Excess Inventory Management Best Practices

warehouse full of unwanted assets

Excess Inventory Management Best Practices

Companies get stuck with excess inventory that they can’t seem to sell, and as excess inventory mounts up, companies struggle to control the issue, while those unwanted assets diminish in value. The excess inventory itself represents capital loss that oftentimes companies will never see a return on. Do not fret, there are numerous solutions that will help reduce excess inventory and ultimately keep operations flowing.

  • Implement an Inventory Management System: It is critical for companies to monitor what inventory is selling and what inventory is starting to accumulate. Having an inventory management system in place accounts for the entire flow of assets at every stage and can prevent the accumulation of excess inventory, or ensure that your company doesn’t run out of stock. According to McKinsey analysis, businesses that put a sustained effort into managing inventory and minimizing disruptions can increase their sales by 3.0 to 7.0 percent, improve margins by 1.5 to 2.5 percent, and boost working capital and cash flow by 15.0 percent. With a successful inventory management system secured, one’s company will always have the right amount of inventory at the right time, while avoiding stalled cash flow and ensuring customer satisfaction.
  • Monitor and Prioritize Inventory: Inventory management allows businesses to see the various amounts of inventory they have so they can purchase more or opt out. Companies can then invest in the inventory that is selling and halt the purchase of unwanted goods. Retailers can prioritize purchase-order flows to confirm that crucial inventory is in stock when in demand to avoid unforeseen disruptions and ensure customer satisfaction. For example, fulfilling orders during the peak holiday season. Over time, retailers will be able to recognize the ebb and flow of specific inventory and make long-term decisions on what inventory to prioritize, how to better coordinate purchases and minimize any disruptions along the way. If improvements need to be made along the way, such as redesigning warehouses or adjusting operations due to an increase in labor costs, retailers can monitor productivity to mitigate potential risks.  Keep in mind, planning and creating timelines for inventory will have a direct impact on the transportation one chooses to deliver the goods. The sooner orders are placed, the better the chances that orders are accepted.
  • Invest in Safety Stock: eCommerce and online ordering skyrocketed during the pandemic, leaving several companies with little to no inventory. Investing in a safety stock will help prevent unavailable inventory and allow companies to fill orders during times of increased demand or delayed stock supply. As the global economy continues to experience supply chain shortages, having a safety stock in place can keep business moving and combat any unforeseen obstacles.
  • Donate or Discount Excess Inventory: When all else fails and slow-moving inventory becomes costly, companies can apply discounts to excess inventory. Organizations can discount the retail price to benefit customers, discount the wholesale price to benefit buyers or utilize off-price retailers to liquidate dead stock and maximize warehouse space. When discounts don’t appeal, donating unsold inventory is another option. Donations can be a cost-effective solution to clear up warehouse space. Several companies support charities and if your inventory is suitable for a charity, it is a viable option that may even come with tax benefits. If inventory is not donation-friendly, consider the opportunity to reward loyal customers and clients with inventory in the form of gifts and samples. This is a great way to build and maintain customer loyalty and in the long run drive future sales. 

By implementing these solutions, you can ensure that your company is secure to meet fluctuating demand and prevent excess inventory. As unforeseen issues and events disrupt the supply chain, companies must stay organized and equipped to handle any circumstances. In doing so, you can ensure long-term success for your company in the future.

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