To buy more than we can “use” – it happens to all of us. This applies not only to consumers who make shopping decisions spontaneously and emotionally, but also to retailers and wholesalers who usually plan their purchase in detail (or at least should do so). A lot of space in the warehouse can also be used up by unclaimed orders, goods from returns or products with slight defects that cannot be sold to regular clients. The key advantage is knowledge of the market and own customers, and product quality checking. However, stock lots often trouble experienced trading companies, despite good contact with customers and the highest standards of quality control.
Errors in planning
Sometimes it results from an inaccurate estimation of market needs or excessive optimism, and sometimes from completely independent and unpredictable reasons, such as a weather slump (so-called ‘weak season’) or the economic crisis (in a given industry or global). Regardless of the cause, the surplus inventory leads to increased costs (disposal or storage) and frozen capital.
How to avoid surplus inventory?
To a certain extent, you can minimize the risk of inventory surplus by implementing modern (and often expensive) IT systems, monitoring data from customers and suppliers, improving supply and inventory processes, and changing inefficient procedures. We can also increase the frequency of orders and reduce their volume. Ordering smaller lots more often usually involves not only more work, but also higher purchase prices. Damned if you do and damned if you do not…
How to increase sales to get rid of surpluses?
There are many sales strategies based on price reduction. It is good practice to lower the price as the order volume increases, to combine homogeneous products in collective packaging or special sets from various elements. Of course, not always a discount, promotion or sale will make us get rid of the product quickly, but it can help us as long as we don’t wait with it until the last moment when the market is satiated or the season is over.
What to do with goods that have already saturated the market?
There are several ways to deal with surpluses. They can be stored (waiting for demand to increase), distributed, disposed of, or resold to another trading company, such as STOCKLOTS.
“The costs of storage in time” are analysed in a separate article. To read about the various “pros and cons” of giveaways, disposing and resale to agents, go to “Surplus merchandise – how to get rid of the trouble? (part 2)”.