Can you imagine how many hands were raised?

Unsold inventory is a common occurrence in the world of business. You don’t need to panic if your shelves aren’t empty by the end of the day. But when those days turn to weeks and those weeks turn to months, you may want to consider strategizing how you can flush out your stocks—fast.  

Aging inventory is a reality that most business owners don’t even dare to discuss. Whether it be from simply not knowing who to turn to or how to improve their situation, business owners usually end up struggling with their aged stocks in secret.

We believe, however, that it should be talked about.

What is aged inventory?

Aged inventory is simply excess inventory that has been sitting in boxes and shelves anywhere between 60 to 180 days from its receiving date.

Yes, we’re talking about stocks that don’t bring profit to companies anymore. These are the stocks that don’t contribute to your cash flow because of low demand from your customers. These are the stocks that are taking up space in your warehouse and costing you money.

Why is it important to make room?

A  warehouse full of aging inventory is problematic for several reasons:

• It ties up your capital. The capital you invested on your aging stocks won’t return to you unless your customers buy them. Unfortunately, aged stocks are not attractive to customers, so they have a higher probability of extending their stay in your warehouse and limiting your cash flow. This decrease in stock movement and the resulting lost sales opportunities will freeze your capital and prevent any ROI from coming to your business.

• It occupies space that could have been allotted to your fast-moving or better-selling products. This represents sales opportunities lost and additional revenue loss. Slow-moving products which eventually age consume spaces that newer, better-selling products should be occupying instead. Having aged inventory produces a negative chain reaction on your business: The older your aged inventory gets, the more difficult they will be to sell at profitable rates and the more you’ll need additional storage for your fresh stocks. This means that you’ll have to increase the budget for your inventory storage while you lose profit whenever your aged items get sold.  

• It hikes up your inventory costs. Storing products costs money. The downside with storing aging inventory is you have a slowly decreasing chance of recovering your storage costs as the days go by. 

• It increases your inventory’s risk for obsolescence. As your inventory spends more time on your shelves, its exposure to obsolescence also increases. Obsolescence simply means your product is no longer in demand and wanted by your customers, hence negatively affecting your cash flow and decreasing the profitability of your business.

How should you handle aging inventory?

Managing aging inventory—and recovering the capital you invested on it—is easier said than done, but not impossible. 

In order to recover the value of aged products or put them into good use, we need to be strategic, bold enough to try new ideas and creative.

If you’re looking for ways on how to generate income out of your months-old products, we have a few ideas that you might want to consider doing.

Sell your old inventory at a discounted price

Think of how your favorite clothing brand changes the price of specific items weeks before the New Year comes. Have you noticed that these discounted products are not from their selection of new arrivals?  These items are products that haven’t been sold yet since they arrived in their store months ago! Instead of keeping them in stock when the new year comes, the clothing brand decides to sell them at a lower price before changing their product selections in time for the next season.

Holding a sale is a proven and effective way to flush out aged inventory. There are even consumers that anticipate it to happen at certain times (e.g., during payday, double-digits, weeks leading up to Christmas). Whether that means hosting a limited-time-only clearance sale or a payday-sale exclusive, you’ll have a higher chance of getting rid of your aged inventory if you sell them at a discounted price. You might see more customers adding it to their shopping carts this time around or buying them outright! 

Bundle your aged inventory

There is also the bundling technique that businesses with aged inventory can utilize. Take an aged product, combine it with another aged product, another slow-moving item or another item that complements it and sell them in a buy-one-take-one effort. Running a buy-one, get-one promo allows you to hit two birds with one stone: you get to sell aged products fast and make room for new stocks! 

Use old inventory to create new products

The idea behind this innovative strategy is this: placing aged inventory back in the market isn’t for the purpose of selling it as it is but transforming it to a value-adding  component and using it to generate extra income.

As our society experiences the damaging effects of the climate crisis, our perception and appreciation of environmental causes increases. If you ask us what we like about these modern times in the land of trade and commerce, it’s the initiative of more businesses to become sustainable as the years go by. Business owners are leaning towards incorporating sustainability practices in their operations. Today’s most respected brands look for a balance between gaining profit for themselves and taking care of the rest of the world by avoiding harmful chemicals when manufacturing their products or diverting their waste from ending up in landfills, to name a couple of examples. The bottom line: modern consumers value environmental responsibility and support brands that practice it. 

Now, we ask you: why not be one of these business owners that are making a change? You can start by incorporating three little steps we’ve all learned in grade school: reduce, reuse and recycle. 

Everything has value in and of itself. Whether you’re trying to get rid of a pallet of aged inventory like jeans or an old stuffed toy animal, it will always have parts that can be used to create something brand new. Recycling aged inventory is a natural solution to generate income without produce waste. Not only does recycling enable you to lessen the load of your warehouse (and of the world, if we may add), but it also allows you to recover the cost of your old products by using them as materials for creating new ones. Using recycled scraps of fabric to make a new piece of clothing, a pillowcase or a bag requires only creativity. Once you begin offering sustainable products that are aligned with your business’ values and goals, we’re confident you won’t  regret it!

Liquidate your aged inventory

If you need to get rid of your aged inventory fast, then we recommend you to be open to converting these unwanted assets into cash by selling them to interested buyers.

In other words, liquidation.

Liquidating your aged inventory will help you clear up space in your warehouse and open up new revenue streams for your business by tapping into new markets for your products. Liquidation is an environment-friendly solution for disposing of your aged inventory because you are giving these items an opportunity to find new owners instead of throwing them away in the trash. Oh, and did we mention that this will give you more sales opportunities as well? With the freed up space in your warehouse comes the possibility of housing faster-moving items that will generate profits for your business!

Research about liquidation companies that are accessible in your area. From recovering value from your aged inventory to reducing the number of wasted items ending up in the mountainous pile of trash in our landfills, partnering with a liquidation company is truly a win-win situation for your business, consumers and our planet! Plus points if you can choose a liquidation company that recognizes the importance of saving the earth, too! 

Evaluate your inventory

When you find yourself dealing with aged inventory, don’t take it as a bad omen. Rather, look at it as a motivation to further improve how you handle your company and your consistency in running your business.

If you are wondering, “How am I supposed to identify my aged inventory?”, we recommend referring to your aged stock report (or inventory aging report) for guidance. This financial document provides the data of how long certain products have stayed on your shelves before they were sold. Additionally, an aged stock report lets you examine the following information:

• The inventory management approach used to store specific products
• The product journey, from when it was sourced to when it was made available in the market
• The storage and quality maintenance costs by the products being evaluated

This report is crucial in your inventory decisions because it gives you a rundown of your past business reports and gives you a glimpse of how your current stocks are doing. Having an aged stock report is important for businesses because it allows you to identify slow-moving items and calculate how much you’re gaining or losing from them.

Out with the old, in with the new

To be in the world of business means to fall into a continuous spiral of unpredictability. Your customers may be raving about a product now which they will no longer buy in a few months’ time. If your items are already celebrating monthly anniversaries in your warehouse or storage unit, you may want to try out one of the creative and proven ways we shared in this article so you can still generate revenue from them!

Here’s our tip: don’t hesitate to try new strategies when dealing with your aged inventory. Who knows? You might just come up with even more ways to generate revenue from what you once thought was a hopeless situation.

If you have never tried working with a liquidation company that can help you recover value from your aged inventory, why not give it a shot? 

Liquidate your aging inventory with Humble Sustainability

Humble Sustainability is a professional liquidation company with a purpose. They accept items from a wide range of categories including high-value IT and office assets such as laptops, mobile phones, furniture, home and living appliances, and more!

The post From aged inventory to assets: ways to generate revenue from your old stocks appeared first on Humble Sustainability.

A quick search of the term “liquidation” generates results along the lines of “the process of a closing business selling off their assets”. However, a more thorough analysis of these definitions reveals a more flexible definition wherein liquidation in and of itself is simply the process of converting assets into cash – bankruptcy or business closure need not be a prerequisite.

Over the years, the process of liquidation has evolved from simply being a failing business’ exit strategy into a viable and promising method used by thriving businesses to recover value from assets that would’ve otherwise represented complete losses.

Simply put, liquidation has transformed from a one-off strategy into what could possibly be an essential part of any company’s daily operations.

All is not lost: The role of liquidation in managing excess and aging inventory

The most common way in which liquidation has lent itself to the strategic growth of thriving companies is in the area of inventory management.

If your company stores and sells goods, then you already know how essential it is to remain on top of your inventory, from purchasing stock, allocating warehouse space, maintaining the quality of goods, and ensuring the proper flow of inventory into the market.

Two particular factors that could cause a bottleneck or hurdle in your company’s smooth operations are excess and aged inventory.

The term excess inventory refers to the goods companies haven’t sold yet due to a lack of demand from consumers. These items are often nearing the end of their life cycle and the longer they are left sitting around the shelves, the lower the chances of them being sold off. Aging inventory, also called slow-moving goods, is a form of excess inventory that has been kept in storage from 60 to 180 days due to low demand.

Another form of excess goods is dead stock. This refers to inventory that has surpassed the 180-day mark.  If aged inventory poses a challenge for making a sale, dead stock doubles down on that. This is because items that are considered dead stock are often damaged, expired or outdated.

Excess inventory is the result of plenty of factors but from a broad perspective, it comes down to an overestimation of demand from consumers and of course, quick shifts in consumer behavior and trends.

These different forms of excess inventory curtails a company’s operations by representing unrecovered investment, affecting your business’ cash flow. Furthermore, these goods eat away at precious storage space that could’ve been allocated towards better-selling or new arrival items.  Another concern of carrying excess goods are the costs it takes to keep them in storage such as utilities and labor.

So, if you’re a company facing the dilemma of what to do with your excess inventory and you’ve turned to liquidation as a solution, then you’re on the right track. The next step is ensuring that your venture into liquidation is as productive as possible – successfully recovering value from your unused assets instead of entailing any more unnecessary costs.

