Managing Abandoned Inventory: Strategies for Fulfillment Warehouses

When a tenant moves out of a public warehouse, they often exit in a hurry and leave behind unwanted inventory, creating a headache for the 3PL (third-party logistics) provider. This abandoned inventory, also known as closeouts, abandoned products, excess stock, overstock, or dead stock, can quickly pile up and take up all your valuable warehouse space. As a 3PL, dealing with this leftover inventory requires a strategic approach to minimize losses and maximize returns.

In this blog article, we'll explore the common challenges 3PL warehouses face with abandoned inventory and provide practical solutions to help you manage this issue of unwanted merchandise effectively.

The Rise of The Problem of Abandoned Inventory and Excess Stock in 3PL Warehouses

The rise of e-commerce and the ever-changing consumer demands have contributed to the growing problem of abandoned inventory, closeout stock, liquidation items and unwanted merchandise in 3PL warehouses. As businesses strive to keep up with the pace of the market, they often find themselves with excess stock and extra merchandise that they are unable to sell. When these companies vacate their warehouse space, they may choose to leave behind the unsold inventory, rather than incur the cost of removing it. Tenants often exit 3PL warehouses in a hurry, and leave abandoned inventory behind for the landlord to liquidate in an effort to get back some money owed to them for warehouse fees.

This abandoned inventory can come in various forms, including:

• Closeouts: These are excess products that are no longer part of a company's active inventory, often due to discontinued lines, seasonal changes, or changing consumer preferences. Most often sellers look for ways of offloading these goods at a loss, just to get them off the books and out of the warehouse.
• Excess inventory: Businesses may order more inventory than they can sell, leading to an accumulation of excess stock. Excess stock is costly to keep because it takes up valuable warehouse space that could otherwise be used to store profitable inventory. It is one thing if your business has unlimited warehouse space, but this is not usually the case. Most businesses use all of their warehouse space as much as possible, leading to the need to look for ways to offload closeouts, overstock inventory and dead stock. It is sometimes cheaper to give away inventory free just to get it out of the warehouse and free up warehouse space. This is especially true if you have new products already on the way and no room for storage.
• Overstock products: When a company's sales projections are off, they may end up with more inventory than they can reasonably sell. This seems to be more common, now that we are post-pandemic and sales are trending back to more normal levels. During Covid there were supply chain disruptions, but today there is so much excess inventory sitting in warehouses around the U.S. that we have done a complete 180. Huge amounts of merchandise are being stored in 3PL warehouses and much of it will probably be offloaded to closeout buyers or disposed of through other inventory liquidation channels. It has become too costly to store dead inventory that isn’t selling, and it can be better to give it away free just to offload it in bulk and get it out of the warehouse.
• Dead stock: These are items that have become obsolete items, closeouts or simply abandoned inventory no longer in demand, rendering them unsellable. Unloading this kind of excess inventory is often best left to the professional inventory liquidators. If you are looking to offload large amount of excess inventory, consider doing a Google search online looking for these buyers. Some of the following search criteria may lead you to the right closeout partner: closeouts, offloading excess inventory, keen to clear stock from 3PL warehouse, looking to sell bulk inventory, selling excess inventory, looking for closeout buyers, overstock inventory available, looking to clear warehouse, shutting down operations, downsizing moving to smaller warehouse, going out of business, overstocked merchandise for sale, closeout websites, closeout brokers.

The Challenge of Abandoned Inventory

The presence of abandoned inventory in a 3PL warehouse can pose several challenges. These fulfillment centers are designed to move products in and out efficiently. They were not designed to store old inventory and slow-selling products for years and years. Dead stock is like dead weight – it does no good and has no value. Of course, nobody likes losing money on inventory. But there are times when you are keen to clear the warehouse and the only option is to offload excess stock to an inventory liquidator.

• Occupying valuable warehouse space: Abandoned inventory, overstock products, discontinued items and closeouts all take up precious storage space that could be used for more profitable products. This can lead to increased rental costs and reduced efficiency. In addition, if your business is holding large amounts of excess inventory for too long, it can become a large part of your inventory and actually put you out of business. Some businesses that failed to reduce inventory by looking for closeout buyers to offload excess stock went out of business. It would be better to not wait so long until the situations becomes dire.
• Increased operational costs: Handling, storing, and disposing of abandoned inventory and slow-moving products requires additional labor, resources, and time, which can eat into the 3PL's profit margins. But this is still cheaper than taking up all your valuable warehouse space with dead inventory.
• Potential liability: Depending on the type and nature of the closeouts and abandoned inventory, there may be legal or environmental concerns that the 3PL must address, further complicating the issue. This tends to be the case when the products are consumables or chemicals. But most name brand closeouts and overstock inventory are closeout housewares, toy closeouts, excess inventory of lawn and garden products and closeouts of tools and hardware.
• Reduced revenue: The 3PL may be unable to generate any revenue from the excess stock and abandoned inventory, resulting in lost opportunities. Liquidating closeouts is the fastest and most efficient way to clear inventory from the warehouse quickly. Closeout companies will only offer you a small percentage of the original cost, but it is better than sitting on old inventory that isn’t moving at all. Overstock inventory buyers often gamble by taking products from warehouses that may not even sell. Discontinued items, closeouts, excess inventory, overstock products and abandoned inventory all represent stock that at one time was good, but is no longer popular or in demand.

