Excess inventory is a serious issue that can happen in any company and it can cause a lot of damage in different areas. The routine of all processes can be affected by this kind of problem.
To know more about inventory and stock excess, what defines it, the problems it can cause, how to avoid and deal with it, keep on reading our article that Polyexcel’s blog has prepared especially for you.
What does it means to have an inventory excess?
We already know that having an inventory excess is not a good thing for your company and it’s workflow. But what does it mean in practice? What exactly defines that you are having a problem with your stock management? There are a few factors that can answer all these questions.
First definition would be that products or feedstock has not been sold or shipped the way it was expected. That is something to be aware of, since it causes to accumulate artifacts in the stock.
To avoid the extra inventory, it is important to know what all areas are doing and calculating. There can be a lot of reasons that could explain why you have accumulated products, but one of the most common is mistakes made by the purchase department.
Another reason can be the lack of organization in your inventory and stock. This prevents you from knowing what you already have, what is selling and what is stuck, so it is important to keep a good system in all areas, especially this one. Besides those, we can see some causes that can lead to this scenario below:
- Uncoordinated supply and demand: this can happen due to a lot of factors, such as changes in the buying patterns, target public or even the economy as a whole;
- Mistakes made in the buying department: one of the most common causes can happen due to buying or ordering an excessive amount of products, that are going to be stuck later,
- Problems in the marketing sector: If the selling strategy does not work or is not sufficiently performed, the products or services can be left forgotten.
What can an excess inventory cause?
The main issues that an excess inventory and stock can cause are obsolescence, unnecessary expenses and an affected and compromised workflow. These can have a lot of impact in the productivity and results of a company, so it is really important to invest on an excess inventory management to avoid them.
By having preventive maintenance, you can avoid problems like cash flow, that can generates bigger debts or even liquidity issues. Also, additional expenses, since destruction and transportation of the excess inventory can cost a lot.
At last, the products can expire and give you a massive lost. Obsolescence can also be a reality, since they cannot be sold, what prevents the organization of your stock.
How to deal with an excess inventory in the best way?
So if you already identified that your inventory or/and stock have an excess of product, now it is the time to deal with it and prevent from more damage. The focus and difficulty is to decrease it without causing a lot of loss to the company.
With that in mind, we gathered some information and options on how to work this situation out in the best way possible. Analyze all the alternatives and find the one that fits better with your brand and current status.
Low prices, but with moderation
One option that can help you to get rid of some of the product is to sell overstock inventory. That means all the extra artifices have to be gone, and that is usually done by lowering the prices.
The secret to achieve a successful excess inventory sales, is analyzing the market interest in your product, study the time that is best to sell it and all the strategies that the marketing team can use to reach this goal.
This can help you to regain some of the money spent buying the product, but is important to see if this can be done. The sales strategy is not a good alternative for a company that has expired products or if the shipping costs are too high.
Selling to other companies in the same sector
Selling It to companies that are in the same environment as yours is a certain way that the interest is going to be there. It is important to negotiate the price, so they can have a good deal and you can lose as little money as possible.
Organizing the stock and inventory
At last, having an organized inventory and stock is a great way to be able to see the whole picture. You can separate a special place or smaller stock to keep the left products, so they don’t get in the way of the new ones.
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