Excess inventory includes all products that are not being used and are not likely to be used in the near future. Also called overstock, excess inventory can be caused by factors like inaccurate forecasting or predictions, poor inventory management systems, unreliable vendors, lengthy lead times, demand variability, and other reasons.
Regardless of the cause, it is important to get rid of excess inventory as soon as possible. Unfortunately, some businesses and business managers do not understand why it is so important to get rid of their overstock.
Major Reasons You Should Get Rid of Excess Inventory Fast
Getting rid of excess inventory is an important business process that can yield many benefits. Here, we will briefly summarise some of the more critical reasons to get rid of your excess inventory:
Increase In Carrying Costs
Carrying costs include all costs associated with storing inventory in your warehouse, including capital costs, storage space costs, service costs, and inventory risk costs. These costs will easily add up when you have excess inventory and fail to get rid of it. The longer you keep your overstock, the bigger the financial burden it will bring to your business.
Loss Of Profit
Excess inventory depletes your profit potential in many ways. In addition to increasing the overall cost of the product, holding onto stock for longer lowers the prices of the products as they get older. The longer the stock stays, the lower your profit margin. It can even get to a point that you will incur losses just to get the products out of your warehouse or store.
Excess inventory ultimately turns to expired stock when it is not removed in time. A product that is fast approaching its expiry date will lose value and become harder to sell. When an overstock expires, the value is completely lost, and you will likely incur more loss just to get rid of the expired products. Even when an inventory item doesn’t expire, it can become obsolete and useless to buyers, resulting in losses.
Lower Storage Capacity
Excess inventory occupies precious space that can be used to store new and more valuable stocks. By leaving your excess inventory for too long, you are directly lowering your storage capacity for valuable and necessary inventory. You may be forced to invest in extra storage space, which would be otherwise unnecessary if you moved your overstock.
Get Rid of Excess Inventory the Smart Way
There are different ways to get rid of excess inventory. You can reduce the price of the product. You can also run giveaway campaigns or donate your overstock for tax deductions. But we believe that unloading your excess inventory in bulk to an industrial clearance company is the smartest way to recoup the cost and even make some profit.
Industrial Clearance can help you prevent all the possible losses associated with excess inventory in Australia. All you need to do is take the right action at the right time. Contact us to learn more.