Strategies for Managing Abandoned Inventory

To effectively manage your abandoned inventory and offload to liquidators, 3PL warehouses can implement the following strategies:

1. Inventory assessment and categorization:
   • Conduct a thorough assessment of the abandoned inventory to understand its condition, value, and potential for resale. You may have some inventory worth keeping, while other portions would be better to offload and get some cash out of it. Keep in mind how quickly you can sell these products, how big the market is for them and the cost of having excess inventory sitting in your warehouse. Generally, getting rid of closeouts is helpful when you can use the warehouse space for new products arriving.
   • Categorize the overstock inventory based on factors such as the type of closeouts, how long you have been storing the overstock inventory, age, and marketability.
2. Communication and documentation:
   • Establish clear communication protocols with tenants regarding the handling of abandoned inventory. When a tenant either shuts down their business or downsizes and moves to a smaller warehouse, it is their responsibility to remove all inventory from the current premises. If they leave abandoned inventory behind in the warehouse, it becomes your product to liquidate to try to cover any expenses they owe.
   • Ensure that all excess products and abandoned inventory is properly documented, including the tenant's contact information and the inventory details. Hopefully, when you originally signed an agreement with the tenant, you had measures in place to justify liquidation of inventory left behind at their expense.
3. Disposition options:
   • Explore various disposition options, such as inventory liquidation, donation of any overstock products left behind, or recycling, to maximize the recovery of value from the abandoned inventory. If you have control over the inventory, you should act quickly to get rid of the excess inventory to closeout buyers, overstock inventory buyers, inventory liquidators or any other buyer you can offload the inventory to.
   • Develop relationships with liquidation brokers, closeout buyers, excess inventory buyers, auction houses, or charitable organizations to facilitate the sale or donation of the inventory.
4. Inventory management systems:
   • Implement robust inventory management systems to track and monitor abandoned inventory, including its location, condition, and disposition status. Sometimes, a warehouse can get so busy they have no idea there is even old and abandoned inventory sitting there. Regular inventory management is a good way to keep an eye on overstock products and closeouts before they get lost in the back of the warehouse.
   • Utilize data analytics to identify patterns and trends in abandoned inventory, excess stock and closeouts, which can help inform future decision-making.
5. Proactive tenant engagement:
   • Engage with tenants proactively to understand their inventory management practices and identify potential issues before they lead to abandoned inventory. Make sure they understand any abandoned inventory becomes property of the managing warehouse and they will lose control of it. Any abandoned stock will be liquidated to closeout buyers for as much as possible in an effort to pay old storage fees. If you have dead stock or abandoned inventory and are keen to clear the warehouse, consider working with a reliable and professional closeout buyer to help you through the liquidation process.
   • Offer guidance and support to tenants on effective inventory management strategies to minimize the risk of abandoned stock. The more they know, the better chance they get rid of closeouts and discontinued items before it gets to the point where they are looking to offload inventory for pennies on the dollar.
6. Lease agreements and policies:
   • Review and update lease agreements to include clear guidelines and policies regarding the handling of abandoned inventory, excess inventory left behind, closeouts and other unwanted merchandise.
   • Ensure that tenants are aware of their responsibilities and the consequences of leaving behind unwanted inventory. Explain how you will immediately contact inventory liquidators to make offers to buy the overstock products and have them removed from the warehouse. In a similar vein, if the company is acquired by another company and they don’t want the inventory, explain that they will have to find a way to move out the excess merchandise before moving or shutting down operations.
7. Outsourcing to specialized providers:
   • Consider partnering with specialized providers, such as liquidation services or reverse logistics companies, to handle the processing and disposition of abandoned inventory. There are companies that buy closeouts of almost every category imaginable, as well as closeout specialists that only buy certain categories of overstock products and liquidation items. If you are liquidating pet products you can surely find an inventory buyer to help. The same holds true if you are selling housewares closeouts, overstock inventory of home accents, closeout pet products, closeout lawn and garden inventory, etc.
   • These providers can offer expertise, scale, and efficient solutions to manage the abandoned inventory effectively. They can connect you with merchandise buyers for overstock inventory and abandoned goods.
8. Inventory optimization and prevention:
   • Implement strategies to optimize the use of warehouse space and prevent the accumulation of closeouts, overstock products and abandoned inventory, such as regular inventory audits and proactive inventory planning. Holding old merchandise in the warehouse is costly and can prevent you from having enough warehouse space for new goods arriving. Get rid of closeouts in a timely manner so you won’t have to go out and rent more warehouse space to store old merchandise.
   • Work closely with tenants to ensure that their inventory levels align with their sales forecasts and market demands. Let’s be honest, it is easy to set lofty sales goals, far beyond what is reasonable and attainable. This leads to low sales and accumulation of closeouts and overstock inventory. Having realistic expectations of what you can sell helps to run a more efficient business with less dead stock and closeouts sitting unsold in a big warehouse. Keep your overhead down by selling goods and turning your inventory.

