Channel

Stock rotation

Also called: Stock rotation rights · Return allowance

A distributor’s contractual right to return a capped share of slow-moving inventory, usually quarterly and expressed as a percentage of purchases.

Like price protection, stock rotation is a concession that makes holding inventory viable for the partner and creates a contingent liability for the manufacturer. It is normally capped as a percentage of prior-period purchases and often requires an offsetting order.

Because the entitlement accrues continuously and is exercised in bursts, accruing it against purchases rather than recognising it on return is what keeps the liability honest.

Related terms

Channel inventory

Product you have sold and recognised revenue on that is still sitting in a partner’s warehouse, unsold to an end customer.

Price protection

A credit owed to a channel partner on their existing inventory when the manufacturer reduces the price of that product.

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