Even when things are going well, when you manage inventory, it’s some form of a challenge. Too little means sellers will miss chances for them to make sales. You can’t sell when things are empty. But, on the flip side, too much of a good thing also is not good, as this will mess up the capital and the cash flow that’s there. this can actually hamstring companies until all of that gets sold.
There’s also the further consideration that comes with this too as well, especially where the inventory goes. The space of a warehouse is a premium location, and if there’s anything that’s found, they’ll use it.
When you manage and store stock that’s extra, you’re missing out on chances to add things that will sell, which is why it’s not ideal to keep it.
These are various challenges that the retailers and the e-tailers need to keep in mind and work with. This is especially true with the volatility of the global supply chain at the moment. One means of handling this is to utilize safety stock that’s considered a buffer whenever things run a little bit scarce. But there is a risk from carrying too much of this, especially as it might become obsolete.
Obsolete inventory is very detrimental and costly for a lot of companies to keep around, especially in our current market. Let’s talk a little bit about it, and what you can do to manage this better.
What it Is
This is basically when the product has been able to reach that end of their life cycle. This is because of lack of product demand and even value, which makes it not sellable. This happens for different reasons. Most of the time, it’s because tastes have changed, the technology is outdated, and other such reasons.
Other reasons also include the following:
More competition and a pressure to offer something new
Drops in the trends of marketing
New technology messing with this
Innovations that’ll improve the functionality, which makes these older models almost not useful or attractive.
Why this is Dangerous
Why is this bad? Well, the thing is, it’s not an asset anymore.
With the swiftness of technology as it’s being released, the life cycles of products are much shorter lived.
Inventory that’s obsolete will be accumulated.
It then causes a lot of problems, one of them being inventory forecasting issues. This can mean that companies don’t have a good idea of their inventory and tend to overbuy items. This means that they’re wasting a ton of money as well.
There is also inventory management issues that come with this. that’s because, if you don’t plan this accordingly, you’ll also cause a higher risk of this happening. It can cause products to sell slowly, becoming obsolete. The solution is to provide different insights, and also determine the turnover rates faster.
It also causes inventory transparency issues. There’s a lack of sight for the stockouts of items in high demand. You won’t be able to see, and it can disrupt everything. The best way to prevent this one is also just having a solution to improve the control of this, so that you can optimize this in order to make the forecasting better.
So, what do you do about this? flash sales can help, and you can offer them as freebees too. The best way to get rid of it is to just also have someone look at this ahead of time, which is why software that tracks this can prevent these major issues too.
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