The 2020 pandemic sparked a surge in demand for goods, as people stayed home and searched for ways to maintain their sanity. However, when the lockdowns lifted and people could venture out again, the need for products decreased. As a result, retailers found themselves with excess inventory they were unprepared for.
Managing surplus inventory can be a daunting task for business owners and warehouse managers. The challenge lies in effectively handling stock that exceeds your company’s capacity to sell within a given timeframe. Having excessive inventory can occur because of expectations of increased demand, market fluctuations, or supply chain issues. These factors can lead to a growing surplus of stock.
This guide provides expert advice and strategies to help you navigate the challenges of managing excessive inventory. By implementing these recommendations, you can optimize your operations and boost your profits.
What is Surplus Inventory?
Surplus inventory is excess stock that is not immediately needed. It can occur for various reasons, including inaccurate demand forecasting, production delays or unexpected changes in customer preferences.
Surplus inventory is a common challenge businesses face in multiple industries, including manufacturing, retail and e-commerce. Companies should regularly check their inventory, study demand patterns, and adapt production and procurement strategies to handle excess inventory efficiently. Implementing robust inventory management systems and data analytics can help identify excess inventory and proactively address issues.
Why You Don’t Want Too Much Inventory on Hand
Excess inventory can have substantial negative impacts, creating challenges that your company must proactively manage. The following is a list of areas where excess inventory could have a detrimental impact:
Storage Costs and Efficiency
When businesses have too much inventory, they need more space to store it, which costs money. They have to pay for the warehouse, and also for keeping it safe and working well. To save money and be more efficient, businesses should keep their inventory levels just right.
Capital Allocation and Investment Opportunities
Having too much inventory costs you money. Instead of spending it on inventory, you can use the money for investing, researching, marketing or getting into new markets. If your capital is limited, it can stop your company from growing.
When you have too much inventory, it can become outdated. This means that the products may no longer be popular because of new technology, changing tastes or industry changes. This can make the items worth less and cause financial losses.
Active Inventory Management
It is important to have a plan for managing the amount of inventory you have. This means knowing the right amount to order and having accurate forecasts. Keeping track of the market can also help. Using data to track your inventory helps prevent overstocking or running out of stock.
What Can You Do With Excess Inventory?
Companies can deal with extra inventory in different ways to reduce problems and manage the surplus.
Discounts and Promotions
Businesses can give discounts or special offers to get people to buy more. This helps the business earn more revenue, sell more items, and free up space in the store.
Diversify Sales Channels
To decrease excess products, try various methods to sell them. Try selling your products in places other than just where you usually do. You can put them on online stores and work with other businesses who can help you reach more customers.
Make a Donation
Some companies give away their extra products to charities or organizations that need them. Not only is this a good way to help people, but it also shows the company values the community.
Recycle Surplus Inventory
Think about how you can use excess inventory to make new products or parts. This creative idea turns extra materials into useful things. Consider working with experts in crafting, designing, and recycling for help to turn your extra inventory into something special or valuable.
Reevaluate Procurement Processes
If you have too much inventory, look at your production and what you buy from suppliers. Use data to figure out how much to order and make the supply chain more efficient so it doesn’t happen again. Adjusting buying strategies can help reduce extra inventory in the future.
What is Overflow Storage?
Overflow storage is a temporary solution for managing excess inventory. If your warehouse is too small for extra stock, you can rent extra storage space to have more room.
Overflow storage is also handy during seasonal peaks or when unexpected surges in demand occur. Businesses can easily increase their storage space without long-term commitments or large investments. However, it’s crucial to evaluate overflow storage requirements and select a trustworthy provider for the safety and protection of surplus inventory.
What are Overflow Warehouses?
An overflow warehouse is a dedicated facility that handles excess inventory and overflow storage needs. Unlike traditional warehouses, overflow warehouses are flexible and scalable, allowing you to adjust your storage capacity based on demand fluctuations. These warehouses have advanced inventory management systems, efficient material handling equipment and enhanced security measures to protect the excess inventory.
Outsourcing warehousing and partnering with a logistics provider for overflow storage is a cost-effective solution for businesses with excessive inventory. This approach enables businesses to save money while ensuring they properly manage their inventory.
By outsourcing warehousing, businesses can avoid the costs associated with maintaining their own storage facilities. Additionally, partnering with a trusted logistics provider ensures that businesses have access to additional storage space when needed.
This allows businesses to efficiently manage their inventory without incurring unnecessary expenses. Outsourcing helps manage extra stock and improve efficiency by providing infrastructure and expertise.
How Third-Party Logistics Providers Help Manage Excess Inventory
Third-party logistics (3PL) is when external companies offer services to improve a company’s supply chain and logistics processes.
Examples of these services include storing, moving, organizing, delivering, and packaging goods, as well as handling customs and distribution. 3PL providers specialize in managing and executing logistics functions on behalf of businesses. They help ensure the efficient movement of goods from the initial point of origin to the final point of consumption.
Benefits of Using a 3PL Provider
One of the primary benefits of using a 3PL provider is their expertise in supply chain operations. These companies specialize in logistics and use their expertise to develop cost-effective solutions for inventory, transportation, and warehousing issues.
They have extensive knowledge and experience in this field. They design their solutions to address a wide range of problems related to inventory management, transportation logistics, and warehouse operations.
By using their expertise, these companies are able to offer affordable and effective solutions to their clients. 3PL providers have the ability to create logistics plans that tailor to your specific needs. These plans can help you improve efficiency, save money, and enhance your service. By implementing these customized plans, you can stay ahead in the market.
3PL Providers Help Manage Transportation
3PL companies generally have established relationships with a network of carriers. With a 3PL, they can negotiate favorable rates, access all major modes of transportation and optimize routes to ensure the timely delivery of goods. 3PL providers utilize advanced technologies and systems to track shipments and monitor inventory levels.
Turn to MVP for Help Manage Excess Inventory
Having too much inventory is a big problem for businesses. It needs careful planning, good inventory management, and the right storage solutions.
Contact MVP Logistics today to learn more about our comprehensive solutions for managing excess inventory and optimizing your supply chain. Our team of experts will work closely with you to develop customized strategies tailored to your business needs. Refrain from holding excess inventory and take proactive measures to turn it into a competitive advantage.