At the juncture when you have organized your most useful stock and have a control system in place, the time comes to get rid of your unwanted inventory. These items are, in reality, worth only what someone is willing to pay you for it. Anything you can get above the liquidation cost is considered to be “found money.” Most successful distributors have a documented plan for liquidating materials.
The following are among the strategies that have produced the most success:
Donate the material to a non-profit organization. Can a school, church, or charity use some of your dead or slow-moving inventory? This alternative is especially attractive for sub-chapter “C” corporations in the United States. These companies can take of the inventory. Talk to your accountant or tax advisor for details and restrictions concerning material donations.
Feature the product in place of a less expensive item. Let’s say that you sell air conditioners. Your vendor replaced his model 920X (area coverage 1000 sq. ft.) with the model 940X (area coverage 500 sq. ft.) but is more energy efficient. You have three pieces of the discontinued 920X in stock. Naturally, contractors want the new model. But when a customer orders the new model why not offer him one of the 920X at the price of the 940X unit, thus doubling his space coverage? Remember, stock isn’t worth what you paid for it. It is worth what someone is willing to pay you for it.
Is space short? Throw away items that can’t be liquidated. Even if you do not receive any payment, the free space you gain in your warehouse may make the effort worthwhile. Otherwise you’ll continue tripping over and shunting unwanted material around while you try to fill orders for popular products that are selling like hotcakes.
Lower the item price to “shake loose” the excess inventory. Retail stores do this all the time, and this strategy works when customers have some discretion as to which of several items they will purchase. For instance: a customer might purchase a discontinued sink if the price is substantially lower than a similar item from normal stock.
Offer your sales staff a monetary (or some other) incentive to sell the product. Like reducing the price, this method is effective when a customer can choose between several products that will meet his or her needs. Often it is amazing miraculous how quickly items can move when sales staff is provided with the right kind of incentive.
Promote the availability of the items to other suppliers. Search for Internet sites that specialize in liquidating material using the words “surplus,” “inventory,” and the name of the product line that contains the material you want to dispose of. The Internet is particularly effective for liquidating material when there are a large number of potential customers. A product may no longer be popular in your market but still be needed elsewhere.
Relocate excess stock to a second location where it is needed. A product may be “frozen” in one of your locations, but still active in second one. Avoid buying more of the item when you already have it taking up space in a second location. This option is particularly attractive if the cost of transporting the product between branches is a small fraction of the value of the item.
Returning items to their vendors. This option varies with each vendor – some are very good about accepting returns while others tack on unlimited conditions and charges making returns unfeasible. TIP: The best time to negotiate terms for returns of items is before you issue a large purchase order. Have your buyers continually remind their vendors of the material they would like to return.
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