Overstocked inventory happens when a business inaccurately orders inventory stock and is left with more than the market demands. Having excess inventory stock is bad for business because it means that there are associated inventory turnover problems and the costs involved with managing it are not great for the bottom line. Excess inventory stock can have implications on warehousing space, profitability of your business, storage costs and waste. We look at three proven methods to turn the problem of being overstocked into a business solution before you have to consider heavily discounting your products to get rid of excess stock.
Try Returning Products
Check with your supplier about their returns policy. Try returning products for cash or credit. Where possible, industrial distributors should return products to suppliers. Flexible return agreements with key suppliers must be negotiated at the beginning of the relationship generally to maintain good partnerships. It is also helpful to develop a system that allows you to track and flag products that are nearing return date limits by having a sound inventory stock management system.
Identify New Avenues for Selling the Surplus
Explore any and all avenues for selling the surplus, by asking these three questions:
- Can I rebrand?
- Can I remarket?
- Can I repackage?
The answers to these questions can be found by keeping accurate records of customer needs. For example, you may be able to generate a list of customers who have purchased the products in the past or a list of strong cross-sell and up-sell candidates. Incentives such as freight allowances or lowest cost guarantees may move inventory stock more quickly. Promote surplus products in mailings, targeted e-mail campaigns or on the company website. If existing products do not sell to existing customers, consider re-packaging products with complimentary items, reworking products to make them saleable or finding new customers either domestically or overseas.
Donate Excess Inventory Stock
A great way to get rid of surplus items by turning them into a business solution is by donating the excess inventory stock can be donated to a charitable initiative. The first reasons why this is a great business solution is that goods and services tax (GST) on charitable gifts is usually recoverable. The second reason is by giving a donation for marketing purposes you could look to turn it into a public relations campaign to raise your businesses awareness and visibility. Some examples include donations to local community events, schools and libraries.
With the right strategy, software and systems, inventory stock distributors can successfully avoid, identify and eliminate surplus inventory in the first place. Depending on the industry and the organisation, such an effort can save thousands to hundreds of thousands of dollars annually and avoid a business having to heavily discounting excess stock.