As lean and "just-in-time" as we want supply chains to be, the fact is that demand planning is both an art and a science. So, what are some strategies that brands can utilize to maximize their excess stocks to minimize inventory cost as well as storage space and earn profit margin from it?
The disadvantages of excess inventory are clear, from the risk of not selling the obsolete inventory, cost of warehousing, cost of disposal and holding costs, the opportunity cost of a more lucrative item being sidelined, higher insurance premiums, risk of natural disasters, or theft in the warehouse. Brands have many things to consider when faced with excess inventory, hence the demand for demand planners.
However, while the possibility of all these costs is daunting and often motivation enough to think of excess stock as "dead stock" and a liability, what if deliberately extra inventory became the 'smart' move?
Think about it: the world is moving faster than ever, but it revolves on an axis and around the sun. Trends, likewise, return; ideas are given new life; old movies are remade.
This is not to say that brands should hold inventory on-hand past its useful life, waiting for a return to its glory days. On the contrary, the excess inventory strategy has many benefits, but turning an expired good into a still-fresh item is not one of them.
What, then, is the deliberate excess inventory initiative, and how does it help businesses?
First and foremost, the reason most companies hold some inventory of buffer stock: enable faster restocking in response to unprecedented demand forecasting. The last thing a brand wants to do is disappoint eager shoppers by asking them to wait months for a reprint (though this, of course, can also be a deliberate scarcity tactic wielded by marketers).
Another reason retailers may choose to hold larger stock quantities is to secure wholesale pricing from distributors since purchasing in bigger volumes often results in some form of "bulk purchase discount" or "discounted price". And finally, in counterpoint to the earlier mention of a perception of scarcity, for some retailers having full shelves of selling inventory is key to brand positioning.
But holding more goods than necessary isn't a pleasant experience when demand is worse than expected or lukewarm at best.
Enter inventory sustainable liquidation: additional sales channel and environmentally-friendly and community-conscious avenue.
With planned inventory liquidation by using inventory management system, businesses factor in their exit strategy from holding excess inventory: after a certain cut-off point, goods are listed on online liquidation marketplaces like Pollen for sale to the highest bidder - whether locally or internationally.
These buyers - importers, exporters, distributors, wholesalers, and retailers - will then go on to sell the goods further down the supply chain until the items eventually reach the hands of end consumers seeking these products - which fulfills consumer demand.
This process will result in cash flow income for the original retailer and the parties along the liquidation supply chain, consumers getting the goods they need at affordable prices, and reduced waste from the landfill.
In cases where a business chooses to do its part for the community by donating its inventory levels (unsold items), companies like Pollen work with trusted partners around the globe to ensure the goods get to those who need them - quickly and cost-effectively.
Turns out, there are many benefits to planned excess inventory.
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