While there is no best way to go about liquidating, some methods are definitely better than others. On the occasion that your company has the manpower and experience to explore in-house liquidation, then deliberating the qualities on what to look for in a liquidator may not be as big of a concern for you.

However, more often than not, businesses are already preoccupied with the needs of their day-to-day operations and may not know where to even begin. This is where liquidation companies swoop in with their experience and expertise to help you deal with selling off your unused assets – from evaluating your goods according to the current market value, marketing your items, connecting you to the right buyers, and more.

It is important to note, however, that not all liquidation companies are built equally. Depending on the assets of your business, the nature of your industry, and the goals you have in mind, finding the right liquidator is crucial if the partnership is to be a productive one.

We recognize how important it is for companies (especially those that are new to liquidation) to find their right match. In this article, we’ll be divulging the top 5 things you must consider when looking for a liquidation partner.

Cost-efficiency

More often than not, the primary cause of entering liquidation is to recover capital invested in non-moving assets. So, it is only logical that cost should be one of the top things you should consider when looking for a liquidator.

Of course, before making any moves towards liquidation, it is important to consider and be transparent with the resources your company has. This is an important factor to thoroughly discuss with liquidation companies upon setting a point of contact. How much will their services cost? Will there be a retainer fee required during the partnership? If you’re specifically liquidating inventory, one must also consider how the liquidator will go about selling these assets. Are the items going to be fully purchased outright or is a consignment an option? How will profits be split and distributed?

It is also crucial that the responsibilities and expectations you have of your liquidator are discussed thoroughly. This allows you to fully gauge whether the range of services being provided to your company are worth every dime invested in the partnership.

The complexity of your company’s affairs often affects the cost of liquidation. This involves looking at factors such as the timeline and urgency surrounding the partnership, any outstanding debts, legal considerations, and more. Furthermore, consider the different asset realization costs involved to make a sale. For example, if your items will be hosted in an in-person auction, this may entail transportation, storage, auctioneer, and advertising fees.

You will know that a liquidator is promising when they are willing to invest time into getting to know you and your company’s needs, set realistic expectations, and work together towards fulfilling these in a manner that is as efficient as possible.

Industry-fit

Liquidation companies come in all shapes and sizes.

When doing your research on potential liquidators, it is important to look at the clients they have catered to. Are they well-versed in all sorts of industries or do they tend to have a specialty? 

One of the easiest ways to discern this is to look at their websites and review sections, paying close attention to their client list. Examining the type of industries your potential liquidation partner has catered to also tells you about the potential buyers of your assets.

If a liquidator has a history of dealing with a wide range of clients, they may have a diverse set of B2B partners, marketing methods and channels, and thus potentially capable of tapping into different segments of the socioeconomic classes. 

You may consider looking for liquidators specializing in a certain industry if your assets fall into a specific niche. For example, liquidators with experience in dealing with antiques are most likely equipped with the contacts, auction houses, auctioneers, and direct buyers suited for such items.

Experience

Considering your potential liquidators industry-fit is important, especially if your assets fall into a specific category needing specialized handling and treatment. However, taking into account a liquidators experience in the liquidation industry as a whole is equally important.

Liquidation is a strategy that involves many moving parts of your business, from your business development, operations, warehousing, finances, marketing, and more. The process can become increasingly complicated and frustrating if you engage with a liquidator who lacks the significant experience needed to meet your goals.

Aside from doing your own research, one of the simplest ways to discern a liquidator’s level of experience is by asking questions. Probe your potential liquidation partner on the average cost across the market for liquidation, the price and level of service your partnership will entail, and their strategies for mitigating losses. Bear in mind that experienced liquidators must be equipped with the knowledge, operational expertise, technology, and the right connections.

Look for detailed answers when you ask how your assets will be priced, which selling channels they’ll be onboarded on to, and how you can receive reports on their movement or performance.

There are several more questions you can ask, each one varying according to the nature of your assets, industry, and short and long-term goals. 

Furthermore, a good liquidator will be transparent off the bat, informing you of pain points, bottlenecks, and potential roadblocks while also offering potential solutions to be explored throughout the partnership. Statements from your liquidator such as, “Don’t worry about it,” or “Leave it up to us,” just won’t cut it.

If you sense that your liquidator tends to deflect or takes an alarmingly long time to answer your inquiries, then you may want to rethink your partnership or look elsewhere altogether. 

Innovation

Any good business owner or entrepreneur must be constantly aware of the different market shifts and trends, emerging technologies, and other opportunities for growth. After all, part of running a successful company has to do with remaining current and constantly innovating. Why should your potential liquidation partner be any different?

When you’re looking for a liquidator, one thing to consider is their innovative spirit as a company. Look at how they present themselves on their website, social media, advertisements, etc. What kind of feedback has their previous clients left?

You may also be interested in considering the different channels they utilize to liquidate. If you’re liquidating excess or aged inventory in particular, ask about what different selling channels and marketing initiatives they utilize. 

Furthermore, pay attention to the recommendations they give as to how to proceed with your partnership. A good liquidator should be able to recognize what strategies and tools are most appropriate for the goal at hand. Additionally, they should also be able to think quickly on their feet, addressing any potential losses before they occur, and constantly innovating on how to recover value from your unused items or assets.

Reputation

Last but not the least is reputation. This is perhaps the culmination of all the attributes you must look for in a liquidator.

Aside from the questions and courses of action we’ve previously recommended, it may also benefit you to directly reach out to a liquidator’s previous clients and get firsthand knowledge on what their experience was like.

It is important to also consider the ease of the transaction. Was the liquidation company easy to contact? Were regular updates given to their clients? Are they capable of working on a budget? Were their financial reports and estimated value of your assets transparent and fair?

Liquidation may be a strategic way of recovering value from your unused assets, but that does not automatically make it an easy one. Choosing a liquidator who exhibits professionalism and transparency all throughout the partnership will make your decision to liquidate a good one.

Finding your perfect (liquidation) match

In this article, we’ve discussed five of what we have discerned to be the most important factors any business owner should consider when looking to partner with a liquidation company.

At the end of the day, it’s all about asking the right questions, establishing transparency and expectations from the start, and ensuring that a constant team effort is being exerted throughout the duration of the partnership.

There are several other green flags one can look for in a liquidator, but the five detailed in this article should be enough to help you start communicating and negotiating with liquidators confidently.

Liquidate your excess and aging inventory with Humble Sustainability

Humble Sustainability is a liquidation company with a purpose, having partnered with ecommerce stores, logistics providers, brands, malls, retailers, manufacturers, distributors and so much more. They accept items from a wide range of categories including high-value IT and office assets such as laptops, mobile phones, furniture, home and living appliances, and more!

If you’re wondering, “Can I liquidate my products to Humble Sustainability?” or perhaps, “How much can my company earn through a partnership with Humble Sustainability?”, then reach out to the Humble team! You may schedule a call, discuss your inventory and receive an estimate on how much value your business can recover by filling out their contact form or sending a message directly to team@humblesustainability.com.

Make your office assets and excess inventory the hero or buy sustainably-sourced items in bulk. Start your business’ sustainable journey with Humble Sustainability today! 

Send us an email: team@humblesustainability.com | Contact us through mobile: +63 915 573 9111 | Our warehouse: 664 Sgt. Bumatay St. Mandaluyong City, Metro Manila, Philippines 

The post Top five things you need to look for in a liquidator appeared first on Humble Sustainability.

In this article, we will learn about corporate asset liquidation and how it works here in the Philippines.

What is corporate asset liquidation?

Corporate asset liquidation, as the name suggests, is simply the liquidation of a corporation’s assets. For the purposes of this article, only assets with a physical form will be considered as corporate assets.

Corporate assets include all the objects and equipment owned by a corporation that has economic value, whether at the present time or in the future. These may include:

• Desktop and laptop computers used by their employees in their offices
• Tablets and mobile phones given to their staff
• TVs and monitors placed inside their office building
• Office furniture such as desks, office chairs, lighting fixtures, storage cabinets
• Machinery such as food processing and packaging equipment
• Tech equipment such as point of sale systems, WiFi routers, printers, scanners, copiers
• High-value artworks and decors in the office building
• Company vehicles

Benefits of corporate asset liquidation

Liquidating your corporate assets can benefit your company in many ways, including:

• Freeing tied-up capital in assets that are not generating enough income or profit for your business
• Increasing your business’ liquidity
• Improving your cash flow
• Clearing your office or warehouse space so you can make room for assets that generate higher income for your business
• Lowering your risk for asset damage
• Lowering your risk for theft

What is the process of liquidating a business?

Liquidating a business, specifically an insolvent business, here in the Philippines typically begins with a court announcing the bankruptcy of a company. This will allow the creditors and/or shareholders of the company to start filing their claims for payment of the outstanding debts owed by the bankrupt business.

Next, the company will assess its assets and determine their value. This may be done internally or with the help of a professional liquidation company.

These assets will then be sold and the earnings will be used to settle the debts and liabilities of the bankrupt company before it is officially shut down.

How does corporate asset liquidation work?

Corporate asset liquidation works differently for different companies, depending on their type.

Solvent businesses — businesses with more assets than liabilities — that choose to liquidate some of their corporate assets will still continue existing as a legal business entity after their corporate assets have been sold. In this case, their decision to undergo the liquidation process is voluntary; it may be a way for them to improve their liquidity so they can continue operating profitably. Their earnings from the sale of their corporate assets may be allocated for more investments in equipment, their people, products, or other assets.

