Effective Strategies for Managing Obsolete Inventory

We have thus addressed outmoded inventory, but what about excess inventory? Though they are sometimes referenced interchangeably, the two are not the same item. Excess inventory is merchandise that, although beyond present demand, could nonetheless be sold in the future. If there is more demand, you will order or make extra things, but suddenly, you will find that you have more than you need.

The potential value of surplus and obsolete merchandise sets them apart most importantly. While obsolete goods have little to no market value, excess inventory can still be sold – probably at a discounted rate. Like too much of a good thing, excess inventory is not perfect but it is not totally useless either. Conversely, obsolete inventory is a problem since it’s unlikely to bring in money without major markdowns or other disposal plans.

Regarding financial health, knowledge of the differences is really vital. Although both excess and outdated goods can tie down working capital and result in storage expenses, obsolete inventory is especially detrimental since it usually demands write-downs or write-offs, therefore directly affecting your bottom line.

Businesses sometimes apply particular calculations considering elements like holding costs, markdown percentages, and inventory turnover rates when determining the financial impact of excess and obsolete inventory. Minimizing the possibility of collecting either surplus or outdated inventory depends on routinely checking assets and modifying your inventory plan.