What is excess inventory and why are closeouts and overstock inventory so difficult to manage? Excess inventory refers to that inventory, which is at the end of its product life cycle. It either hasn’t been sold or it’s been kept for a long period of time. And it’s not expected to be sold in the near future. This type of merchandise is often sold when it's time to clear out a warehouse or if a business is shutting down operations. Excess stock is often referred to as dead stock and it must be written off the company’s books. In general, inventory means goods and materials that a company owns, which must be sold to consumers. If the inventory isn’t sold for too long, it depreciates and loses its value.
Excess inventory usually happens when you have products that haven’t been sold because the amount exceeds the projected demand. You can end up having too much inventory to clear out of the warehouse if you fail to properly manage the stock. Such mismanagement happens in case of internal and external factors. Internal factors are inaccurate demand projections, canceled orders, or untimely delivery. External factors include unexpected economic fluctuations or weather changes. When a business is shutting down operations the first step is often getting rid of closeouts and selling off excess inventory that needs to go.
Some retail stores have a policy when they consider all the inventory important and keep it on shelves much longer than they are supposed to. They do so because they hope to sell the products for their full price one day. However, such an approach is costly because dead stock sitting in the warehouse is taking up space that may be needed for new goods arriving or next seasons stock. The slow-moving inventory usually is way more expensive to hold and manage which is why it is always better to have product liquidation sales and clear out the warehouse. Even if you eventually sell it for full price, you’ll end up in loss. That’s why slow-moving inventory should be immediately removed, not to create extra expenses. Having too much inventory on hand is associated with loss of revenue.
Bad forecasting and predictions is the first and most obvious reason a business my have closeouts. Businesses use different ways and strategies to forecast consumer demand. However, many implement unreliable and outdated methods, which eventually lead to poor predictions. The market is complex and the demand variability may be excessive. The forecasting model must take into consideration all the factors that can affect demand. There are myriad reasons to have excess inventory, overstock and merchandise for liquidation. It’s impossible to have sufficient inventory levels without accurate forecasting. You will end up with overstock inventory, which will cost you a lot.
Poor inventory management system – the inventory management team must be responsible for a number of tasks. For example, making transactions, ordering, purchasing, and all of the other tasks related to sales. When the management system is unorganized, this will result in poor inventory tracking and ordering mistakes. Product liquidation companies benefit from these mistakes by buying closeouts at deeply discounted prices. Closeout buyers and liquidators will liquidate your entire inventory in one fell swoop and the liquidation process can be very easy. Bad coordination between sales, purchasing and customer service departments will lead to poor inventory management. So having too much inventory can happen if the company neglects the management of the processes. This leads to excess inventory and closeouts that need to be liquidated before costs incur. It is possible too much dead stock can force a company into shutting down operations because it affects cash flow so badly. But on most occasions these are just overstock situations that can be easily rectified by liquidating inventory and clearing the warehouse of dead stock.
Failure to manage the obsolete inventory – even if you have a proper inventory management system, sometimes things can go out of control. You must be ready to somehow handle the stock if you end up having too much of it. If you are looking for buyers to take your closeouts you can do a simple Google search using terms like excess inventory, closeouts, discontinued products, buyers for closeouts, where to get rid of dead stock and liquidating closeouts. Expecting that your obsolete inventory will sell out at some point in the future is not a smart approach. You don’t want to simply ignore your slow-moving inventory. The obsolete inventory will affect your profit and create a lot of costs. So make sure to have a team working on improving the inventory process, reducing the overstock and working with liquidation buyers who buy excess inventory.
Long lead times – everyone in your supply chain, from suppliers to manufacturers, makes sure to add a safety factor to their lead time. They do so to have some extra time if something goes unplanned. This results in long lead times and inefficient supply chain. This is how we currently have so many closeouts on the market that is filled with business liquidations and excess inventory. All the containers that arrived so late in 2021 were filled with seasonal goods that are now overstocked. It’s important that everyone in the supply chain process provides you with a realistic estimate of lead time. This will help reduce lead times, upgrade the supply chain, and permanently decrease the stock number you keep on hand.
Unreliable suppliers – having reliable suppliers is essential for successful inventory management. Consider you make an order early enough. However, your supplier holds the goods for an unknown period of time and you eventually get your order late. So next time, when making an order, you’ll purchase way more than you need to cover future demand. Yet, you risk to end up having too much stock sitting in the warehouse. That’s why it’s important to work with suppliers that are reliable and deliver orders in a timely manner. It is more efficient and less costly than having to liquidate closeouts at pennies on the dollar because you are shutting down our 3PL warehouse do to late shipments.
Wasted storage space. Excess inventory takes up space in your storage area. This space could be used for products that will actually sell. Depending on the amount of excess inventory, it may even prevent you from ordering other products because you just don't have space available. Increased storage cost. There are overhead costs associated with your storage of all your closeouts. Isn't it better to bite the bullet, liquidate everything, and make room for new products in your warehouse? Spending more money to get additional 3PL warehouse space only to store dead stock is senseless. Anything that you don't sell is taking money out of your pocket. You also have to pay your employees to handle the products and possibly take manual inventory of these liquidation products.
This drives up costs prime cost which eats into your profit margin. Loss of revenue. This hits in a few ways. First, is a lack of income from the surplus inventory itself. Since you aren't selling the product, which may be wholesale products,you aren't profiting from it. Second, there is the idea of opportunity cost of not liquidating overstock. These unsold products interfere with your ability to sell other products. Depreciated and expired products. The product that sits is a product that loses value. In accounting terms, these items are declining in value, so every day you lose profit potential. Worse, expired products are a total write-off and represent unnecessary costs.
Merchandise USA is a wholesale closeout liquidator specializing in helping companies recover some money for excess inventory and unwanted closeouts. These are goods that are sitting in the warehouse not selling and collecting dust. It is better to have a liquidation sale and get rid of dead stock. We buy closeout housewares, overstock toys, unsold inventory and excess inventory being sold on liquidation.
Merchandise USA is an overstock inventory buyer for closeouts, excess inventory and unsold goods or unwanted merchandise. We buy closeouts of toys, housewares, sporting goods, home goods and overstock lawn and garden. We buy closeout pet products and all other surplus inventory. Closeout liquidation companies are not all the same; make us your #1 choice when liquidating excess inventory.