Inventory Tips

How does Surplus stock accumulate?

  • Due to improper inventory management
  • In efficient forecasts on market demands
  • Upgrades in the manufacturing process
  • Disposal of used machinery and replacing with newer ones
  • Hesitation to discontinue old products, anticipating that there may still be customers who will need it.
  • In the excitement of rolling out a new product, they fail to plan the slowdown of the older ones.

Tips to control surplus stock.

  • A Careful planning, discipline and training are necessary so everyone involved, from purchasing to production and distribution, understands what steps are necessary to be competitive in today’s economy.
  • A careful sales and operational planning.
  • Implementing a lean manufacturing approach, which will focus on improving the flow of the production process and elimination of waste. This process will establish effective controls and procedures that will require the buy-in of all departments and individuals and improve the company’s bottom line.
  • The purchasing department should establish a replenishment schedule for each inventory item, which will provide efficiencies in the flow of inventory and reduce overall costs.
  • Establish measurable goals and objectives, such as inventory turns and return on investment, for purchasing and sales personnel. Motivate these individuals to reach their goals by tying performance to compensation.
  • Implementing these types of systems is a top-down process, which requires management’s commitment to putting a process in place and training every employee to follow the system.
  • Making every employee in the process of purchase and sale accountable for the surplus stock accumulation
  • Establish a cycle inventory system that will improve efficiencies and identify discrepancies on a regular basis.
  • It is useful to identify and implement an inventory management software system that will enable management to capture crucial information and evaluate key performance indicators to assist in projecting customer needs.
  • Implement a system to identify and eliminate slow-moving or obsolete inventory that is consuming valuable warehouse space along with capital.
  • There is value in slow-moving and obsolete inventory items, but if these items pile up and sit as surplus or dead stock over a period of time, they become worthless.
  • Implement Auto-replenishment Systems.
  • If there is growth in obsolete inventory, missed forecasts, reduced earnings and increased backlogs, closely integrate the supply and demand planning processes that allow the business to provide the right products at the right time in the right quantity at the lowest possible cost.
  • One of the key traps associated with demand planning is the optimistic view that new products or promotions will generate high sales and thus get stranded with surplus inventory after ordering in anticipation of demand.
  • Inventory that isn’t use full or is no longer relevant to a company’s process can be returned to vendors.
  • Offer special reduced pricing to help turn the inventory quickly.
  • Give sales-people incentives to concentrate their efforts on moving that inventory.