But for insolvent businesses — businesses with more liabilities than assets — the decision to undergo the corporate asset liquidation process is not necessarily voluntary. In many cases, it is a last resort and one of the remaining ways for bankrupt companies to raise funds so they can pay off their debts and avoid facing legal charges brought upon by their creditors. In this case, corporate asset liquidation becomes part of their exit strategy and signals the end of the company’s existence as a business entity. Unlike solvent businesses that have flexibility on how they will spend the earnings from their sold corporate assets, insolvent businesses must use all of their earnings for one purpose only: as payment for their obligations. Once all their debts have been settled, the business is shut down.

Corporate assets that can be liquidated

There are many types of corporate assets that can be liquidated. It is best to consult with your chosen liquidation partner for the list of assets they can accept as this may vary from liquidator to liquidator.

For your reference, the following assets are generally accepted by liquidation companies:

• Unsold inventory (note that this may depend on the products you offer; perishables like food, beverages and medicines may not be accepted)
• Raw materials
• Used office equipment such as company computers, keyboards, monitors, printers, laptops, tablets, mobile phones
• Other high-value electronic items such as televisions, speakers, sound systems, point of sale systems
• Office furniture
• Office decor such as paintings and sculptures
• Company vehicles

How to dispose used office equipment

You have many options for disposing of your used office equipment. Depending on their condition, you may choose to:

1. Sell them with the help of a liquidation or buy and sell company. Choose a company that specializes in liquidating or selling used office equipment so you can have a higher chance of selling them for a competitive price.
2. Return them to the manufacturer. Some manufacturing companies accept used products from their customers for the purpose of recycling some of its parts.
3. Sell them to a recycling company. Similarly, you may look for a recycling company that can safely handle and recycle the parts of your used office equipment.
4. Donate them to another company or school. Give back to your community and simply give your used equipment away to another company or educational institution that needs them but can’t afford to buy one.

Used company computers liquidation

If your business is looking to upgrade its computer equipment, consider liquidating your used company computers first. Not only will this help you boost your cash flow but it will also give you an opportunity to recover a portion of the money you spent to buy these high-value equipment in the first place. This will help you maximize your investment on these assets and potentially increase your budget for your new company computers.

Corporate asset recovery

Some corporations have initiated their own asset recovery programs and efforts to maximize and recover the value of their assets, such as computers, mobile phones, vehicles, and other functional items that have never been used or are nearing the end of their life cycle.

There are many ways companies can implement their asset recovery programs, such as by:

1. Organizing an employee purchase program. This gives employees an opportunity to buy these assets easily through flexible payment terms (e.g., salary deduction or installments)
2. Selling. Companies can sell these assets within their network or publicly.
3. Reusing. This is suited for assets that haven’t been heavily used.
4. Recycling. There are companies that specialize in end-of-life product management; entrusting your outdated or slightly damaged assets to them will ensure their parts and components will be recycled responsibly.

Disposal of outdated office equipment

Disposing of your outdated office equipment has benefits for your business apart from revenue recovery.

While selling or liquidating your outdated office equipment will give your company that extra financial boost, there are other benefits you can gain from strategically disposing of your old equipment.

For example, you can recover the space that your outmoded equipment is occupying and use that space for new and more advanced equipment that could help improve your company’s processes, efficiency, and quality of products and services.

Office equipment liquidation

Bought too much office equipment, only to realize that your office doesn’t have enough space to hold them all? Or are you planning an overhaul or upgrade of your existing company equipment?

You may want to look for a company that provides office equipment liquidation services. This can help you recoup your investment from your current office equipment and ensure your company’s good financial health.

The post Corporate Asset Liquidation in the Philippines appeared first on Humble Sustainability.

In their desire to quickly solve this problem, some business owners decide to take matters into their own hands and liquidate their unsold inventory on their own.

Unfortunately, the process of liquidating your excess inventory is not as simple as it sounds. There are so many moving parts, such as the fluctuating economic value of consumer goods, changing customer behavior and preferences, and inflation, to name a few.

This is exactly why we think inventory liquidation is best left to the experts! Since liquidation is a process that can get complicated pretty quickly, we think it is best to involve a professional who knows the ins and outs of inventory liquidation for you to reap its maximum benefits.

What is liquidation, anyway?

Kenton (2023) explained that liquidation is a process of putting your excess items into good use, such as by selling your assets to clients in order to gain revenue. Businesses turn to liquidation when they are struggling to sell their products and they are determined to recover value from them. During the liquidation process, businesses typically sell their assets below their market value. The goal is to sell these items quickly, after all, and the lower the selling price of your goods, the more attractive they are to customers, and the higher the chances that they will be sold faster.

Now, putting your company’s assets up for sale is not as simple as holding a garage sale at home. If you are really serious about recovering the value of your assets, then partnering with a credible liquidation organization is the most logical step for you to take. Not only will it increase your chances of generating the most revenue out of your assets but it will also reduce your risk of earning less from your assets and encountering unwanted problems that you may potentially encounter if you handle your own liquidation.

Four reasons why you should leave inventory liquidation to the experts

Without further ado, here are the four reasons why you may want to consider letting the experts handle your inventory liquidation:

1. You will get better liquidation results because of their expertise.

Many companies end up handling the liquidation of their own items, believing this will be cheaper and more efficient for their company’s growth. After all, these are their own products and they know how best to generate value from them.

But, do they?

A blog by Spoiler Alert (2022) revealed that most companies involved in consumer packaged goods (CPG) have a higher tendency to get poor results — recovering only 50% or less — -from their liquidation efforts due to poorly thought-out, in-house liquidation programs.

Source: Spoiler Alert. (2022). 6 Insights into liquidation and automation. https://blog.spoileralert.com/6-insights-liquidation-report

Here’s another alarming statistic: only 18% of companies think they have superior liquidation programs.

Source: Spoiler Alert. (2022). 6 Insights into liquidation and automation. https://blog.spoileralert.com/6-insights-liquidation-report

Liquidation experts have experienced handling the ins and outs of the whole liquidation process for various clients. Partnering with them will give your company less risk for costly mistakes and a higher chance of recovering maximum revenue out of your assets. Take note that there are also certain procedures regarding the liquidation process which only experts in this field can handle (and derive successful results from).

2. You can get better liquidation results with the experts’ use of advanced technologies such as AI and automation.

Let us remember that our world is constantly moving towards innovation and technological advancement. Liquidation, then, is not just about finding actual buyers and selling your items to them. To achieve greater success in your liquidation efforts, you may also want to utlilize strategies that deal with automation.

Some liquidation experts utilize state-of-the-art technology like AI tools and automation to deliver their services to their clients. That means you can also tap into these technologies — and reap their benefits — if you choose to partner with them. AI and automation can benefit your company by saving you from engaging in time-consuming processes and helping you determine which of your products are still in demand — all in a matter of minutes! With the help of AI machines, you can employ better management procedures that will assist your company in generating higher profits.

Need an example? Most companies in Japan receive better profits because of their use of AI machines that contribute to their efficient operations and management.

Of course, not all companies have the means to invest in their own AI tools and automation equipment. This is another benefit of partnering with a liquidation expert that uses these technologies: you don’t have to invest in your own AI tools, but you can still experience the rewards that they offer.

3. You will stress less as partnering with a liquidation expert is more convenient. Given that liquidation is complex in nature, it is no surprise that many business owners tend to mismanage this process. Add to that the fact that they are not experienced in this field and they already have a never-ending pile of tasks to ensure their business runs smoothly. It is no wonder why business owners end up mismanaging or getting a poor result from their in-house liquidation activities!

Can you imagine? On top of your day-to-day tasks, you still need to check and sort which of your items can be sold, research how much you should sell them for, look for buyers, and organize the actual selling event? Surely, there are other tasks that you need to prioritize more in your business!

Yes, liquidation is a time-consuming and complicated process that requires regular coordination between your in-house sales, operations, marketing, and finance teams. If you want to just focus on the more critical aspects of your business, you may want to consider partnering with a liquidator who can help lighten your load and take this huge task off your plate.

Here’s a fair warning: the complication of handling your inventory liquidation on your own could lead to insolvency, insufficient cash flows, and worse, total bankruptcy. This applies particularly for businesses that have no knowledge or prior experience with liquidating their inventory.

4. You can gain more connections (and potentially sales) in less time. Forming an alliance with a liquidation expert can have a bigger return to your company’s growth and development.

With a liquidation partner on your side, you may find it easier and faster to sell your assets. Why? Because liquidation companies already have a network of buyers who may be interested in your items!

Of course, there is nothing wrong with trying to establish your own network of buyers. Just remember that in order for you to build a strong and stable network, you would have to attend various events and networking sessions. Perhaps more importantly, you need to remember that building a strong relationship with your buyers will take time.

So if you want to save time and increase your chances of selling your items faster, consider letting the experts handle your inventory liquidation. Not only will this save you precious time which you can allocate to your other tasks but it can also be an opportunity for you to obtain new clients for your business!

 

Let the experts handle it

If you have items you are struggling to sell and you know that your resources — whether that’s time, knowledge about the liquidation process, manpower, or all of the above — is very limited, then it may be best to just let an experienced liquidation partner help you in recovering value from your inventory.

Partnering with a liquidation expert can give you better liquidation results because of their expertise and technology, lessen your stress, and widen your network while generating the revenue you hope to achieve from your excess inventory and assets.

The post Four reasons why inventory liquidation is best left to the experts appeared first on Humble Sustainability.

One essential factor of a business that can determine its success or failure is inventory—more specifically, your company’s capacity to practice good inventory management. After all, inventory is one of the most valuable assets of any business. Procure too little and your capability to cater to your customers’ needs are compromised, resulting in them doing business elsewhere, and a loss of potential sales. However, there is another common problem that businesses have to contend with: purchasing too much stock.

The inventory dilemma

The problem of excess, aged, or returned inventory is a costly one.  In fact, towards the end of 2022, materials supplier Avery Dennison reported that about 8% of excess stock would ultimately end up being wasted and about $163 billion of inventory is being disposed of annually With the supply of products exceeding the demand for them, businesses are also left with little room to grow and inbound new and more in-demand products due to a lack of warehouse spaces.

