GPI 464 – Try these various ideas to turn obsolete inventory into cash.

All businesses either buy too much, make too much or both. To the detriment of cash, too many hesitate too long before identifying and identifying and selling off this stock. To stop this delay in decision making among your managers, establish an internal control procedure which is ongoing and automatically identifies, isolates and lists old stock.

This procedure will measure stock level versus orders and determine those items that need to be sold off. If well designed, this procedure will mandate management to isolate and identify all stock that needs to be sold off, turned into cash, even at a loss. You want to identify these items as soon as possible in order to get the maximum amount of money in the market. Age generally diminishes market value as applicable buyers disappear. Here are a few ideas to try to move your old inventory.

Methods to consider to reduce excess inventory:

Determine definition of excess: Is excess for your business 6 months old with no sales? Is it one year with no usage or sales? You determine this cutoff but be conservative.
Calculate excess dollars regularly and post: Run the your report calculates any excess inventory your firm has today and post the total excess dollars regularly. Make sure everyone knows that number. Run this report every day, every week or when you believe is relevant depending upon your company’s inventory. Many stores have alternate excess products on the clearance rack
Pay attention to the NEW excess items: Post the descriptions of all the new items immediately so get everyone’s attention. They know the old items on the list. They do not know the new ones so do not hide them by scattering them throughout the list. Publish them as soon as they appear on the list to get immediate feedback.
Cut the selling price first: Before you do anything else, cut the price first of the affected stock and offer no incentives for this period of time. Accept reasonable offers even if they are below cost. This time frame lasts for a defined time period. After that, this stock becomes eligible for incentives and referral fees.
Contact previous buyers of this product: Search the sales records of this product and approach those specific buyers with attractive selling offers.
SIC code relevance?: If similar types of businesses buy these excess items in your plant, go get a list of competitors in the same industry and sell the excess stock. These SIC code lists can be obtained with a library card through your local library.
Notify sales first: The first people who should be notified of the excess stock are your sales staff. Give them an opportunity to move the items first (for an attractive incentive).
Make a weekly list: Publish the updated list of excess products and update it constantly. Assign someone specifically to this task and make them publish a new listing on a regular basis on highly visible basis (i.e. 15 people emailed, 10 copies distributed, internet webpage updated every Monday at 2 PM).
Physically count your items: Make sure to cycle count all items on your excess inventory list to ensure the numbers are real, in your warehouse and ready to ship. Assign this duty to an individual and require that he confirm all excess quantity counts.
List excess inventory items on your website: List your excess inventory items on your website. Feature a printout key so customers can easily print your list. Allow and encourage them to email your list to others.
Ask your vendors to buy/trade/swap items: Ask the vendors from where you purchased these excess stocks if they want these items back. See if they are willing to take a trade-in for other useable items. Prepare to pay a penalty for this ‘courtesy’ unless your firm has extraordinarily large leverage with the vendor.
Ask your vendor to find a buyer: Your original vendor most likely will know the market for these goods and is worth paying to find a buyer. Prepare to pay a discount or finder’s fee.
Pay for referrals: Ask the public to record referrals on your website and take their name, address and phone number in order to pay them a referral fee in the event they help your company sell excess inventory.
Give your drivers lists to distribute: Give your company drivers and delivery men lists every week of the items that are excess inventory. Make sure those drivers are eligible for incentive payments when they make sales. Pay them as soon as the excess inventory is shipped to get their attention.
List exclusively with selected customers: Offer exclusive customer log-ons to gain first access to your excess inventory sale items on line. For example, give selected customers 48 hours notice before new items added to the list are to be offered for sale.
Mark down prices over time: Mark your inventory items down over time (i.e. 10% down every 30 days, red items 25%, blue items 35% off). Show the prices on the list so customers do not have to call to get prices. If they are forced to call you, they probably will not.
Free delivery: For example: offer free delivery within 100 miles and 50% freight costs for trips within a 500 mile radius of your warehouse. Depending upon the items, an attractive freight cost may help the buyer decide to make an offer.
Extended terms: Give extended payment terms on the sale of excess inventory if that is desirable to some customers.
Bigger bonuses: Add additional incentives to the successful sale and invoice collection efforts of this excess inventory by your sales personnel.
Pay bonuses frequently: For the sale of excess stock, pay bonuses to employees weekly. That will get their attention. If you wish, for sales over $500, cut the employees manual payroll checks within 24 hours after a qualified sale.
Incentives to all employees: Open the incentive program to all employees (all non-sales people) for selling excess stock.
Incentives to the vendors: Open the incentive program to all vendors for selling your company’s defined excess stock. (i.e. vendor representatives walk through many plants in a week and may know potential buyers your sales personnel do not.)
Priority customer access: For certain valuable customers, offer an exclusive “company only” discount when they elect to buy any item or items on your firm’s published excess inventory list.
Motivate sales with other services or products: Offer other free services or products of high perceived value when a customer buys excess inventory items.
Offer a handout box for the public: Build a box to be stocked with excess inventory handouts in front of your building or offered to all visitors in your front lobby. Offer a telephone number to contact inside sales personnel to call and buy some of these items. Update the lists weekly.
Follow an inventory write-off procedure: Develop an ongoing procedure to weed out and identify aging inventory based upon time limits. Teach your inventory personnel to automatically follow those guidelines so management addresses the problem regularly.
Discover problem inventory quickly: You want a system with early warning signs that identify potential problems as items start to age but before they become worthless. The earlier you identify those items, the more likely you will be able to sell them before they have no market value.
Publish the list regardless of cost: Publish the listing on a regular basis regardless how large or small. Eliminate any threats to inventory personnel concerning dollar write-offs, otherwise they are apt to keep quiet and not participate.
Advertise on the internet: Take out advertisements on Craigslist or other shopping internet sites to sell excess or worthless stock to dealers and the public.
Call for scrap values: Paper, wood and metal all have scrap values in the market. Know what your excess inventory is worth and scrap it if your personnel are spending too much to time finding buyers.
Write down values to cut taxes: Before yearend, write down the values of the worthless stock so you do not pay property taxes on its value. If possible, get it sold prior to yearend or scrap it and remove it from your facility (facilities) before yearend. Following year property tax renditions must report the previous yearend values to pay taxes in many states (real estate, land, equipment, vehicles and inventory).
Donate or scrap?: Before allowing the scrap dealer to come pick up your items at local market prices, find out from your tax guy the donation value (tax effects) of giving away your items to a local business organization. Which yields the better higher return?
Ban further purchases in your system: Do not allow anyone to buy these items again, without multiple approvals. It does no good to have an automated system that repeats errors perfectly.