Buying And Selling Closeouts. How To Maximize Space In A Small Warehouse.
One of the most common issues for warehouse managers is what to do when the warehouse gets too small and there is too much excess stock taking up space. Closeouts are dangerous because they slowly accumulate and accumulate until you are loaded with closeouts and excess inventory taking up space and maybe even forcing you into shutting down a 3PL warehouse. The rise in prices in the logistics real estate market means that, in many cases, expansion as a solution to a small warehouse isn’t economically viable. However, on occasion, behind the progressive lack of space lie inefficient management. In our article, we analyze the most common causes of this shortage of space. Plus, we propose options for leveraging the available surface area and continuing to manage a facility that’s become too tiny. Inventory liquidators can also be called in to purchase and remove chunks of inventory.
- More than 85-90% of the total storage capacity is continuously occupied. A full warehouse is usually a double-edged sword. On the one hand, you can’t sell from an empty cart so you have to load up on closeouts, overstock and excess stock. Although the end goal from a storage-cost perspective is to make the most of the installation, this can also reduce the flexibility of operations. With such a high occupancy level, the warehouse wouldn’t be able to respond to even the slightest increase in stock. But on the other hand, small businesses have been forced into shutting down 3PL warehouses due to too much overstock inventory and they have contacted inventory liquidators to help with the inventory reduction process.
- There are incidents in location management: they may occur because a certain type of racking or specific location is overloaded, or because other areas in the installation are constantly used as makeshift storage space (aisles, the preload zone, the maintenance area, etc.). If you are using these locations to store merchandise, you likely have too much stuff and need to examine older dead inventory that is no longer selling. Getting rid of excess stock you don’t need will free up warehouse space making it easier to operate. Liquidating excess inventory can be freeing because it shows how you won’t miss the dead stock and by either selling it cheap or donating it, you are able to create new space in the warehouse for new goods.
- The number of pending orders or back orders steadily grows: these refer to purchases received by the warehouse but that can’t be fulfilled because of stock imbalances. This affects the dispatch completion rate and prolongs cycle times. During the pandemic this was a problem when there were containers stuck at sea and not enough merchandise getting unloaded. But as all the containers came and merchandise was often delivered too late, it quickly became overstock and excess inventory that wasn’t needed anymore. This created a surplus inventory on the market and quickly began putting downward pressure on pricing.
- Factors that contribute towards shrinking space in an installation can be varied. The most frequent are usually linked to business changes, such as rises in sales, international expansion, or increased goods procurement for commercial reasons. Inventory liquidators specialize in helping small businesses get rid of old inventory and closeouts no longer selling. These conditions put small business owners in danger of shutting down 3PL warehouses, downsizing operations and having to learn the closeout process of getting rid of excess inventory.
- Nevertheless, the lack of storage space can also stem from the emergence of new digital business models. If the company begins to manage orders online, adopting an omnichannel retail strategy, the installation needs to adapt. To do this, it has to set aside extra space for more complex picking and for labor-intensive returns management. Today there are closeout buyers who are willing to take returns and remarket them to discounters if they are cheap enough. The secondary market of closeouts, overstock inventory and canceled orders is highly profitable.
- Organizing the layout of a small installation comes down to pure precision. The first step to devising the layout of a closeout warehouse consists of accurately measuring the actual working space you have, excluding the area occupied by architectural elements such as columns, walls, doors, etc. From there, the analysis lies with the excess inventory: you need to know what products are handled (number of SKUs, volume, and weight) and where and how often they’re moved (warehouse inflows and outflows). This can be challenging if you buy and sell closeouts because no two days are alike, and every day is a new day. Today you may be buying closeouts of toys and housewares, but tomorrow may be liquidation of sporting goods and lawn and garden excess inventory. This moving target makes closeout wholesalers especially good at what they do because they are always dealing with different closeout wholesalers and closeout brokers.
- This study is necessary for assessing alternatives that can articulate the available space in a small installation. One solution that works extremely well is automating the operations with the most repetition and that remain stable over time.
In the five years between 2012 and 2017, the average closeout warehouse size increased by over 140% in the US, according to CBRE data. But how can an installation gain cubic feet?
- Choose rack supported buildings: the racking makes up the actual structure of the warehouse. Combined with automated systems, these installations can measure over 130 feet tall. Racking in the closeout business may not be as easy as other industries. In many cases the quantities are small and there are not huge quantities of few items to store high in racks. Liquidating excess inventory might help because it creates room in the warehouse eliminating the need for racking.
- Equip the premises with tall racks: it’s important to consider the impact this will have on handling equipment and picking.
- Rent a temporary installation: this is a good option when the lack of space is due to marked seasonality, as in the case of e-commerce logistics.
Organization is key to becoming/sustaining a successful business. The warehouse should be considered the foundation to your business. If you’re currently operating a disorganized warehouse and need some help prioritizing your next steps, you’ve come to the right place. Our suggestion is to start by making small changes that will make a big impact with an immediate return. So how do you get started on your warehouse organization journey? First, keep in mind buying closeouts puts you in a state of little organization right from the beginning. When liquidating inventory to a closeout buyer, a business does not have your best organizational needs as a priority. They just want to get the inventory out of their warehouse as quickly as possible. Closeout buyers often receive messy shipments. Inventory liquidators often have to repack inventory into new cases, or make assortments so their customers will take the closeouts at a low price.
If you’re in the design phase of your warehouse, you’re in luck, because you can set things straight from the start. I know I said organization doesn’t have to start with an overhaul, and it doesn’t. This can be a long-term goal if you find things don’t flow in your warehouse in the best way for your business.
Now, if you are an inventory liquidator or closeout wholesaler, take a step back and consider your current warehouse layout. An organized workspace should provide a safe environment for your employees and be highly efficient. The flow should be set up in the order of operations. For example, inventory comes in from Receiving and moves on to Storage either in one or multiple zones based on storage method. Once orders have been picked, they are packaged and sent to shipping and out the door. Closeout wholesalers are often small businesses and not engaged in making the best organizational decisions. In most cases they are small businesses trying to survive, and this means operating in messy conditions and tight spaces.
This is an easy tip which you can implement immediately. Labeling inventory and work zones throughout your warehouse will ensure organization and facility flow is maintained long term. Once you’ve established your warehouse layout, labels will ensure employees know where to find things and/or where they belong.
You can mark closeout housewares with one color, overstock inventory of toys with another code, and even lawn and garden closeouts can be another easily identifiable color. This can be especially beneficial for new employees or in facilities that utilize temp labor to repack closeouts, excess inventory and obsolete merchandise that wasn’t selling fast enough.
One of the best ways to keep your inventory current is to manage it often. Any dead stock should be thrown away or donated for pennies on the dollar. Closeout websites can be helpful when it comes to getting rid of closeouts and dead stock, because they have customers that are deal shoppers and closeout buyers for excess inventory and slow selling inventory at discounts.
Merchandise USA has been an inventory liquidator for 38 years. We have an excellent reputation and specialize in liquidating excess inventory, buying closeouts and working with importers who want to sell discontinued inventory for cash. We are excess inventory buyers handling closeouts of all housewares, home goods, lawn and garden closeouts, excess pet product inventory and much more.