By implementing these strategies, 3PL warehouses can effectively manage the challenges posed by abandoned inventory, obsolete stock, closeouts and excess inventory. When necessary, working with a reliable closeout buyer will minimize losses, and maximize the recovery of value from these unwanted products and slow-selling merchandise.

The Financial Impact of Abandoned Inventory

The financial impact of abandoned inventory on the bottom line for 3PL warehouses can be significant. The costs associated with handling inventory, storing dead stock, and disposing of this excess inventory can quickly add up, eroding the 3PL's profit margins. These warehouses are more profitable by moving goods in and out quickly than sitting on old merchandise that isn’t selling anymore.

According to industry estimates, the average cost of storing abandoned inventory can range from $0.40 to $0.80 per square foot per month, depending on the location and the type of warehouse facility. The same holds true for name brand closeouts, excess inventory of toys, sporting goods, housewares and lawn and garden closeouts. Additionally, the labor and administrative costs related to processing and disposing of overstock inventory can further increase the financial burden.

In some cases, the value of the abandoned inventory may be so low that the cost of handling and disposing of it may exceed the potential revenue that can be generated from its sale. This is why getting rid of closeouts and working with inventory liquidators is so important. These extreme cases of high volume closeouts can lead to a net loss for the 3PL warehouse.

To mitigate the financial impact, 3PL warehouses must adopt a strategic approach to managing abandoned inventory. By implementing the liquidation strategies outlined earlier, such as effective inventory assessment, disposition options, and proactive tenant engagement, 3PL warehouses can minimize their losses and potentially generate some revenue from closeouts and overstock inventory.

The Importance of Compliance and Sustainability

When dealing with abandoned inventory, 3PL warehouses must also consider the legal and environmental implications of their actions. Depending on the nature of the excess inventory, there may be specific regulations or guidelines that must be followed when disposing of these closeouts.

For example, certain overstock products, such as electronics, may contain hazardous materials that require special handling and disposal methods to ensure special compliance with environmental regulations. Failure to adhere to these rules can result in hefty fines and legal consequences for the 3PL warehouse.

Furthermore, as consumers and businesses become more conscious of sustainability, 3PL warehouses have an opportunity to show their commitment to environmental responsibility. By exploring Eco-friendly disposition options, such as donating usable items to charities or recycling materials, 3PL warehouses can enhance their reputation and attract environmentally-conscious tenants.

By prioritizing compliance and sustainability in their excess inventory and abandoned inventory strategies, 3PL warehouses can not only mitigate legal and environmental risks but also they can position themselves as responsible and forward-thinking logistics providers.

Abandoned inventory poses a significant challenge for 3PL warehouses, but with the right strategies and a proactive approach, these many challenges can be effectively managed. By implementing comprehensive closeout inventory assessment, communication protocols, inventory disposition options, and inventory management systems, 3PL warehouses can minimize the impact of closeouts, excess inventory and abandoned inventory on their operations and finances.

Merchandise USA specializes in buying closeouts, excess inventory, overstock products and dead stock from companies going out of business or downsizing to smaller 3PL warehouses. Having too much inventory sitting in your warehouse directly affects your bottom line. We buy pet product closeouts, overstock inventory of home accents and home goods, overstock housewares, closeout toys and liquidation sales of all types. If you have canceled orders or if you are shutting down your warehouse due to excessive storage fees we can help. The closeout liquidation process is easy and we can walk you through liquidating your entire inventory. If you are closing down all operations and keen to clear stock from your warehouse call us today.