In today’s economic climate, most leaders recognize that effective inventory management will result in significant cost savings and is a barometer of corporate health. A key component of optimizing your inventory is having regular visibility into excess and obsolete stock followed by processes to determine root cause and clear plans to address it. Unfortunately, few have visibility into their excess inventory and even fewer know how to deal with it. Most choose to simply write it off. Others fear the write off and never deal with it, perpetuating the build up of obsolete inventory.
Read on to discover alternatives to ignoring or writing off your excess inventory.
CASH GENERATING (RANKED HIGHEST TO LOWEST*)
1. RETURN TO VENDOR FOR CASH OR CREDIT: One possibility is to try and return the items for cash. This typically has been a hard sell as vendors do not want to repurchase items that have already sold especially in a depressed market. That being said, it is an option worth exploring as part of your overall investment recovery efforts.
2. CONSIGN TO SELL THROUGH EXISTING VENDOR: Enlist the vendor or the OEM to re-sell on your behalf. This method has not worked well in the Oil & Gas industry and as staff is cut across the board may become even more so.
3. SELL VIA 3RD PARTY INVESTMENT RECOVERY SERVICE: Have your 3rd Party investment recovery service, such as Inventory Portal, sell on your behalf. This is a great way to monetize your dead stock and if done properly can typically have high rates of return. A good 3rd party investment recovery service will also assist with all of the options mentioned in this article to ensure the highest return of investment.
4. DIRECT SELL: Sell via Craigslist, eBay, Alibaba or other similar sites. This method’s strengths lie in a broad reach and ease of listing but it may fall short in resources required to respond as well as your items being presented to a non-targeted market.
5. AUCTION/LIQUIDATION: Have a 3rd Party investment recovery service auction your items. This is a quick way to monetize your dead stock but typically does not bring in the level of returns that other methods will i.e., internal transfers, consign to sell, RTV. It is crucial when choosing an auction company that they know your equipment i.e., if you are liquidating drilling equipment do not choose an auction company that specializes in jewelry or estate sales as the returns will be much lower.
6. SCRAP: Scrap dealers can assist you with scrapping of your excess and obsolete inventory items and they may even pay you for them. With spare parts this is not always the case and care should be taken to ensure the items are being handled in the most environmentally friendly method possible by the scrap dealer.
COST AVOIDANCE (PROCUREMENT REPLACEMENT)
7. INTERNAL TRANSFERS: One of the more cost effective methods is to transfer the material internally. To make this option work, there are a few things to consider:
-It should be as easy or easier for the materials staff to request transfers as it is for them to order items from an external source.
-Support for the internal program has to exist at management and rig/facility level.
-Just because the items have transferred does not mean they will be used. The same process that caused the excess may still be at play to continue overstocking (effectively just moving the problem around).
-It can be a long process that usually has a point of diminishing returns.
8. SWAP-OUTS WITH VENDOR: Exchange the items with the vendor or OEM for active items you purchase from them.
9. DONATE: A great way to give back is to donate unwanted items to charities in the local communities i.e., school, religious groups and others. In developing areas, there could be a need for some of your excess materials.
10. ENVIRONMENTALLY FRIENDLY DISPOSAL: If all else fails, disposing of the items is an option. Care should be taken to ensure the items are being handled in the most environmentally friendly method possible. Also, it is imperative that you follow your internal disposal procedures which should include documentation requirements and local regulations, among others.
While none of these is a one size fits all approach, savvy corporations will avail themselves to the many creative opportunities afforded to them in today’s market environment. Lean operations and effective inventory management provide a great potential for recovered dollars. Your 3rd Party Investment Recovery Service, such as Inventory Portal, can ensure that you receive the greatest return by utilizing the best option for monetizing your surplus while you focus on your core business.
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