Solutions For Excess Inventory

Everyone has excess inventory.  It’s a bigger problem than people might think.  Having excess lying around is one of those things that come up, and it seems to be more of a burden than anything else.  No one wants to deal with it, it’s low on the priority list, and most of the time it is discarded and written off, or lot sold for pennies…that’s right, pennies on the dollar.  Sounds bad right?  Yes, but there are more factors that weigh down a materials manager and make a finance person go crazy. First off, there’s a space problem.  Excess inventory takes up space and that could be used for newer products or parts that have high demand in the marketplace.  Second, you are reducing your profits.  As mentioned above, most of the time companies lot sell or place items on “clearance” to sell quickly at extremely low prices.  This reduces profit margins as you are making mere pennies on what you paid for the inventory in the first place.  And third of all, there are the carrying cost.  Every company pays to store and carry inventory whether the items are relevant, or not.  So you have the items stored, but what is it costing a company to keep the excess?  They have the cost of utilities, warehouse employees, admin costs, etc.  These are just a few examples that would get someone thinking about the P&L. When you take all of the above into account, suddenly a solution for excess inventory is bumped up a little higher on that priority list.  Do your research and try and find a way to maximize profits where possible, because things add up.  If you are in the electronics industry, you might start here.  Good luck everyone.
December 9, 2016 In: All Posts Comments (None)

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