Furthermore, as a business owner, one has to be conscious of the limited shelf life that inventory possesses.  Now, this is different from the expiration dates most perishable goods come with because despite your stock being non-perishable , they still come with a ‘sell by date’ before they become what we call aged and dead stock. 

We have a separate blog detailing all the different sorts of inventory your business should be concerned with but for a quick recap, aged stock refers to items that have been in your warehouse anywhere between 60, 90, and 180 days.  Also called slow-moving inventory, these are items that have a slow turnover rate either due to being seasonal in nature (such as Christmas decorations) or simply having low demand due to the quickly changing shifts and trends in the market. 

On the other hand, the term dead stock, also known as obsolete stock, can be used to refer to your inventory that has surpassed the 180-day mark. Dead stock refers to items that are especially difficult to sell due to them being damaged or outdated.  Unless you are able to find buyers with a particular interest in these types of items, the chances of getting a return on the investment you shelled out for these items are slim to non-existent.

The bottom line is, carrying these sorts of inventory can quickly become costly.  Not only do you have to contend with unrecovered investments but also the rising storage costs it takes to house such inventory in your warehouse. Clearly, there is a need for a solution that addresses both these problems.

Liquidation: An easy catch-all solution?

Enter liquidation, the process whereby enterprises or corporations sell their inventory and/or assets in order to pay off outstanding debts and obligations, smoothen their operations, make (financial) room for growth and expansion, among many other reasons. Liquidation is often thought of as a bankrupt company’s last resort. However, the many aforementioned benefits have made it an attractive strategy even to thriving businesses – especially as a solution to the many problems related to excess inventory.

However, one should beware of jumping the gun too quickly. While yes, liquidation is a feasible solution, it can quickly devolve into just another dilemma in and of itself when not planned for and executed properly. Don’t get us wrong, there is absolutely nothing wrong with deciding to do your liquidation in-house. After all, no one knows the ins and outs of your business better than you do. However, there are certain situations you may find yourself in that indicate that your company may need the help of a professional liquidation company. If you are second-guessing whether it’s time to call and seek the help of a liquidation expert, then here are the tell-tale signs that you need to look out for.

Signs you need the help of liquidation experts

You have no idea what to do with your assets

Let’s begin with one of the more obvious signs: when you find yourself wanting to liquidate but have no idea how to kickstart or go about the process. While we wish liquidation was as easy as pricing or repricing your assets and putting them out there on the market, it is much more nuanced if the desired result of recovering value is to be achieved.

There are different approaches that may be taken to liquidation depending on your industry, resources, budget, goals, and many other factors. Rather than spend an excessive amount of time mulling over what to do with your assets, researching the different liquidation methods you can explore, directly speaking and filtering interested parties, and essentially learning “Liquidation 101” on your own, wouldn’t it be so much simpler to have a third party do all that (and more) for you and your company?

Liquidation experts are equipped with the experience and resources required to assess and value your assets according to their current market value, recommend the right courses of action to take, and ensure that your assets are made visible to the right buyers.

You are struggling to find a demand for your merchandise

This is a situation you may find yourself in, especially if you’re liquidating excess, aged, or returned inventory.

Before you give up all hope on recovering a profit from your items, you may want to enlist the help of liquidation experts first. When you onboard a professional liquidation company, you gain access not only to their expertise and direct resources but also to their vast network of suppliers and buyers of different sizes and industries.

In addition, these companies will also often include an analysis of your items and their current status to come up with strategies to help them sell better. Are they slow moving due to uncompetitive pricing? Liquidators can aid by surveying the current market value of your assets and ensure that it is priced competitively. Perhaps it’s not the item itself that is the cause of no movement but rather a lack of exposure. These experts may recommend different strategies appropriate to your needs. This can be anywhere from onboarding your items onto different sales channels, a change in marketing strategy and promotion, a rebrand, and so much more. 

Or maybe you just can’t seem to connect with buyers in industries that may have a need for your merchandise. Liquidation companies, after working with many other organizations and enterprises, often come with an impressive network of buyers and sellers – one of which may just be what your company is looking for.

Your operations are being interrupted

We like to emphasize that liquidation is one of the more straightforward ways to recover value from your company’s overstocked, aged, or returned items.  However, as previously mentioned, this doesn’t necessarily mean that the entire process is easy. 

Managing the different moving parts involved in liquidation, from valuing your merchandise to finding buyers can quickly get out of hand, eating away at manpower that puts your daily operations at risk.

Liquidation is a process that often requires full and regular coordination and cooperation between your company’s different departments. Leave out one of the teams and your pursuit may collapse before it even hits the ground running. 

However, it’s also important to consider that your business’ operations don’t stop simply because you choose to liquidate.  You still have customers to sell, clients to meet, inventors to entertain, incoming inventory to sort, and so much more. 

Amidst the different moving parts involved in liquidation, it’s highly likely that you may miss something along the way resulting in roadblocks or worse, a mistake that incurs financial consequences.

Partnering with a liquidation company not only lightens your load but ensures that a whole separate team is managing the entire pursuit, addressing problems as they arise, and ensuring that all the necessary departments are kept up to date. This allows your business to keep running as usual and gives you greater peace of mind.

Your business keeps accumulating losses

The main reason why your business may have entered liquidation is to prevent further losses to your capital and to gain back some of the resources invested in your slow-moving assets.  Now when your pursuit into liquidation results in the opposite, there is no clearer sign that you may be in need of professional help.

This can happen when, in pursuit of finding buyers for your assets, your inventory is priced below their market value, you onboard your items onto platforms that reap little to no sales, you spend on non-targeted advertising, and more.

We’ve also briefly mentioned increasing holding costs as one of the consequences of harboring excess, aged, or returned inventory. Essentially, these costs are made up of the different resources you use to keep your inventory in working condition. These accumulated costs may result in losses the longer you hold onto your slow-moving assets while pursuing in-house liquidation.

Partnering with a professional liquidation company ensures that no time and resources are wasted thanks to their knowledge and connections, resulting in an efficient and seamless liquidation process.

Your business is looking to grow, expand, or diversify

We’ve said it once and we’ll say it again: holding onto unmoving assets ties up your cash flow!

These assets hinder you from getting a return on your investment. Excess inventory or unused equipment lying around in your warehouse or storage unit essentially equate to less room for pursuing opportunities that may lead to growth. 

Partnering with a liquidation company helps recover some of your invested capital and allows you to put it to better use whether that be in the form of new equipment, development of new products, purchase of more in-demand inventory, hiring of additional manpower, and so much more.

Your business is going into bankruptcy

Of course, liquidation is an essential part of a bankrupt company’s exit strategy, acting as the last resort for the corporations to pay off their obligations towards investors, creditors, banks, and other parties. 

Shutting down a business is both a physically and mentally stressful feat in and of itself.  Enlisting the help of a professional liquidation company can aid in alleviating some of the pressure by adding an extra set of expert hands when it comes to managing the different moving parts of the business. 

Furthermore, some liquidation companies also offer the option of purchasing your assets outright, as compared to a consignment model wherein profit is only gained upon a successful sale. An outright purchase immediately alleviates you of your assets, allowing you to move your focus onto other aspects of the bankruptcy process.

As previously mentioned, these liquidation experts can also aid in the proper valuation of your assets, connect you to interested buyers, and ensure that you get the optimal results out of your goods, and fulfill your company’s financial needs.

Leave liquidation to the experts

​​Whether your business is looking to partially liquidate in pursuit of financial growth or fully sell its assets as part of the bankruptcy process, partnering with a professional liquidator is one of the courses of action that can produce the most optimal results.

In summary, by partnering with these liquidation experts,  your company saves on time, finances, and manpower. In return, you gain access to their vast knowledge and expertise on liquidation, network of suppliers and buyers, innovative solutions, and of course, consultations that result in a liquidation process tailor-fitted to your specific and unique needs.

We mentioned at the beginning of this blog that the goal of every business owner is to ensure that their company runs smoothly. By enlisting the help of a professional liquidation company, that goal is shared, your resources are increased, and the likelihood of your assets being sold has been doubled. Save on time, energy, and resources by leaving your liquidation to the experts.

The post Tell-tale signs you need the help of a professional liquidation company appeared first on Humble Sustainability.

Product returns are often encountered when a sold item does not meet a customer’s expectations (e.g., damaged, defective, not looking as advertised, wrong size/specification received). But how does this process actually happen? Is it as simple as customers simply returning their ordered products to the seller and getting a refund? Are customers always right when it comes to this issue of product returns, and up to what extent? What are the companies doing with these returned items?  And what is the impact of product returns on their businesses and our environment? We will answer all these questions in this article!

Generally speaking, customers think they have every right to jumpstart this process of returning their ordered items. After all, they paid for it, right? 

However, from the company’s viewpoint, returned items equate to lost revenue and additional overhead expenses. In fact, the increasing number of product returns, particularly in e-commerce, is alarming on many levels. 

Of course, you as the business owner want to prioritize your client’s satisfaction. To make your business sustainable and profitable, you need to deliver excellent after-sales service, a significant part of which is how you handle the return and refund requests of your customers. If you haven’t addressed or formulated any refund policies for your company yet, it may be a good idea to start doing so now. 

It is tempting to think that return policies are easy to enforce, especially if you have a system and manpower already in place to handle this issue. Once your customers return their products, simply provide them with a new one or give them a refund. How hard can it be? 

In reality, dealing with returns is not that easy. In fact, the whole process of returning products and refunding customers is much more complicated than you might think. What exactly makes returns a costly, long drawn out process? 

Let us dive into it!

