Slow Moving and Obsolete Inventory Disposition Memo Template
Slow moving and obsolete stock rarely disappears on its own. A short disposition memo records the options considered, the cost of each and who approved the decision, which keeps finance and auditors comfortable.
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Slow Moving and Obsolete Inventory Disposition Memo Template
Acme Precision Ltd - Inventory Disposition Memo
Memo number: EO-2026-Q4-03 Date: 2026-10-20 Prepared by: A. Planner, Materials Planning
Inventory in scope
| Item | Quantity | Book value | Last movement |
|---|---|---|---|
| Legacy hydraulic seal kits, series A | 1,850 EA | 41,400 | 2024-09-14 |
Recommendation
Recommended disposition: Return to vendor
Expected recovery: 15,000 return credit less 1,200 freight
Rationale and alternatives
Product line was discontinued in 2024. No demand in the last 24 months. Vendor accepts returns with a 20% restocking fee within 60 days. Repurposing to the series B line was reviewed by engineering and rejected due to dimensional change.
Options reviewed
| Option | Considered | Estimated recovery | Comment |
|---|---|---|---|
| Continue to hold | |||
| Sell or discount | |||
| Return to vendor | |||
| Rework or repurpose | |||
| Scrap or dispose |
Financial effect
| Item | Amount |
|---|---|
| Book value | 41,400 |
| Existing reserve | |
| Additional write-down | |
| Expected recovery |
Approvals
This is a starting template, not accounting or tax advice. Write-downs, disposal and any scrap of controlled or export-regulated items must follow your accounting policy, applicable regulations and customer contract terms. Check treatment with your accountant.
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Optional: an expert review of how to produce aging, usage and where-used evidence for each disposition review.
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How to use the memo
Run your aging or no-movement report, pick the item or family, and fill in quantity, book value and last movement date. Choose the recommended disposition and list the alternatives you considered in the rationale. Complete the options table by hand or after export. Route for approval before changing the item status, adjusting the reserve or issuing scrap transactions in the ERP.
Choosing among the options
Start with the options that recover the most cash. Returns to the vendor and sales to the secondary market usually beat scrap, even at a discount. Rework or repurposing works only when engineering confirms form, fit and function. Donation may help in some jurisdictions but check tax rules. Scrap is the last resort and creates a write-off. Holding is a legitimate choice only with a review date and a reason, such as service parts for installed equipment.
- Check contractual support obligations before disposing of spares
- Check export or ITAR controls on parts that leave the building
- Remove or mark traceable components before scrapping
Financial effect
Compare the proposed write-down with any existing excess and obsolete reserve. If the reserve already covers the loss, scrapping does not change profit, only the balance sheet detail. If it does not, the difference hits the income statement in the period you approve it, which is why the controller should be on the memo. Record expected recovery net of freight, fees and handling, and compare with the carrying cost you pay each year to hold the stock.
Common mistakes
Treating last movement date as the only test: a part that moved once in two years because of a rare repair may still be needed. Not checking the bill of material and service demand before declaring a part obsolete. Scrapping without a documented approval. Leaving the item active in the ERP so MRP keeps ordering it. After disposition, set the item to a blocked or obsolete status and close open purchase orders.
Frequently Asked Questions
How long without movement makes stock obsolete?
There is no single rule. Many companies flag 12 months without movement as slow and 24 as potentially obsolete, adjusted for the product. Spare parts for long-lived equipment often use longer periods.
Who must approve a write-off?
Set approval limits in your finance policy. Commonly the controller or finance director for amounts above a threshold, with plant and materials management signing for operational agreement.
Do I need to keep the memo after disposal?
Yes. Keep it with the accounting records and the ERP scrap or adjustment document so the auditor can trace book value, approval and disposal. Retention period follows your local rules and policy.
Can I use this for raw material and finished goods?
Yes. For finished goods, include customer or channel returns options. For raw material, check whether other products use the same material before declaring it surplus.
If you want the aging report, usage checks and where-used analysis produced from your ERP data before each review, Netray can build that as a read-only assistant.
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