Parts Carrying Cost Calculator
What Parts That Have Not Moved in a Year Are Costing You
Working model — George M. Keen, Principal Consultant
What the dead stock costs each year
| Component | Annual |
|---|---|
| Carrying cost on non-moving inventory | -$25,000 |
| Gross profit not earned on redeployable capital | -$36,774 |
| Recurring annual cost | -$61,774 |
Acting now vs. waiting three years
| Line | Act now | Wait 3 years |
|---|---|---|
| Cash recovered from disposal | $50,000 | $5,000 |
| Carrying cost paid in the meantime | $0 | -$75,000 |
| Gross profit earned on redeployed capital | $110,323 | $0 |
| Less: inventory book value surrendered | -$100,000 | -$100,000 |
| Three-year net position | $60,323 | -$170,000 |
The decay curve
| Timing | Typical channel | Recovery | Value of dead stock |
|---|---|---|---|
| Act now | Dealer network / online | 50% | $50,000 |
| In 12 months | Liquidation lot | 20% | $20,000 |
| In 24 months | Scrap / write-off | 5% | $5,000 |
| In 36 months | Disposal | 2% | $1,500 |
The math, shown
Effect on the value of the business
| Line | Amount |
|---|---|
| Recurring annual cost removed | $61,774 |
| Valuation multiple | 4.0x |
| Enterprise value tied up in dead stock | $247,097 |
A buyer runs the last-sale-date report in the first week of due diligence. Non-moving inventory is discounted heavily or excluded from the balance sheet outright. This line is the earnings effect only — the inventory write-down comes off the balance sheet separately and in addition.
The monthly routine that keeps it from coming back
- Run the last-sale-date report on the first business day. Segment 0–6, 7–12, 13–24 and 25+ months and chart the dollars month over month.
- Work the six-month zone first. A part with no activity for seven months is, by practitioner estimate, about 95% likely to never sell.
- Keep a one-page return window calendar for every vendor. Set the reminder sixty days ahead, not thirty.
- Submit everything eligible. Waiting does not make the restocking fee smaller.
- Assign a disposal path, an owner and a date to anything not returnable, within thirty days.
- Accrue an obsolescence reserve monthly, roughly 1% of parts purchases, so the write-off is funded before it lands.
- Review every new SKU added to stock in the last thirty days. This is the only step that reduces next year's number.
- Count the parts on your service vans. If they are not their own bin locations in the DMS, none of it appears above.
Figures are planning estimates based on the inputs supplied. A book write-down alone does not earn a tax deduction — confirm carrying-cost components, return program terms and the treatment of any disposal with your accountant.
Want the number for your actual store?
This model runs on benchmarks. Wise Wolf Consulting works directly with equipment dealership principals and managers to measure the real figure — and to install the discipline that closes the gap.