(Courtesy: Kathy Turner1 at flickr.com)
Warehouse inventory managers are well aware of excessive inventory issues. Someone was too excited over the prospect of selling a particular product so he or she ended up ordering too many of them. Although there may be more reasons for excessive inventory, whatever the reasons the inventory manager needs to come up with ways to handle the surplus.
Inventory managers may commonly use nine methods to relieve the inventory overage, yet these methods may cause more problems. Common ways excess inventory is handled and the problems they cause include:
· Doing nothing. Procrastination doesn’t relieve the problem. You may think you have time to settle the problem, but while you wait the amount of slow-moving products is multiplying. Doing nothing can result in a bottleneck that will affect the efficiency of the warehouse’s operation. Moreover, the company will be paying more taxes on the excess stock.
· Lease more space. Viola! The problem is solved. But what about the slow seasons of the year when very little product orders are being made. The result could be the leasing of empty space. And consider this. Leasing space from another storage and logistics warehouse company means money flowing out of your warehouse to the benefit of another warehouse.
· Liquidate it. Sounds like a good idea. Just mark the price down and sell it. However, the products you sell for a discount are finding their way to secondary markets that offer them to compete with your company’s release of new products.
· Continue to sell it. If it’s not selling what makes you think you can sell it later? Don’t keep stale, outdated products. You may need the storage space they occupy for newer, more saleable products.
· Give it away locally. Giving away product to the neighborhood may boost your company’s reputation in that neighborhood. However, it will reduce sales and get people to think that if they wait long enough you will give away products again.
· Sell it to employees. It might help employee moral if you offer products to them on a discount. However, this is only a temporary fix to a continuing problem.
· Give it away to employees. If you give products away to your employees, then some energetic workers looking for a quick buck can turn around and sell the giveaways through eBay, Amazon, or other similar retailer.
· Sell it to your top customers. It may provide a quick fix, but your clients could decide to wait for your next discount dump due to another period of excess inventory and not buy products from you at full price.
· Throw it out. You will be throwing out the money you paid to buy the product along with it.
Here’s another way to dump excess product. A little known section of the tax code called IRC Section 170(e)(3) permits Regular C Corporations to donate excess inventory and receive an up to twice-cost federal tax deduction. Give these products to gifts-in-kind organizations.
The law forbids the receiver of the donated products from reselling, bartering or trading them. Instead, the product must be used in a way that is consistent with the charities’ mission. So there is no way the product will end up on the open market competing against your new products.
Companies have been known to use this law to giveaway office supplies, classroom materials, clothes, maintenance items, tools and hardware, toys and games, computer software, sporting goods, books, tapes, CDs, arts and crafts, personal care items, holiday and party items, janitorial supplies and more.
The law can also be used to rid you of underselling SKUs or discontinued items. Not bad and you get a break on federal taxes and that’s even better.