The Surface Issue of Returned Products

In a 2019 report by Practical Ecommerce, there is an underlying issue in this returned products conundrum. With the rising influence of digital platforms in the consumer market, only 5 to 10% of physical returns are reported, while online returns can reach as high as 40%. What about the remaining numbers? Where did they go? We can only imagine how this number increased during the height of the COVID-19 pandemic, and where these returned products ended at. Recycled? Sold to other customers? We hope so. 

Customers enjoy shopping online because it offers many benefits such as  the convenience and comfort of shopping whenever, wherever; vouchers; product and shipping discounts; and promos. But in their view, nothing beats the ease of returning items to their respective sellers in determining their online shopping experience (Kaplan, 2019). Online sellers, in particular, are also expected to deliver the best customer service  as the e-commerce industry continues to grow exponentially in the new normal.

From 2019 to this post-pandemic era, online purchases—particularly for items in the fashion, personal care, and electronics categories—-have seen an influx of consumer returns. For instance, Zalando, a fashion company garnered over 50% of returned items, which is half of their sales in the past months (Runeberg, 2021). Having easy return policies creates a positive impact on customer loyalty because it creates the impression that your brand is prioritizing your customers’ rights. But should companies always accept customer requests for returns, with no exceptions?

Returned items or fraudulent acts? 

Sellers who accept returns face the risk of being cheated or being victims of fraud. Considering that the majority of companies will do anything to maintain their customer’s loyalty, offering free and easy returns has now become the standard and the norm. Sadly, some customers take advantage of this benefit, as the table below shows. These return issues have caused a panic in many companies because of the revenue they have lost due to these cases of return fraud. 

Source: Appriss Retail and National Retail Federation. (2021). Consumer Returns in the Retail Industry 2021. https://cdn.nrf.com/sites/default/files/2022-01/Customer%20Returns%20in%20the%20Retail%20Industry%202021.pdf 

Appriss Retail and the National Retail Federation (2021) reported that the most returned fraudulent items are wardrobes at 68.42%, followed by stolen merchandise at 56.14%. Counterfeit receipts come in at the 7th place at 10.53%. 

Now, this might be a familiar scenario to some of you. If you are thinking of that scene in Ocean’s 8, you got it right! Unfortunately, it does happen in real life. A number of companies tend to overlook the receipts and the accuracy of the item for the sole purpose of satisfying customer experience and avoiding conflict that could possibly damage the company’s reputation.

Source: Appriss Retail and National Retail Federation. (2021). Consumer Returns in the Retail Industry 2021. https://cdn.nrf.com/sites/default/files/2022-01/Customer%20Returns%20in%20the%20Retail%20Industry%202021.pdf 

In this pie graph, we see an alarming 25.64% of retailers not requiring any proof of purchase for in-store returns. Despite being smaller in number, there is still an issue with mail-in returns as 12.82% of businesses don’t ask for receipts at all!

Given this fraudulent behavior of some customers, companies must reassess their return policies and requirements to minimize their risk for experiencing fraud and suffering losses as a result. This can also help them minimize any wastage of materials and resources, which returned items notoriously come with.

Dealing with Returned Items 

Some companies with an excessive number of returned items look at their competitor’s return policies in order to strengthen their own regulations. The idea is that whoever has the easiest and most reliable refund policy must be delivering the  highest quality of customer experience. But, how do companies do it? What is the process of returning items? 

You might think this process all boils down to shipping. The same way a product was delivered, the same way it should be returned to the seller. Sounds pretty convenient, right? However, it is not always as easy as that. 

Some consumers perceive the process of returning items as accessible and convenient on their part. But, for many companies, dealing with returns is not only a hassle but also an additional expense. In a Knowledge at Wharton Podcast, Robertson (2020) mentioned that some retailers actually ignore returns for the following reasons: 

1. It adds to their excess inventory;
2. It translates to expensive shipping fees and repackaging, and; 
3. It requires an extensive analytical process.

It is easy to see and understand why these reasons push businesses to avoid or ignore returns. After all, who wants to deal with excess inventory at their company’s cost? In that case, retailers generally opt for the easier option: loosening up their strict return policies.

In the same podcast, Robertson (2020) stated that this is both an opportunity and a curse for companies. Looking at this on the bright side, easy returns pave the way for the retailer to satisfy their customers’ demands for an exceptional customer-centric service. As a selling point, easy return policies also gives your company an opportunity to sell more of your products. However, on the other side, this is considered a curse because improperly dealing with returned items has a negative impact on your bottom line, reputation, and sustainability. 

This opens an opportunity for companies to take on a more strategic approach regarding returns. The first step for retailers to progress in this aspect is for them to be willing to analyze their customers’ behavior, quality of their products and shipping processes, among others.

Need proof that this is doable? Amazon has already implemented their own strategy of dealing with returns. To avoid being a victim of fraudulent and excessive returns, they have denied accounts that have records of high returns. 

Source: Appriss Retail and National Retail Federation. (2021). Consumer Returns in the Retail Industry 2021. https://cdn.nrf.com/sites/default/files/2022-01/Customer%20Returns%20in%20the%20Retail%20Industry%202021.pdf 

To dive more into this, let us see who manages these returns. In the same report, Appriss Retail and the National Retail Federation (2021) recorded that the same department does not manage these returned items. It is mostly handled by E-commerce at 35%, followed by Merchandising at 30%. If we were to closely look at the pie graph above, we will see that 21.95% is unknown, which means that these returned items probably end up being untouched, mishandled, wasted, or thrown away, with no one to be held accountable for the manner these returns were handled upon receipt from the customer.

This creates a major problem not only for customer-seller relations but also for our environment as well. 

Returned Items Harm our Environment

Practical Ecommerce (2019) reported that over 5 billion pounds of returned items end up in wastelands each year, clearly showing businesses’ lack of strategy and/or commitment for responsibly handling their returned goods. And for those products that are received back by companies, there is still a lot of room for improvement: recent data shows that only 54% of returned goods are recycled. 

The actual back-and-forth movement of returned items—from their sellers, logistics providers, customers, then back to the logistics providers then sellers—is also harmful to our ecosystem. As a matter of fact, our planet is getting hotter every day compared to the past centuries because of this practice. Frequent cargo trips, whether by truck or plane, contribute to greenhouse gas emissions. 

How should we resolve this issue? What solutions are available?

Sadly, most retailers are opting for the easier, cheaper but most environmentally destructive option, which is burning, destroying, and shredding their returned goods instead of recycling or liquidating them. Their primary objective is to maintain their branding and sales in the market. These brands that engage in these practices clearly  have a lot to declassify in their environmental protection policies. 

On the brighter side, some brands are creating innovative solutions for handling their product returns while preserving our environment. Some companies sell them to secondhand or thrift stores at a lower rate. Others partner with a liquidation company to help them recover value from their returned items. 

The best way to eradicate the increasing statistics of returned items is for them – product returns – to cease to exist in the first place. Returning products is the major root of this, and the solution must also come from their foundation (Runeberg, 2021). That being said, individual consumers must also shop consciously and responsibly instead of mindlessly. 

Moving Forward & Closing the Gap

There are several methods available at our disposal that can help us  minimize the damage caused by returned products to our environment. Below are just three of these methods: 

1. Use Artificial Intelligence and machines. AI and machines can help brands assess the quality of their products more effectively. Given their capability for acquiring, processing and storing large quantities of data, they can help efficiently track down which products are malfunctioning or damaged. With their help, sellers can determine if their product is still sellable or not, lowering their risk for shipping out faulty items which will most likely be returned back to them.  

 

2. Being transparent. Some products end up being returned because they did not reflect what the customers saw on the product advertisement, website or online marketplace. This is a common problem that can be resolved easily. All sellers have to do to resolve this issue is to practice transparency in all their promotions and content. From the materials they have used in making the product to how it was sourced, companies that are transparent even in these details may potentially gain more benefits in the form of increased brand loyalty. 

 

3. Liquidation. Most companies are not aware that even their returned items can be a hero; hence, the burning, shredding, and destruction of their products. For a company to be tagged as sustainable and generate higher profits, making use of what you have is the key. The good news is, whether it be returned or barely used items, you can still generate revenue out of them through liquidation. Partnering with a professional liquidator can help you recover your investment from your products and clearly show your concern for our environment as well. 

While most companies that accept returns do it purely to maintain their competitiveness by providing superior customer experience, it would be a mistake if we think that this issue of handling returns is  just a customer experience issue. 

In the larger scheme of things, the way we handle returns won’t just impact our brand and how customers see us. In the long run, it will also impact our world and the generations next to come.

The post The reality of returns: the high cost and long journey of return products appeared first on Humble Sustainability.

According to Michael Baker, a retail analyst from the equity research firm D.A. Davidson, inventory is going to be the most important factor in running a business and keeping your merchandise moving in 2023 and we wholeheartedly agree. Order too little of an item and you risk products going out of stock.  Stock up on too much and you may find yourself dealing with excess inventory that you may have a difficult time selling.

This article will tackle all things excess inventory-related and why it’s a problem that you will want to avoid having as much as possible.

What is excess inventory?

Excess inventory is defined as the items in your warehouse that are left sitting around after your customers’ demands for these products have been met.

This kind of inventory dilemma can occur in different situations.

Perhaps you overshot the forecasted demand for a trendy product and now find yourself dealing with items no longer in style, and thus, sellable. Maybe you have leftover seasonal products from the holidays that you cannot afford to hold onto until the next cycle comes around. Or possibly, these items may be customer returns. 30% of all online orders usually end up being shipped back to the seller by customers, making this scenario highly likely.

Regardless of how you’ve found yourself dealing with excess inventory, the fact remains that they are taking up space in your warehouse and costing your business money. The problem with holding onto your excess inventory for too long is that they slowly depreciate in value and their risk of becoming unsellable increases. Sooner or later you may find yourself dealing with a loss due to dead stock.

However, do note that not all excess stock is detrimental to your business.

