The Inventory Nightmare: How Discrepancies Led to a Warehouse Overflow

Inventory discrepancies, seemingly minor at first, can quickly snowball into a major headache, leaving businesses with a warehouse overflowing with closeouts, excess inventory, overstock items, abandoned inventory, and discontinued products. We will explore how these discrepancies arise and how they can lead to such a chaotic situation.

1. The Root of the Problem: Discrepancies Galore

• Data Entry Errors: Human error during data entry is a common culprit. Incorrectly entered quantities, misplaced decimal points, and typos can lead to inaccurate records and miscalculations. Sometimes, you can find yourself with what you think is a huge overstock only because of this. Let’s say you import housewares, pots and pans, and you accidentally enter at quantity of 10,000 instead of 1,000. On paper, you have a huge excess inventory of frypans and coffee makers. But in reality, you don’t have to worry about getting rid of overstock housewares because the extra inventory never really existed.
• Physical Count Inaccuracies: Inaccurate physical counts during inventory audits can significantly skew actual closeout and overstock levels. This can be due to human error, damaged goods overlooked, or inefficient counting procedures. Let’s face it, when dealing with overstock inventory and discontinued products, it is easy for humans to make mistakes.
• Theft and Shrinkage: Unfortunately, theft and shrinkage, whether internal or external, can significantly impact inventory levels. This includes employee theft, shoplifting, and damage during transit. Theft is a real problem that can affect your inventory. If you buy closeout toys and excess stock of novelties and sporting goods, your numbers can be off if your employees are stealing. But instead of having a huge overstock and having the warehouse filled with closeouts and overstock products, you may actually have smaller quantities that expected.
• Poor Inventory Management Systems: Utilizing outdated or inadequate inventory management systems can lead to inaccurate record-keeping, delayed updates, and difficulty tracking inventory movements. This is a different problem, because it may cause you to re-order products you don’t really need. This can lead to double ordering or over ordering. When this happens, you end up with overstock inventory and excess inventory that often has to be liquidated to make room in the warehouse.
• Supply Chain Disruptions: Unforeseen events like natural disasters, transportation delays, and supplier issues can disrupt the flow of goods, leading to unexpected inventory surpluses or shortages. You might recall the supply chain disruption prior to the pandemic. When this happened, warehouses were flooded with overstock inventory and 3PL warehouses in LA had so much excess inventory, they were liquidating overstock for pennies on the dollar. If you are interested in finding a closeout partner to help you with your excess inventory, consider a google search using these terms: closeouts, overstock inventory, inventory liquidators, keen to clear stock from 3PL, looking to offload closeouts, getting rid of abandoned stock, shutting down operations, moving to smaller warehouse, need to reduce inventory, overstock products.
• Lack of Communication: Poor communication between departments (e.g., sales, purchasing, warehouse) can lead to inaccurate demand forecasts, overordering, and ultimately, excess inventory. When one hand doesn’t know what the other is doing, you will most definitely end up with multiple individuals buying the same inventory, leading to having overstock products and item duplications and closeouts.

2. The Domino Effect: From Discrepancies to Warehouse Overflow

• Overordering: When inventory levels are underestimated due to data entry errors or inaccurate counts, businesses tend to overorder to avoid stockouts. This leads to a surplus of inventory and when this happens, the only option is to liquidate the excess inventory. You can do this by listing your products on closeout websites and overstock websites, or you can go the more traditional route and find the largest and most reliable inventory liquidators in the U.S. These closeout buyers will direct you through the inventory liquidation process and help you offload dead inventory in bulk to make room in your warehouse.
• Order Cancellations and Returns: Customer returns, order cancellations, and damaged goods can quickly accumulate, leading to abandoned inventory that occupies valuable warehouse space. Canceled orders and buybacks are another reason for having too much inventory, and this quickly leads to an overstock situation where the warehouse is crowded with too much inventory that has to be liquidated.
• Slow-Moving and Non-Moving Inventory: Inaccurate inventory data can mask the true sales velocity of certain products. As a result, slow-moving items may remain in stock for extended periods, eventually becoming non-moving (dead stock). This is how some large closeout inventory warehouses end up having a large overstock of merchandise they had no idea was there. It’s one thing when you know about excess inventory sitting in your warehouse that you are unable to sell. But it’s another thing when you don’t even know there is dead stock in your building, taking up valuable warehouse space. Once you know about it you will be keen to clear the stock to make room for new products arriving.
• Discontinued Products: When product lines are discontinued, what is overstock inventory, which items are abandoned inventory or inaccurate inventory records can hinder the timely identification and removal of obsolete stock, leading to a build-up of discontinued products.
• Closeouts and Excess Inventory: As new products are introduced; older models can become closeouts. Inaccurate inventory data can prevent timely clearance sales, resulting in an accumulation of excess inventory, closeouts and discontinued items.

