How do you test for obsolete inventory?

The first thing that you need to know is the difference between obsolete inventory and excess inventory. The following definitions should help you identify whether products in your inventory are obsolete or excess.

Obsolete inventory can be described as stock that remains unsold and there has been no demand for it over a prolonged period of time, usually greater than 12 months whereas excess inventory is defined as stock that has levels exceeding forecasted demand.

The simplest test is to consider the last usage date, basically when did you last sell the product, if it has been more than a year then the product very likely falls into the obsolete category.