Removing Dead Inventory from your Warehouse Shelves

Inventory management techniques

Because excess inventory and dead stock leads to decreased turnover and profitability, it is essential to your business health to liquidate unusable stock items so that you can better control and manage your inventory going forward.  That is often much easier said than done, however.

Getting Inventory off the Shelves

When trying to get inventory off of your shelves, the temptation is to try to recoup your costs for those particular items.  However, as Jon Schreibfeder, president of Effective Inventory Management, Inc., says, “inventory is not worth what you paid for it. It is worth what someone is willing to pay you for it.”  Therefore, the goal should be to cover the cost of liquidation and consider anything above and beyond that “found money.”  What you don’t recoup in liquidation, you will make up for in improved profitability once your warehouse is fully stocked with inventory you can move.

Some successful techniques for removing that dead inventory from your warehouse include:

  • If a product is dead in one location but still active in another, transfer the excess stock to the location where is it needed.
  • Return material to the vendor, unless the vendor assesses excessive charges for returns. The best time to negotiate the terms for the return of material with a vendor is before you issue a large purchase order.
  • If your customers have some discretion as to which of several items to purchase, reduce the price to “move” the excess inventory.
  • Offer your salespeople a monetary or some other incentive to sell the product.
  • Keep in mind that a product may no longer be popular in your market but may still be needed elsewhere, so advertise the availability of this material to other suppliers.
  • Offer the product as a substitute for a less expensive item in situations where the customer may be interested in an upgrade.
  • Donate the excess material to a non-profit organization to receive a tax deduction up to twice the cost of the inventory (for certain organizations).
  • If you are short of space, throw away material that can’t be liquidated. Even if you do not receive any payment, the free space you gain in your warehouse may make the effort worthwhile.

Once you have rid your warehouse of excess products, you can utilize a trusted ERP solution to manage your inventory going forward so that you can ensure that your stock remains salable and usable.

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