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7.5 Ways to “Let It Go”

Sometimes Supply Chain Management seems more like a Zen riddle than a critical business process. There’s the constant balancing act Balancing Graphicbetween under-ordering and over-ordering stock, as well as the dilemma of what to do in difficult situations such as when you receive a large order for an item manufactured in China with a long lead time — and the customer wants it yesterday.

One of the glaring ironies is that in order to keep your inventory act together you often have to let it (your inventory) go. Think of the inventory in your warehouse as you would your wardrobe in a closet. The first step is to separate the keeper stock from the unwanted, extraneous stuff in your warehouse. And then you can start getting rid of the excess, un-usable inventory.

Natural born hoarders can have great challenges with this concept; however as business people we need to remember that, like real estate, inventory is not worth what you paid for it. It is only worth what someone is now willing to pay you for it. But unlike real estate, you can’t usually afford to keep stock in the back room just waiting for its price to increase. The space it takes up could be more valuable to you than any money you can pull in once the stuff is marketable. And maybe it will never be marketable.

Less is More

Most successful distributors understand that less is more and have a documented plan for liquidating excess stock. Here are 7.5 tips on how to Let it Go, as covered in a white paper on the topic published by Effective Inventory Management.7.5 ways to let it go visual

1. Send it where it’s needed. Remember the old adage “one man’s trash is another’s treasure?” Just because a product isn’t needed in one branch doesn’t mean it can’t be used in another location.

2. Return it. Some vendors are very good about accepting returns. Some are not so good. But it doesn’t hurt to try. Also try to train your buyers to negotiate the terms for the return of material with a vendor-before you place the big order.

3. Reduce the price. Take a cue from retail stores. A customer might purchase a discontinued item if the price is substantially lower than a similar item from normal stock. But be sure you’re not cannibalizing your other product lines before you reduce prices.

4. Incent your salespeople. The proper incentives can have dramatic results.

5. Advertise its availability to other suppliers. Conduct a search for Internet sites that specialize in liquidating materials to see if the materials may still be needed elsewhere.

6. Substitute it for a less expensive item. For example if your manufacturer replaces model A with another Model (B) and you’re stuck with a few pieces of the discontinued model, why not offer customers one of the discontinued models at a discounted price?

7. Donate it. Can a school, church, charity or other non-profit use some of your dead or slow-moving inventory? (Tip: Talk to your accountant or tax advisor for details and restrictions concerning material donations. A good source for finding organizations that can use what you have to offer is the National Association for the Exchange of Industrial Resources, 560 McClure St., Galesburg, IL 61402-8076. (1-800-562-0955 or www.naeir.org)

7.5 Toss it. We’re suggesting this as a half suggestion, since no one really wants to throw things out, especially in today’s recycling-conscious era. Also, as in the above method, be sure to check with your accountant before you head for the trash bin. There may be some IRS guidelines worth noting such as photographing the stock before you toss it which may provide some financial benefit here.

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