Why Managing Excess Inventory is So Important

IM Strategy

Companies often deal with many efficiency issues, but the issue they struggle with the most is how to handle their excess inventory. This is a problem that should never be ignored, because it can be extremely costly to store in company warehouse space.

How does excess inventory develop?
Excess inventory is the result of poor tracking systems, inaccurate forecasting and an inadequate inventory management strategy (IM strategy). Excess inventory can be physical materials, specialized equipment, product parts or completely assembled products.

Businesses either fail to implement an IM strategy, or they to fail to make adjustments to the one they have in place. Either way, excess inventory can be the result of poor planning, over-ordering or unforeseen events affecting the market.

Inventory management is especially crucial for business that offer seasonal products, or products with a shorter shelf life to better manage their inventory.

Liquidation Solution
There are several ways to deal with this issue, but one smart solution would be to hire an inventory liquidator. Liquidation is one of the fastest ways to get rid of excess merchandise, materials or parts.

Liquidators will buy your excess inventory and re-sell it at a discount to other companies. It’s sometimes difficult to get business owners to realize why liquidation is a good option because:

• The perception is that resorting to liquidation implies a definite loss of the company’s money
• The recovery rate from liquidation is such a small percentage that it seems like it’s not worth it

More Inventory More Cost
Companies that run very lean in manufacturing, if not careful, end up pushing much of the inventory that used to be in the factory upstream. This creates an increase in the expenses for warehouse storage and can decrease your company’s overall productivity.

There is a way to achieve cost savings from freeing up cash and not having to pay interest on that cash; the ability to pay less insurance and lower taxes on inventory; labor savings associated with less material handling; the ability to rent a smaller warehouse; and other areas as well.

Implementing a better IM strategy can help avoid these excess inventory issues. Contract warehousing and fulfillment center services are carefully designed to help you reduce your operating costs and eliminate excess inventory.

AECI can help manage your inventory – we take the time to learn your specific needs in order to offer versatile, customized solutions for your warehousing concerns and distribution challenges.