Having inventory is an obvious requirement for manufacturers. Companies usually have a supply of raw materials, works in progress and finished products. Knowing what you have in each category at any time tells you how much you can make, what’s close to being sellable and what can move out in the next order. Customer satisfaction is paramount, but it’s also essential to be wary of generating excess inventory.
Excess inventory can have a significant impact on your bottom line.
Factors such as fluctuating customer demand, new marketing initiatives, product advances and seasonal changes can all make stocked inventory lose value, particularly if it has been sitting around for an extended period of time.
How could inventory that’s just sitting there affect your income? Aside from the cost of supplies and labor required to make the products that are not being sold, space and additional labor are required to maintain them:
- People have to be paid to manage, count and move excess inventory.
- You might need to purchase (or rent) additional storage space to house it.
- Space is being used for storage instead of revenue-generating tasks.
- Stored, unattended products are at risk for theft or damage.
Holding onto items that are not selling is bad for business. But that doesn’t mean you should just throw the excess inventory away. Before chalking last-season or old-model products up to a loss, try a few money-saving strategies for moving excess inventory.
Sell excess inventory online
Just because your regular customer base isn’t buying a product anymore doesn’t mean no one will have a use for it. Your retailers might stop buying an old model of an item because a new one is available, but consumers may not want to spend extra on the latest version. In these situations, putting individual items on consumer auction sites can reach people who don’t mind having an older model at a lower price.
This idea is especially helpful for electronics manufacturers because new products seem to be produced every season, while older versions are usually still functional. The logistics of selling excess inventory online can be quite simple and fairly inexpensive since you generally ship the items through a package delivery service.
If you are looking to sell your products at a quicker rate — faster than one at a time — there are also business-to-business eCommerce auction sites, commonly known as liquidation websites. These services act as marketplaces for excess inventory, and serve professional buyers looking for products in bulk.
A major perk to using one of these websites is that shipping and trucking logistics, auction management and order processing are all handled by the liquidation company or the customer.
There is also a good chance your products will sell quicker because established liquidation sites generally get traffic from those who are ready to buy.
Create your own buyer network
For manufacturers that want to keep inventory management in house, it’s possible to create a private auction site specifically for selected partners and retailers. Your buyers would enjoy this because they receive access to products at a lower price, and you can benefit because you get to sell excess inventory without additional marketing efforts or paying a fee to another seller.
If you build your own platform, you can invite users to bid and maintain greater control over where your products go and who is selling your brand. Potential buyers might include those in emerging markets, individuals selling items on consumer auction sites and non-contracted retailers who may have periodic relevant needs.
More tips for disposing of surplus
When you have a small manufacturing business, auctioning off excess inventory is not your only option. While auctions have great potential to regain a large portion of the money you spent producing your goods, they might not get your inventory out of the door as quickly as you’d like.
To drive faster sales through your normal sales process, try the following ideas:
- Lower the price or run special sales to clear out excess inventory.
- Give your salespeople additional incentive to sell the surplus products first – you are manufacturing a newer model, but the older one works well, too.
- Let other manufacturers or suppliers in the industry know what materials and products you are looking to get rid of in case they can use your excess.
In some cases, you might not be able to get rid of all your obsolete inventory, and you should plan for that possibility. When this happens, you could donate your surplus to charities and take the tax write-off. If the items are damaged and not suitable for use of any kind, find out how to properly recycle the materials.
It is possible for logistics managers to move extra products in a way that minimizes loss and interference with the company’s normal supply chain. With ever-changing market and consumer preferences, having a set plan for doing so is critical for every manufacturer. Try to do as much as you can online, as it can keep costs lower and reduce additional labor.