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    What is Excess Inventory?

    The term “excess inventory” refers to goods held in inventory which are not anticipated to be sold because the current supply exceeds consumer demand. Overstock often is blamed on overly optimistic demand forecasting, unexpected changes in consumer preferences, or an unexpected downturn in the economy. But in 2022, much of the blame falls on retailers and manufacturers who added record amounts of inventory early in the Covid-19 pandemic.

    In July 2022, inventory growth reached its highest level since July 1984, according to the Institute for Supply Management. Both retailers and manufacturers started increasing inventories at the beginning of the pandemic to cope with anticipated global supply chain disruptions. At the same time, high inflation and soaring prices have depressed consumer demand for goods that were ordered and placed in inventory months earlier. Consequently, excess inventory has become an even greater problem than it typically has been. Find out below why too much inventory is bad.

    Got Stuff? We buy surplus inventory and hard to recycle items. Call us before you send it to the landfill!

    Why Too Much Inventory Is a Bad Thing

    Profitability takes a hit when too much inventory is held. Research shows that holding excess inventory adds as much as 32% to a business’s annual operating costs and takes a big bite out of profits. The additional expenses directly resulting from excess inventory include the costs of storage, pilferage, maintenance, insurance, and so on.

    With a lot of cash tied up in excess inventory, cash flow suffers. There is less available to pay suppliers, and businesses can end up borrowing to pay for new inventory. The resulting interest expense lowers operating profits. And borrowing is a short-term solution that does not address the true long-term problem, particularly in an economic environment characterized by rising interest rates. With less cash available to invest in new inventory, sales and business growth both are inhibited.

    What to Do with Excess Inventory

    Obviously, the best solution is to avoid creating excess inventory in the first place. Demand forecasting and inventory management can be improved through the use of software tools. But just as important, businesses with excess inventory need a plan for moving it out and converting it to cash.

    Retailers routinely run promotional events and may move a fair amount of overstock items by cutting their price and running blowout sales. Or they may sell them through their own online store or social media pages or an online marketplace like eBay or Amazon. They can also look for another business willing to buy their entire excess inventory, which has the advantage of getting rid of it all at once rather than one unit at a time. Converting excess inventory to cash can be even more difficult for manufacturers, as they aren’t in the business of selling directly to consumers and need to find business customers that can buy large quantities.

    All of these methods of converting excess inventory to cash put the burden on businesses to find their own customers to purchase their overstock products. They can be time consuming and labor intensive, and ultimately they may not yield much cash.

    If you’re thinking there must be a better way to turn excess inventory into cash, there is. And that’s where we come in.

    How RepurposedMATERIALS Can Help

    Inventory liquidators make money by buying up overstock and reselling it at a profit. Liquidators either pay a flat amount for all of a business’s excess inventory or work on consignment, paying the business an agreed-upon percentage of the proceeds after selling all the overstock items. The liquidator finds the customers and handles the transportation and storage logistics, relieving the seller of those responsibilities and expenses.

    RepurposedMATERIALS operates a little differently than most liquidators. As our name suggests, we specialize in matching customers who have certain needs with products that can be repurposed to meet those needs. It’s essentially an exercise in creative thinking. That’s how surplus parachutes end up as sunshades in a playground, or brushes from street sweeping machines become backscratchers for cattle.