3. The Impact of a Cluttered Warehouse

• Increased Storage Costs: Storing excess inventory and unwanted merchandise incurs significant costs, including rent, utilities, insurance, and labor for handling and management. When you add up all these costs, you will likely see there is no way you can recover enough money to justify keeping these overstock products in the warehouse. 3PL warehouse space and fulfillment warehouse space are very costly today, so filling these up with overstock products, closeouts and discontinued items makes absolutely no sense.
• Capital Tied Up: Capital invested in excess inventory and unwanted merchandise is unavailable for other critical business functions such as marketing, research and development, and expansion. You would be better off liquidating inventory and getting rid of closeouts for pennies on the dollar, just to get it off your hands and out of the warehouse. If you are keen to clear stock from your 3PL, look for the largest and most reliable closeout buyers and inventory liquidators in the United States.
• Lost Sales Opportunities: Warehouse space occupied by excess inventory, surplus inventory, closeouts and overstock products limits the ability to stock new and in-demand products, potentially leading to lost sales opportunities. Remember, sales cures all sins. This means, do whatever you have to get old inventory and dead stock liquidated, and keep new and profitable inventory moving through the warehouse.
• Damaged Brand Reputation: The presence of outdated or obsolete products can negatively impact a company's brand image and customer perception. Let’s say you are a reputable toy importer and distributor. After your customers coming into your showroom a few times and all they see are the old closeouts and old merchandise, what are they going to think? Are they going to be excited to see you again the next time? No. Customers are looking for new and exciting opportunities. Not old closeouts you want to get rid of and overstock inventory that has been sitting in your warehouse. Get rid of the old and in with the new. Sell your old merchandise that isn’t moving to anyone just to get rid of it.
• Operational Inefficiencies: A cluttered warehouse can disrupt workflow, slow down order fulfillment, and increase the risk of damage to goods. Old merchandise has a way of always getting pushed to the back of the warehouse. Closeouts and overstock products fill all the corners and empty racks until they can’t. Once you start filling your main warehouse space with dead inventory and abandoned inventory of closeouts, overstock and slow-moving products, then what? That’s when you know the overstock situation is out of control.
• Cash Flow Problems: Excess inventory, closeouts, abandoned inventory and excess stock can strain cash flow, making it difficult to meet financial obligations and hindering business growth.

4. Rectifying the Situation: Steps to Declutter Your Warehouse

• Conduct a Thorough Inventory Audit: Perform a physical count of all overstock inventory, reconciling it with existing records. Investigate and address any discrepancies. Make a list of which closeouts need to be liquidated first, and contact overstock inventory buyers, closeout buyers and inventory liquidators who are capable of buying the entire inventory at one time. Don’t play games selling off small pieces at a time; find excess inventory buyers where you can offload the entire inventory in one fell swoop.
• Implement Robust Inventory Management Systems: Invest in a robust inventory management system with features such as real-time tracking, automated alerts, and advanced analytics. This is not a guarantee, but it will most certainly help keep an eye on slow-moving inventory and large lots that have been sitting idle in the warehouse. The idea is to turn your inventory as often as possible, so you don’t have large size closeouts and overstock inventory sitting around not performing. Consider hiring another salesperson to help move old inventory and obsolete products and get rid of any older merchandise.

Preventing Future Inventory Disasters

• Invest in Employee Training: Train employees on proper inventory handling procedures, data entry protocols, and the importance of accuracy. The best you can hope for once you clear stock from your warehouse and get everything cleaned up, is that you won’t get into the same overstock situation all over again. Closeouts and excess inventory have a way of creeping up on you and piling up in the warehouse.
• Conduct Regular Audits: Conduct regular cycle counts and physical inventories to identify and address discrepancies promptly. Staying on top of your closeout inventory is similar to having a healthy diet. You have to monitor it as you go. If you only look through your overstocked warehouse once every couple of years, you are going to find it is filled up again There will be canceled orders, excess inventory from over shipments, abandoned freight leftover from when tenants moved out, and dead stock due to over overzealous sales projections that never materialized and led you back to a position of having too much excess stock in the warehouse.
• Merchandise USA is a reliable closeout buyer and inventory liquidator in business more than 40 years. We specialize in buying closeouts of housewares, overstock pet products, discontinued lawn and garden closeouts, overstock tools, excess inventory of toys and much more. If you are shutting down your business or downsizing operations and have accumulated too much inventory, we can help with through the liquidation process. If your business is not in the United States, but you are keen to offload inventory in a U.S. 3PL warehouse we can help you dispose of it.