Your company’s ability to thrive depends on your inventory management skills. More so than your facilities, human capital, marketing collateral or other resources, your stock is your most significant asset. Do you satisfy demand with exacting precision, or could you stand to improve?
Although carrying inventory comes with the potential for profit, it also exposes you to loss risks when you stock more than you end up selling. Here’s what excess inventory means for modern companies and why so many enterprises are turning to business-oriented marketplaces like Deeperdeals.com.
What Is Excess Inventory?
In general terms, any supply that you possess that goes above and beyond your demand counts as excess. Supply may include everything from finished goods to raw materials and components that you procured from third-party providers. Demand includes the requirements associated with fulfilling consumer orders as well as those related to your manufacturing processes.
Why Is Excess Inventory Such a Bad Thing?
Carrying inventory may seem like a passive activity, but those who do so actively incur real overhead. From paying warehousing costs to having to throw away items that you can’t sell, excesses include inescapable expenses.
Inventory that sits there drains your business until you finally sell it. If you’re tight on space, excess can also hold up other projects and production efforts, which further hampers your profitability.
As many retail experts point out, carrying inventory is an expensive proposition, but having too much is even costlier.
Excess inventory takes many forms. Here are five of the most common types.
When you retire a product line or move on to a new version, you may still have significant quantities of the old merchandise in stock. Many retailers refer to these end-of-life products as slow-moving and obsolete inventory, or SLOBS, because of their tendency to remain unsold for relatively long periods.
Smart planning and foresight can reduce the number of SLOBS in your inventory, but it’s not always possible to eliminate them completely. As with other forms of excess, factors like seasonal demand, forecasting inaccuracies and logistical mistakes are just things that you’ll have to accept. Building a safety net that lets you sell your excess to a wider network of buyers is the smartest strategy.
What happens after you fail to anticipate the demand for a specific item and purchase the wrong amount? If existing statistics are reliable, you could end up contributing to the $1.1 trillion in annual retail industry losses related to overstock and out-of-stock goods.
Carrying too much of a product is never a good thing. On the other hand, not having enough can frustrate consumers, so retailers tend to hedge their bets. As always, it's best to find a happy middle ground. When reality comes knocking despite your best efforts, however, you shouldn’t get caught without a backup plan.
Your employees work hard to do things right, but nobody’s perfect. Some percentage of your products will inevitably sustain damage in transit, during storage or in the retail process.
This kind of shrinkage can have different outcomes depending on how you respond. When left unchecked, however, it’s part of losses that cost billions of dollars annually.
Not all product damage precludes sale, but it might be necessary to accept a lower price for less-than-perfect items. In order to avoid tarnishing their brand images, manufacturers may also sell damaged stock exclusively through alternative markets. By pursuing business in novel sectors and targeting new consumer audiences, it’s possible to put this kind of excess to good use.
According to analysts, consumers return around 9 percent of the goods that they purchase at stores. The outlook is even worse in the world of e-commerce, where this figure jumps to almost one-third.
The main takeaway for retailers is that some excesses are hard to predict. You won’t always know when a formerly loyal customer will need to return an item, and if they do, you might not be able to resell it without including a significant markdown. These items may also cross over into SLOBS territory since some consumers will inevitably shy away from purchasing used goods.
Raw Manufacturing Materials
Did you buy more parts than you needed to build your hottest seller? Excess manufacturing supplies can be hard to manage, especially when they’re for highly specialized purposes. Companies that work with marketplaces that specialize in business-to-business sales may have an easier time finding appreciative buyers who are willing to pay what these materials are worth.
Dealing With Excess Inventory
As experts note, it’s unrealistic to assume that you can permanently eliminate excess, especially in fields like manufacturing. Even if you do succeed at minimizing your supply-demand mismatch, such a state is likely to be temporary.
Instead, move on from constantly having more than you need by working with Deeperdeals.com.
Our robust marketplace makes it easy to come to terms with excess inventory by offering access to a proprietary network of business buyers.
With over 1,200 potential enterprise consumers ready to take your extra stock off of your hands, we ensure that nothing you invest in goes to waste. Learn more by visiting us online today or call 702-636-9111.