In today’s economy it is critical to remove the “fat” from your warehouse. Every dollar in inventory must be working as hard as possible for you to achieve your inventory-related goals. One critical element is to ensure that your stock inventory includes only those items your customers expect you to have in stock for immediate delivery. Last month we began to explore ways to liquidate other “stuff” in your warehouse – that is, excess inventory and dead stock. We discussed:
- Transferring excess inventory and dead stock to another company store, branch, or warehouse.
- Returning this material to the vendor.
- Reducing the sales price when customers’ buying decisions may be influenced by a lower cost.
- Offering salespeople an incentive to move this unwanted stock.
This month we continue this discussion. Other methods to liquidate unwanted inventory include:
Advertise the availability of this material to other suppliers. Some companies place ads in industry publications listing the products they are planning to liquidate. There are also Internet World Wide Web sites that maintain lists of available surplus stock. Search for sites that feature surplus material using the words “surplus,” “inventory,” and the name of one of your major products lines.
Substitute the product for a less-expensive item. Suppose you sell water heaters. Your manufacturer replaced his model A345 with the model A365 that offers easier access to the heating element. You have three pieces of this discontinued 40-gallon heater in stock. Naturally, contractors ordering a 40-gallon heater want the new model. But, when a customer orders a 20-gallon heater, why not offer him one of the discontinued 40-gallon heaters at the price of a 20-gallon unit? Remember, inventory isn’t worth what you paid for it. It is worth what someone is willing to pay you for it.
Donate the material to a non-profit organization. Can a school, church, or charity use some of your dead or slow-moving inventory? This alternative is especially attractive for sub-chapter “C” corporations in the United States. As of the date I am writing this chapter, these companies can take a deduction of up to twice the cost of the inventory. Talk to your accountant or tax advisor for details and restrictions concerning material donations. A good source for finding organizations that can use what you have to offer is the National Association for the Exchange of Industrial Resources, 560 McClure St., Galesburg, IL 61401 (800-562-0955 or www.naeir.org).
Throw it away. This is the least agreeable alternative. But at least you are freeing up some shelf space in your warehouse, getting rid of an eyesore, and getting some benefit by being able to write off the cost of the material.
Remember that the goal of inventory liquidation is to dispose of unwanted inventory at the best possible price or the least possible expense. This can be a painful process but it is necessary to achieve the goal of effective inventory management (or just to survive in these challenging economic times).