Safety stock, also called buffer stock, refers to the excess quantity of certain products that businesses store in their warehouse in order to prevent an out of stock situation. Declaring your items as out of stock, especially during the middle of a sales promotion, can disrupt your sales momentum and result in missed sale opportunities. Upon seeing that  your item is no longer available, your customers will turn to your competitors  that have enough inventory to fulfill their needs. Consequently, having safety stock means quicker replenishment and fulfillment of orders, which leads to your customers’ improved  buying experience.

Keep in mind that there is a thin line between having safety stock and an unhealthy amount of excess inventory, and this line is easily crossed as a result of poor inventory management or forecasting of demand. Not even the biggest retailers such as Walmart, Target, and Gap, are safe from  having excess inventory. Reports have stated that items that used to sell quickly no longer experience the same level of demand, now ending up on clearance racks.

What could be the cause?

The next sections of this article will discuss the common causes of unhealthy excess inventory, why you should avoid it, and what you can do to prevent your business from having to deal with it  in the first place.

Causes of excess inventory

Gaps in reports and forecasting

Forecasting consumer demand can be tricky in and of itself due to the amount of unpredictable variables involved. Trends change quickly and consumers’ preferences can shift within a couple of months, as clearly shown by the  pandemic.

Many big retailers placed expedited orders on large quantities of products that had previously flown off their shelves during the peak of the pandemic. However, consumers’ tastes had changed as restrictions eased up and lifestyles started reverting back to the pre-pandemic norm.  

As a result, merchandise piled up and companies found themselves pivoting and having to cut their forecasts to get back to healthy levels of inventory. In addition, 30% of all online orders were reported to be returned due to the same issue of fluctuating demand.

All of this may stem from a lack of centralized processes and data tracking that contributes to gaps in your demand reports and forecasts.

Seasonal demand

Offering seasonal products that are in tune with the different holidays of the year and have increased demand during these specific times is good business practice.

However, the drastic increase in demand is often accompanied by an equally drastic decrease right after the holiday celebrations end. In addition, seasonal inventory also means increased supply costs due to having to stock up months in advance. There is also the risk that the capital you invested in seasonal inventory may not return back to you in full.

Stocking up on seasonal inventory without proper planning may result in excess stock that can be difficult to sell. This difficulty stems from the demand being tied to the time-bound season, especially if the holiday the merchandise thematically falls under is a once a year event (e.g. Christmas or Halloween). 

Overcompensation due to out-of-stock avoidance

As previously mentioned, declaring items as out of stock can result in your business losing momentum on sales, especially during peak seasons and campaigns

Your customers, when faced with that glaring out of stock sign or informed that the item they want is no longer available, will not hesitate to go to your competitors to find the product they need, and the chances of them returning to your store in the future are minimal.

Businesses may feel compelled to place bulk orders on merchandise to prevent this from happening.  However,this solution won’t work if supply exceeds demand and you will be left to deal with excess stocks as a result.

Inefficient inventory management 

Relying on manual inventory counts or taking the pen and paper approach to inventory management may work during the early days of your business, but over time, you’ll be needing something more efficient and reliable.

Failing to use the right inventory tracking system can also result in inaccurate inventory forecasts and that  results in excess inventory.

Almost half of all retailers have not adopted the use of inventory management software and as a result,  encounter gaps in their awareness regarding what constitutes an overstock or understock for their business.

Disadvantages of having excess inventory

It takes up storage space

All that excess inventory has to go somewhere and that’s most likely in your very own warehouse, storage unit or stockroom.

When you run a  product-based business, your warehouse  space is almost as valuable as the stock you carry. Making the most out of this space is crucial.

What excess inventory does is it takes up valuable real estate, preventing you from stocking up on your best sellers or even carrying new items that your customers may be interested in.

It increases inventory-related costs

In relation to warehousing and storage, excess inventory also increases your inventory-related costs. These include storage costs, measures taken for inventory control and audits, as well as the labor needed to keep the warehouse up and running.

As with all merchandise, certain measures have to be taken to keep the products in good condition in the event of a sale.

Depending on your line of business, certain items call for specific maintenance conditions such as  a particular type of lighting, heating, or air conditioning.  You also need to factor in the capital you’re spending for the physical handling of the goods, insurance, and security.

All of these can add up, equating to a substantial portion of your revenue. Thus, accumulating or holding on to slow-moving excess stock does your business a disservice.

It may turn into aged or dead stock

Aged stock is defined as slow-moving products that have been stored in your warehouse due to low or no demand. 

Excess inventory turns into aged stock when it has been in storage for anywhere between 60 to 180 days from its receiving date. 

Dead stock on the other hand, is the next stage of inventory’s life cycle, occurring when products exceed the 180-day ceiling of aged stock. These  items can be unsellable due to expiration  or no longer in production. For this reason, this type of inventory is usually synonymous with a loss of revenue

Both types of stock represent tied-up capital that could have otherwise been put to more productive and profitable uses.

As you hold onto your excess inventory for prolonged periods of time, they decline in value and the profit potential they hold diminishes as they convert into aged and eventually, dead stock.

It ties up cash flow

Ideally, the capital you invest in your inventory should return back to your business in the form of revenue. This opportunity  can be lost when capital gets   tied up in these excess items.

In addition to increasing holding, storage, and maintenance costs, excess inventory can affect your day-to-day operations as a whole, representing a bottleneck in your cash flow.

According to some estimates, businesses are holding approximately $8 trillion worth of goods in their storage spaces. This is a significant amount of capital that is made unavailable for other more productive uses.

It harms the environment

Accumulating excess inventory isn’t just financially risky– it’s  harmful to our environment as well.

The problem of excess inventory  occurs in all  industries but food distribution, fashion, eCommerce, and electronic-based businesses are notorious for producing and discarding their excess inventory that they can no longer sell or donate. In fact, the fashion industry alone ends up discarding up to 85% of its excess items in landfills or worse, burning them.

Throwing away your excess stock may also tarnish your corporate image among your potential customers

Furthermore, even if these goods aren’t discarded, its mere existence and stagnation in the warehouse contributes to environmental damage. Production of new goods already uses up a good amount of resources such as energy and water. Transporting merchandise from Point A to Point B requires the use of vehicles that  produce emissions and contribute to global warming. 

Ultimately, the problem of excess stock is directly related to the issue of overconsumption of resources and the production of excess waste.

Recommended solutions to excess inventory

Sell through amped up marketing initiatives

One of the most effective strategies to sell your excess merchandise is through enticing marketing and promotional offers, such as bundling slow-moving goods with best sellers or a service.

For example, bundling car cleaning supplies with an oil change service or perhaps hair care products with a haircut makes these items more attractive to your customers who may not have even considered purchasing them.

Offering a ‘buy now, pay later’ system may also minimize your customers’ resistance to buying higher value goods, such as electronics or big appliances, solely because of their steep price point and encourage them to take the leap and purchase.

If your business utilizes eCommerce channels, consider a revamp by updating your keywords, product descriptions, and product photos that clearly communicate your goods/services and the benefits they offer.

Lastly, you may also consider offering discounts. While offering steep price drops can be counterintuitive, moderate discounts can make your products look more attractive to your customers.

Donate to charitable (and credible) organizations

If selling your excess inventory is no longer a possible option, donating to charity or thrift stores is an option that generates both a positive impact and image for your business.

Begin by finding an organization that aligns with your business’ mission and vision. Inform them of your desire to donate your items.

Next, evaluate and document the inventory that you will be donating., Once you have documented. make the necessary arrangements to ensure your  merchandise gets transported and received properly. 

As an added bonus, you can even deduct a portion of your charitable contribution from your taxable income if the proper conditions and requirements are met.

Liquidate your excess inventory

Lastly, there is always the option to liquidate your excess inventory as a way of recovering revenue.

While full inventory liquidation is often practiced by businesses approaching bankruptcy,  this strategy of selling your assets can be beneficial even for stable companies. You can select your slow moving items to ensure that your business recovers a portion of your  invested capital and remains within the healthy profit margin levels for your industry.

Remember, the longer that you hold onto excess inventory, the more it depreciates in value and eats away at valuable capital by increasing holding costs.

There are plenty of liquidation strategies that your business can initiate in-house but partnering with a professional  liquidator can  also make the process seamless and more efficient.

Tips to eliminate your excess inventory

Monitor trends

Having a finger on the pulse of consumer trends and the factors that affect it (e.g. social media, seasons, economic conditions) is crucial to predicting customer demand.

One way to do this is by monitoring search engine trends through the analysis of keywords that consumers are frequently using online. 

If you have a list of competitors you’re keeping track of, you may also want to survey how their customers are receiving their product launches, features, and services. This will help you establish a benchmark that allows for a more data-driven and strategic contrast and comparison.

Finally, monitor your own customers and listen to what they’re saying. If you have a customer service division, capitalize on the feedback that’s already been given to find out what works and what else they may be looking for.

Adapt a pre-order system

Pre-orders help businesses gauge demand for a product so they can ensure the appropriate amount of inventory is ordered to meet that demand. This reduces the chances of an overstock (or out of stock) and allows the costs of purchasing inventory to be spread out over a certain period of time, in comparison to placing a large order at once.

Furthermore, having a pre-order system is also an opportunity to generate hype around your product launch or restock, potentially generating sales for your upcoming drop.

Establish a reliable inventory management system

Inventory management systems refers to the systematic process of tracking a business’ merchandise from one end of the supply chain to another.

As your business grows, you will find that loosely tracking your stocks just won’t cut it. Inventory management systems are essential if you are to ensure accuracy and exercise control over your inventory. This can be done in all sorts of ways from a simple spreadsheet, to inventory management software, and even 360 warehouse management systems.

This system can aid in calculating profit margins, streamlining stock levels across your different channels, and eliminating any other errors that may be caused by manual inventory control.

Best of all, a good inventory management system produces data that you can use for statistical demand forecasting in the long run.

