How to deal with excess stock in your inventory?

The excess stock is best classified as a decreasing phase of the product life cycle, shown in the graph below. There is usually a demand for the product, but it begins to be phased out and organizations that do not actively monitor the stages of demand for all their individually stocked items, due to poor reorder or replenishment Additional stocks run the risk of getting stuck with large amounts of stock. Practices. Excess stock is a term used in inventory management, and is often called the number of different things, Overstock, stock surplus, excessive stock, or excess inventory. It does not matter what you call it, one thing that remains constant is the risk of additional stock to your company’s bottom line.

Companies that hold additional stock levels in their inventories generally know that the issue was due to poor forecasting and poor management of replenishment or not tracking the life cycle properly stages of a product.

Excessive stock levels come with many different costs that organizations should be concerned about. First, the revenue associated with inventory products is lost with the market’s low demand. There are company dollars tied up in capital that are directly related to the original purchase of goods and sometimes associated costs to store inventory referred to as “carrying costs”.

Carrying costs quickly add up to many different factors, including rent or mortgage payments, equipment costs, labor costs, utilities, insurance, and interest that are on the stock. not been sold.


Product life cycle
The excess stock is best classified as a decreasing phase of the product life cycle, shown in the graph below. There is usually a demand for the product, but it begins to be phased out and organizations that do not actively monitor the stages of demand for all their individually stocked items, due to poor reorder or replenishment Additional stocks run the risk of getting stuck with large amounts of stock. Practices.

If not managed properly, a company can expect to sell most of its excess stock to break even on its investment or lose only a small percentage of the profit. This is the best case. Excess stock that is usually not liquidated into obsolete stock, which almost always leads to a large and painful expense on the books.


By: Gaurav Yadav

Gaurav Yadav
Author
https://rack37.com

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Article Tags: excess stock , inventory management , Overstock , stock surplus , excessive stock , or excess inventory

Submitted On Feb 17, 2021. Viewed 40 times.

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