October 9, 2016 3 min readThe reality is that surplus inventory is one of the largest costs for business these days and inventory management is one of the more challenging areas to control. A careful balance is required between reducing costs through streamlining inventory, and the need to meet the increasing consumer demand for product availability. Overstocking to ensure your customers’ needs are well served is only one cause of surplus inventory. Factors for overstocking include seasonality and end of season lines, incorrect tracking of a products life-cycle, product obsolescence, new competitors in the market or even the loss of an existing customer. Typically though, companies who carry excess inventory find the issue is caused by inadequate management of demand forecasting and the subsequent over-ordering of replenishment stock. The question then is how to rid yourself of surplus inventory, recoup the money invested, free up space and reduce the ongoing storage costs of holding inventory.
Rid yourself of excess inventoryProperly managed, getting rid of surplus inventory can provide opportunities for increased sales and has the potential for positive PR and customer relationship management. Some common ways to rid yourself of surplus stock are:
- Clearance sales. Offering heavy discounts is a common tactic for reducing surplus inventory. Be cautious when providing extreme discounts and limit these sales activities in both timeframe and duration or you could find it difficult to sell anything at full price.
- Bundling. Group certain products and services together and sell them at a slightly reduced price. Not only can you clear a lot of merchandise at once, consumers often perceive this as getting greater value for their money. Bundle complementary products, combine slow-moving items with those that have a faster sell-through rate or utilise a ‘buy one, get on free’, ‘two for one’ package approach.
- Sell smaller lots and single items of excess merchandise through third-party and online auction sites.
- Create one-off sales events or limited time offers to reward long-term customers. Rethink visual merchandising and displays to attractively present overstocked items at the event. Repackage low cost items as giveaways or gifts with purchase.
- Selling to a liquidation company is a good option for those wanting to free up space quickly and with minimal effort. You may lose out on potential profit, but you can clear your warehouse of excess stock and receive immediate cash flow.
- If you absolutely cannot sell surplus inventory there is always the option to donate items to schools, charities or community groups. Not only are there potential tax benefits from in-kind donations but this also affords an opportunity to raise your profile and possibly attract new customers through a public relations event.
Forget overstocking – take stockInventory management is a process that needs to be managed continuously and, of course, the best way to eliminate the costs of surplus stock is to avoid or limit overstocking in the first place. With good inventory management software you can optimise your forecast planning and stock management by tracking, monitoring and reporting to provide a transparent view of your business. If the stock is already taking up space in the warehouse, inventory software will enable you to prioritise stock based on age, shelf-life, investment value and turnover to better guide business decisions for clearing surplus goods.
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