Too much inventory, too many risks to your business

Excess inventory is a problem that creates more challenges for your business, from decreasing your storage space, increasing inventory holding costs as well as your risk for having aged or dead stock.

If you need help in managing your excess inventory, consider partnering with a professional liquidation company with an expertise in recovering value from excess items.  

The post Too much inventory is bad enough: Why you should avoid having excess inventory appeared first on Humble Sustainability.

Some things get better with age. Your inventory is not one of them. 

What is aging inventory and why does it matter?

As a business owner, striking the balance when it comes to inventory is important. Place too little of an order for your  products and you risk the chance of a stockout, resulting in lost momentum for your sales and disappointed customers moving to your competitors. However, if you order in excess, there’s a high chance you may find yourself struggling to sell all of them and dealing with a case of aging inventory.

Aging inventory, also called slow-moving inventory,  includes all the items that have been sitting around in your warehouse for months.These items are not  generating  the profits you expected due to their slow or no movement. 

Ideally, non-perishable inventory is distributed or sold somewhere between one week up to 90 days from the receiving date. Of course, if your business deals with perishable goods, their  shelf life  is even shorter. When an item reaches 180 days old in your warehouse, it is considered dead.  Dead stock represents irrecoverable lost capital and refers to inventory that has become obsolete and is no longer sellable.

But what about the period in between? 

That’s where the parameters of aging inventory comes in, which is  60 up to 180 days from its receiving date. Unlike dead stocks, it’s not too late to do something about these items. However, allowing your inventory to age does come with certain risks, as will be discussed in the section below.

The risks of carrying aging inventory

It takes up warehouse space

Having  pallets of aging stock can easily clutter up your warehouse and limit your restocking capacity. Every aging product that is sitting on your shelf, no matter how big or small,  takes up valuable space that could have been allocated towards new or better-selling items that  generate revenue for your business.

It restrains your cash flow

Ideally, the life cycle of your stocks should move on a first in, first out (FIFO) basis, looking something like this: Acquire, store, distribute, and acquire again. The FIFO method operates on the reasoning that inventory has a shelf life and will either expire, especially if the products are consumable, or become obsolete due to loss of value. Thus, adapting a FIFO approach contributes to the reduction  of aging inventory since the oldest goods get shipped out to customers first.

However, aging inventory can throw a wrench in this process by restraining your cash flow. Instead of your working capital going towards developing new products, increasing manpower or acquiring  fast-moving goods, aging inventory can  increase your holding costs and result in higher labor and insurance charges.

It depreciates in value

The longer your inventory sits around your warehouse, the more difficult it becomes to sell. In addition, the chances of it being sold at the  full retail price grows slimmer and slimmer by the day.

The solutions 

As previously mentioned, not all aging stock results in a complete loss. Here are a few strategies that may help your business free up space and  recover what you spent to acquire them in the first place.

Sales, clearances, and bundles

Having aging inventory may be an indicator that  you need to rethink your promotions.

Sales, clearances and bundles are great opportunities to clear out your aging stock. Take advantage of the holidays and occasions such as back to school, the start of summer or Christmas among others to  highlight the relevance of your items.

Another route is to bundle your best sellers and slow moving items together or attach steep clearance price drops to stocks that are nearing the end of their lifetime. If your business has a rewards or cashback system in place,  try attaching double the reward points to your slow moving goods to make them more appealing to your customers.

Switch up your marketing and promotions

Aside from in-store promotions, pursuing new marketing initiatives can also aid in getting rid of aging inventory. One common initiative is running competitions directed towards goals outside of sales.

For example, you can run a social media contest with a selection of your aging stocks as the prize. If you make following the page and liking and sharing the post a parameter of the game, then you have an opportunity to boost your online presence on top of getting rid of your aging stocks.

If you want to build your brand’s database of ambassadors and influencers, you can also add your aging stock into a press or PR kit together with some of your brand’s essentials and send them out to your leads.

Liquidation 

Finally, if purchasing external space isn’t an option, the promotions and bundles aren’t working, and your marketing initiatives don’t seem to resonate with your customers, there’s always the option to liquidate.

Liquidation is the process of converting your assets into cash. In this case, those assets are your slow-moving goods. Selling your items to a liquidation company is one way of clearing up your space and recovering revenue from your stocks that would have otherwise gone obsolete.

Tips to avoid having aging inventory in the first place

Use your inventory’s average age data to improve your demand forecasting

Knowledge of your stock’s average age helps you anticipate your customers’ demands, improving demand forecasting and future purchasing decisions.

Get to the bottom of your low sales volume

Once you are able to identify the goods that are not selling as fast as you expected, you can move onto identifying the reasons why. 

Are certain items seasonal, selling better during summer or rainy days? Perhaps your product is getting lost in all your SKUs and you need to improve their website or eCommerce placement? Trends caused by the media are also powerful swayers of customer demand.

Understanding why items aren’t moving as fast as you want them to allows you to align your current marketing initiatives and purchasing decisions so you can get better results.

Inventory audits 

Routine inventory audits ensure that all your stock is accounted for and existing financial records match what is physically available in your warehouse. 

Financial and physical warehouse alignment gives insight into your stock flow, allowing you to smooth out any bumps in the process and increase the visibility of your items that may not be experiencing any movement.

There are multiple ways of going about your inventory auditing procedures such as physical inventory counting, high-value item inventory analysis, direct labor analysis, and more. However, there are a few key steps you may consider taking in order to produce a comprehensive report:

• Prioritize which items need auditing. Experts recommend that high-risk inventory items be audited more frequently.
• Create an inventory auditing schedule since it can potentially disrupt your day-to-day operations.
• Prepare the necessary documents  such as inventory lists and financial statements ahead of time.
• Conduct, report, and condense the findings into a comprehensive and understandable report

By the end of your audit, you will have valuable data that can  guide your budgeting and purchasing decisions, identify any inefficiencies in your stock keeping process, and account for the items that may be damaged, forgotten, or lost.

Inventory aging report

Also called an aged stock report or stock aging report, this is a financial report that provides insight into the average number of days your inventory has  been sitting in your warehouse. Essentially, it  reveals information  about your business’ financial health. In addition, it allows you to pinpoint which items are slower-moving in comparison to others. 

This report will guide your strategy moving forward through the following:

• Allows for a more accurate forecasting of your customers’ demand
• Results in better purchasing decisions
• Reduces your financial risk 
• Minimizes your risk not only aging inventory but also dead stock
• Gives insight into your inventory turnover ratio
• Maximizes knowledge on storage costs and inventory control strategies through quantitative data

The inventory aging report can greatly benefit you and your business. However, there are a few key metrics and formulas you need to know.

The inventory formula cheat sheet

Average Inventory Cost

The average inventory cost formula is your business’ annual cost of goods divided by the total number of inventory you have on hand. 

The formula looks something like this:

• Average Inventory Cost = Annual cost of goods/Total inventory on hand

Calculating for this metric gives you better insight into whether the amount of inventory your business is carrying is beneficial or detrimental to your net income. Furthermore, comparing average inventory costs between two different periods also helps you identify spikes and dips in your sales which may have been caused by shifts in the market, shipping costs, seasonal changes, and more.

Cost of Goods Sold (COGS) 

The cost of goods sold tells you how much your products take to produce, taking into account direct expenses such as raw materials, supplies, and labor.  

The formula is as follows:

• Cost of Goods Sold = (Beginning Inventory + Stock Purchases ) – Ending Inventory

The beginning inventory is what you already had at the start of the accounting period.  Purchases account for the cost of additional stock you had to buy. Finally, the ending inventory is defined as whatever is left unsold.

Carrying Cost 

Carrying cost is the total sum your business pays to keep products in stock. This covers everything from the rent of the warehouse and the labor of its employees, insurance of the inventory, and any losses or damages that might happen.

Carrying costs can be anywhere from 15% to 30% of the value of your company’s inventory. For the sake of your business’ profits, this metric shouldn’t exceed 30%. 

The formula is as follows:

• Carrying Cost = Inventory holding sum / Stock value x 100

What this figure tells you is how long you can keep certain items in stock before they start being unsellable and lead you to  losses. In addition, understanding the cost of the inventory you have helps you make more data-driven decisions regarding ideal inventory levels and while also informing your long-term inventory planning.

Days to Sell Inventory (DSI)

The days to sell inventory also called the days sales of inventory (DSI) is a straightforward financial metric that tells you how much time it takes your business to convert inventory to sales. It helps you keep track of the speed in which your stock moves through your business. 

The formula is as follows:

• Days Sales of Inventory = (Average Inventory/Cost of Goods Sold) x 365

The general principle is the lower the average number of days, the better. This means that your inventory generally does not sit around in your warehouse for an extended period of time. Businesses can use this metric to set the necessary changes that will increase liquidity and decrease holding costs.

Sell-through Rate 

The sell-through rate is the total amount of inventory that has been sold to your customers over a certain period of time. It is a strong indicator of your inventory management, giving you insight into the profitability of your goods.

The formula is as follows: 

• Sell-through Rate = (Number of Units Sold/Number of Units Received) x 100

The average sell-through rate is anywhere upwards of 40%, with 80% being the desired percentage. Understanding the importance of this metric is key to accurately planning and predicting how much stock your business will need and how you can go about improving your sales performance.

Inventory Turnover Ratio

The inventory turnover ratio is the amount of stock that your business has sold, used, and replaced during a specific time period. It can also help you forecast the number of days it will take for your remaining inventory to sell.

The formula is as follows: 

• Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory Cost

The general rule of thumb is the higher the ratio, the better. A low ratio may be an indicator of overstocking or weak sales. 

Tracking this metric helps you evaluate whether your business is effectively managing your assets. This will also guide you in making better decisions, ranging from purchasing to pricing. 

