Why Sell Your Surplus inventory?

All companies have old dead stock inventory sitting around that has been bought for projects which never happened or machines which are not running. Inventory costs average about 25% of the value of the material per year so the dead stock sitting on your shelves is costing you money every month. These costs include storage costs plus labor costs for counting and maintenance, and it can create a culture of waste within an organization. One solution to this problem is to sell your surplus inventory.

 

 

A Culture of Waste

Allowing inventory to accumulate creates a culture of waste. Employees see a company which allows the accumulation of large amounts of money in inventory and believe the company doesn’t care about money. This attitude can be disastrous as employees will say the company just bought $5000 worth of items we will never use so what difference does it make if I get an extra $200 of material for something I might be able to use but probably won’t. If you multiply that by all of your employees soon you are wasting huge amounts of money

 

Proper Inventory Management

Inventory is only valuable if it is ready to use and readily accessible by a number of people.This means companies must have a good inventory management system in place and assure their products are well maintained and ready for use.  Often a business will accumulate large amounts of older material that they think they might have a use for one day. Usually there are only a handful of people who know anything about it. I know of a few companies where only person out of a company of 60 or 70 know where anything is and if that person is gone nobody can find half their items as it is not organized with a good inventory system.

 

 

Surplus Companies pay How Much?

On average surplus companies pay 5% of end user cost when buying inventory in lot forms. This amount will be divided between newer easy to sell items which are worth more and other older items which are worth less and some items which are worthless irregardless of how much they cost. This is a reasonable price for the companies to pay when buying as they then are taking all the risk in selling it and it requires a large investment of time into getting it ready to sell.

 

Should We Sell It Ourselves

Some managers will say why should I take such a small value on our material when we can sell it ourselves. This can work but what often happens is they take valuable employees who should be focusing on selling the companies high margin items and put them to work on selling old inventory at cost or a smaller loss to reduce the writeoff. This will then produce an adverse effect as their sales on good material will go down and they end up selling the surplus inventory to good customers who would have bought newer high margin items. Also, it always takes longer than expected and it can result in some potential problems with your good customers as some of the inventory may have issues from sitting for a long period of time.

 

Research Selling Prices and Turn Ratios

If you do decide to sell it yourself it is a good idea to start by doing some research on Ebay about how much the material is worth on the surplus market. Make sure you look at two important details. One is how much items actually sell for as often on industrial items there is a massive spread between how much companies ask for items and what they sell for. Another important detail to look at is the turn ratio on the items you are selling as if there are 2000 items for sale and you put in the 90 day sale count and it is 60 then you are looking at about 100 months of inventory. Do you want to have those items for sale for 8 years before selling it?

 

 

Conclusion

As you can see it is not economical to sit on surplus inventory. If you have surplus inventory that you would like to sell please contact us at issi@cogeco.net for more information.