In our first article, we explored why tracking inventory age matters for lenders, investors, and consumer product executives. Age is a critical signal, but it doesn’t tell the whole story. Some inventory becomes distressed for reasons that aren’t captured by simple “greater than one year” cutoffs.

That’s why at CoMetrics, we track a broader metric we call Potentially Distressed Inventory. This analysis goes beyond static reporting. It’s built in a cascading way, where each risk factor builds on the one before it. And through our proprietary DataMetrics technology, we’re able to deliver these insights on a regular cadence — daily for operators, monthly or quarterly for lenders — in a way that’s unobtrusive but always current.
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The Cascading Approach
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Rather than looking at each factor in isolation, our analysis layers them step by step:

1. Inventory > 1 Year Old
   The starting point: SKUs that have sat longer than twelve months, often with limited resale value.
2. Inventory Presold with Negative Margins
   Next, we include products already committed to customer orders at a loss — distressed before they even leave the warehouse.
3. Inventory Sold at Negative Margins
   We then capture SKUs where realized sales have consistently eroded margins.
4. Inventory with More Than One Year of Supply
   Finally, we add goods where volumes far exceed expected sell-through, even if the items themselves are technically “new.”

By structuring the analysis this way, each category builds up from the last, creating a comprehensive picture of potential distress rather than a disconnected set of metrics.
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Transparency Through Drill-Down
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Numbers are only useful if companies can act on them. That’s why our DataMetrics platform allows borrowers, lenders, and investors to drill down directly to the SKU level. With a few clicks, users can see:

• Which products are driving distress
• Why they are flagged — whether by age, margin performance, or excess supply
• How the total builds up across categories

This transparency moves the conversation from abstract numbers to concrete decisions: liquidate, reprice, discontinue, or manage differently.
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Why It Matters

• For lenders: A clear build-up of distressed categories highlights how much collateral is actually realizable,     with no surprises buried in the detail.
• For private equity: It reveals operational discipline (or lack of it) across portfolio companies and surfaces     margin-destroying practices.
• For consumer products companies: Well-managed teams treat distressed inventory as a red flag. They actively reduce it, protecting working capital, improving balance sheets, and strengthening lender     relationships.

And because DataMetrics updates continuously, stakeholders aren’t working from stale reports — they’re monitoring these signals on an ongoing, reliable cadence.
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Bringing It All Together
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Potentially Distressed Inventory gives stakeholders a structured, transparent view of risk. By cascading the criteria, enabling drill-down to SKU detail, and updating the results on a regular schedule, DataMetrics turns what could be a vague concept into a precise, actionable tool.
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What’s Next in This Series

In our final article, we’ll explore how to use Forecast Risk and Open Orders to predict whether a borrower — or portfolio company — is likely to hit its targets for the year.

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