Managing your aging inventory

Keeping track of your business’ aging inventory helps you minimize your chances of having piles of obsolete stock and permanently losing your investment. To better manage your aging inventory, we encourage you to use the formulas we shared above so you can make data-driven decisions moving forward. You may also try applying the solutions we mentioned to help you generate sales from your aging inventory. 

With the proper planning, more accurate forecasting of customer demand and a lot of creativity, avoiding having aging inventory and managing them is easier said and done.

The post Aging inventory: risks, solutions and tips to avoid them in the first place appeared first on Humble Sustainability.

Manufacturers, wholesalers and retailers alike will tell you that their business inventory—defined as their stock of products—is one of their most valuable assets. After all, if you have zero inventory, you will have nothing to offer your customers. The result? Zero sales and income. 

Running a profitable product-oriented business requires healthy levels of inventory. This means getting good at understanding the law of supply and demand as well as being prepared for the many uncontrollable factors that affect this relationship, such as consumer behavior and trends, inflation, government regulations and taxes, among others.

We can’t do anything about these unpredictable factors, but we can educate ourselves on proper inventory management strategies to help us mitigate their risks. A good start would be knowing which types of inventory are good and harmful for your business. 

Inventory insights

As your business grows, you’ll come across situations that will reveal to you some gaps in how you manage and understand your inventory.

You may have ordered way too much supply of a particular product and felt pressured to sell them all, even at break-even or at a loss. You may have ordered a smaller quantity for a product that your customers are looking for, eventually losing them to your competitors who carried more stocks of that same product. And so on.

Aside from challenging your inventory forecasting skills, these situations also teach you that not all inventory is good for your business. The fact that you have pallets of an item in your warehouse is not always and not necessarily a good thing. There are certain types of inventory that are helping you achieve your business goals just as there are types that are pulling you away from them and costing your business more money than they should.

But here’s what we discovered: searching for “types of inventory” online will usually yield the following results:

• Raw materials inventory
• Work-in-progress inventory
• Maintenance, repair and operating (MRO) inventory
• Finished goods inventory

These are all correct as they are also types of inventory in business. But there’s another classification of inventory that we need. The one that answers the question: “Which types of business inventory are helpful and harmful for my business?”

That is exactly the question that we tried to answer in this article.

You’ll see below the different types of inventory which we classified according to whether they are beneficial (the good), detrimental (the bad) and financially burdensome (the costly) to your business. To enlighten you further, we gave relatable examples for each type and explained why they belonged under each of these categories. 

The good

Anticipation inventory

Anticipation inventory, as the name suggests, refers to inventory that business owners keep in anticipation of or in preparation for a surge in demand for their products during an upcoming campaign or sales event. These campaigns and sales events usually coincide with holidays and celebrations such as Christmas, Father’s Day and Mother’s Day, to name a few. 

Anticipation inventory is also called smoothing inventory. If we use a line graph to represent your customers’ demand for your product, then a sudden spike in demand for your product will be represented by a peak. Your smoothing inventory is meant to smooth out these sudden fluctuations to ensure your business can accommodate these seasonal surges in demand.

A good example of anticipation inventory would be the additional bouquets of roses that florists keep in their shops days before Valentine’s Day. Another example would be the boxes of products that e-commerce stores stock up on in preparation for Cyber Monday.

Why this is good: Anticipation inventory helps minimize your chances of running out of stock for popular products and missing out on many sale opportunities during periods where your customers are most likely to buy. Planning ahead for these seasonal celebrations and referring to your past sales data can help you forecast with better accuracy how much anticipation inventory you should keep in your warehouse. 

Buffer inventory 

Buffer inventory (also called buffer stock, contingency stock or safety stock) refers to inventory that business owners keep in case of emergencies, unexpected delays in shipment and unforeseen spikes in demand. They come in handy for any unexpected situation that may arise and disrupt your order fulfillment process.

Why this is good: Like anticipation inventory, buffer inventory lessens your risk of experiencing stockout and losing revenue during times that your customers are ready to buy your product. Buffer inventory also ensures you have enough supply to offer your customers should something go suddenly wrong in your supply chain, such as transportation delays caused by protests of cargo drivers, for example. Lastly,  keeping buffer inventory enables your business to serve more customers at the time of their greatest need and positions you ahead of your competitors.

Healthy inventory

Healthy inventory refers to inventory that has not yet aged and is still within the “healthy age” parameters. The experts’ recommendation of a healthy age of inventory is 30 to 60 days but some extend it to 90 days. Clearly, these figures only apply to non-perishable goods such as books, consumer electronics and fashion accessories. Perishable food items such as bread, fruits and vegetables have a much lower threshold.

It is worth noting that different industries and companies have their own standards for how long a product should stay on their shelves. The above figures are just general recommendations and should not be viewed as the rule.

If we are to follow these recommendations, then an example of healthy inventory would be freshly harvested bananas which you sold within a week after receiving it from your farmer supplier. Another example is a box of T-shirts which you sold one month after the wholesaler delivered it to your warehouse. 

Why this is good: Healthy inventory is more profitable than aged inventory. Since they are fresher and newer stocks, you can maximize your profit on these items more than with the older items in your warehouse. Products that fall within your healthy inventory category are also more attractive to your customers and thus, easier to sell, as consumers typically prefer items that are new and have just arrived in stores. 

The bad

Dead inventory

Dead inventory, also known as aged inventory, dead stock or obsolete inventory, refers to inventory that a business can no longer sell. Products unsold for more than 180 days are generally considered dead stock, but as with healthy inventory, it is ultimately up to the company itself to decide what makes their inventory dead or how many days it should spend in the warehouse before it can be classified as dead inventory.

The reasons why inventory becomes unsellable may include:

• changes in customer preferences
• damages to the product itself
• expiration
• flawed inventory forecasting and management
• sudden shifts in the economic and political environment 

A fairly recent and local example of dead inventory would be face shields. Here in the Philippines, face shields were initially required by the government to be worn on top of face masks to curb the spread of the coronavirus. But last November 2021, then-President Rodrigo Duterte announced that the use of face shields is no longer mandatory in many parts of the country. Businesses selling this particular protective gear were caught off-guard by his announcement and suddenly left with stocks of face shields that are no longer needed by the public. 

Another example of dead inventory would be fruits containing worms and leafy vegetables infested with pests. These are no longer safe for consumption and are considered unsellable.

Why this is bad: Dead stock represents investments that are impossible to recover. Unless you can find buyers for your outdated, expired or damaged stocks—who will usually buy these goods at extremely low prices—the chances that you could get a return on your investment for these items are almost non-existent. 

On top of selling these items at a loss, carrying dead stock also increases your inventory carrying costs (all costs related to storing unsold items, including depreciation, handling, insurance, opportunity costs, shrinkage, taxes, transportation, wages and warehousing) and takes up precious space in your warehouse—space that could’ve gone to your other products that actually bring in money to your business.

Dead stock also comes with health and safety risks. Perishable items left rotting on your shelves will attract pests like cockroaches and rodents, which may also jeopardize the quality of your healthy inventory. Damaged items may also compromise the safety of your staff while they are transporting and storing them. From leakage to detachment of parts that could result in trips or falls, storing broken items may lead to accidents in your warehouse and increase your liabilities. 

The costly

Aging inventory

Aging inventory refers to inventory that is no longer considered healthy but is not yet old enough to be considered dead or obsolete. If we are to follow the general recommendations for the healthy age of inventory and dead inventory, then aging inventory would be stocks that have been in your warehouse between 60 or 90 days and 180 days.

Aging inventory is also called slow-moving inventory: items that do not sell as quickly as you predicted and have a slow turnover rate. 

An example of aging inventory is the stock of raincoats and rain boots in a department store after the summer season began. Since the demand for these items is low during the summer months, you can expect them to stay in your warehouse until the rainy season comes and the demand for them picks up again. A second example of aging inventory would be outdoor sports and recreation equipment during the height of the coronavirus pandemic. Since many governments mandated their citizens to stay at home during this time, these outdoor equipment were left to age in  warehouses until restrictions eased and people were allowed to spend time outdoors again. 

Why this is costly: The older the age of your inventory, the more expensive it becomes. Of course, carrying any type of inventory comes with its own costs, but the caveat with aging inventory is there’s a fair chance you will not be able to recover your investment.

Aging inventory is usually sold for less than their retail price, which means less profits for your business. Generally speaking, customers have a preference for newer items, unless they’re into outdated or vintage products. If you have a lot of aging items, then that means your business is at risk of losing money and having a negative bottom line. 

Excess inventory

Excess inventory, also called overstock, refers to inventory with a quantity that exceeds the actual demand of your customers. This is usually the result of inaccurate forecasting of consumer demand and poor inventory management. 

In the case of a grocery store, an example of excess inventory would be boxes of chocolate-flavored cereals. Considering how health-conscious today’s consumers have become, these chocolate-flavored cereals may be ignored by your customers who are looking for healthier, whole grain cereals instead. Another example of excess inventory in this scenario would be cases of artificially-sweetened drinks and sodas. 

Why this is costly: Similar to aging inventory, excess inventory results in smaller profit margins and additional costs. Businesses typically hold clearance sales and mark down the prices of their excess inventory just to break even or recover a fraction of what they spent on these goods. 

Carrying stocks of products that your customers no longer need or want does not make business sense at all. Aside from incurring costs that might be difficult to get back, they also take up warehouse space that is better reserved for items your customers actually need and will pay for. This may explain why some businesses throw away or destroy their excess inventory; in the process, they completely eliminate their chances of recovering value from these items while damaging our planet.

Mind your inventory

Regardless of the industry you belong to or the product you are selling, bear in mind that effectively managing your inventory is critical to the success of your business. Knowing which types of inventory are helpful and harmful to your business will help you stay profitable and competitive in this fast-paced and ever-changing environment.

The post Business inventory 101: the good, the bad, the costly appeared first on Humble Sustainability.