OEMs: Before Selling Your Surplus Inventory, Read This

By Logan Wamsley

A lot bid is the most common solution OEMs use in regards to surplus inventory. There are a multitude of reasons for this and while some are valid, others are misguided and based on a lack of information of the options available to OEMs.

First, it is true that when it comes to surplus or excess inventory, it is ideal to recover at least some — or any — of the investment originally made on it. Even a 1 percent return on inventory is preferable to the returns received from selling it for scrap, and in theory, a lot bid leaves open the possibility of using market competition to inflate the cost of inventory to the seller’s benefit.
Also, it cannot be overstated how, in more extreme cases, the discarding of surplus inventory also means the savings on a significant amount of inventory carrying costs. Not only does surplus inventory take up valuable and finite warehousing space that could be used for more profitable ventures — including current and future OEM offerings — but the act of simply storing the inventory has been known to result in costs equating to up to 30 percent of the inventory’s original value. When assessing the pros and cons of taking an action in regards to surplus inventory, it is important to consider this.

The counter to that, however, is if the lot bid process is just as likely to work against the seller. A competitive market for the inventory can only be assumed when it can be ensured that the said market is aware the lot bid is taking place. Competition does not materialize out of thin air, and when it does not, even inventory in high demand on the open market can sell at a 95 to 98 percent discount.

To avoid this, a change in perspective is needed. A lot bid should not be the first resort when trying to sell your surplus inventory, but the last.

Instead, consider using the resources that would be spent on a lot bit to craft a detailed surplus inventory strategy. A proven strategy can guarantee those with the inventory in question are properly educated on what it is they have available — and the buyers who need it can be found.

The first, and most commonly overlooked step in this process, is educating yourself on the material in your possession. A successful surplus inventory strategy requires a detailed analysis of not just the seller’s industry, but of the state of the market for each individual part. Each part will have its own story to tell, with its own inherent set of potential buyers who may not even operate in the same industry as the seller. Some inventory may have a limited and declining market, while others may be in high demand that may even result in a greater ROI than was originally used to acquire it. In either case, it is critical to understand before taking action to know the current market value of the inventory in your possession and understand what ROI you might expect. In fact, should the market be favorable, it might bypass the need to resort to a lot bid at all and negotiate the selling of your inventory on an online search engine or marketplace where the price can be negotiated on your terms.

This is the main advantage of Partstat’s Surplus Recovery Solution. Instead of using a lot bid as a first resort, Partstat offers all OEMs who enroll in the solution a free Surplus Inventory Analysis that uses the same Big Data that powers the world’s largest free online search engine for electronic components and semiconductors to create a line item analysis for each and every part on your surplus inventory list. Our trained product specialists will determine information including current lifecycle status, current global availability, average distributor price, and average factory lead time that will help you understand the true value of your inventory and what it can be accurately priced as.

The strategy does not end there, however. Partstat will then use this information to create a detailed marketing strategy that will highlight your inventory to buyers on not just Partstat, but all across the Internet. As an open platform, all of Partstat’s product pages are indexed by all major search engines like Google, Bing, and Yahoo, which ensures that your inventory will be visible to anyone who types its part number into a search bar. Combine this feature with Partstat’s 34,000 daily searches, and you have a marketing strategy that guarantees your inventory will be seen by those who need to see it. Instead of actively trying to find the market, the market comes to you, giving you substantial leverage in the negotiation process. Plus, while your inventory is waiting to be sold, Partstat will house the inventory in its own climate-controlled facilities and enable you to avoid annual carrying costs.

Only once ROI is maximized on the open market should an OEM consider a lot bid process. Without understanding the other options available to sell surplus inventory, you risk leaving thousands of dollars in unrealized returns on the table. There is likely far more value in your inventory than you realize — all that is needed is the resources to better understand it.

To see how much your surplus inventory is worth and the ROI you could realize, request your free Surplus Inventory Analysis by clicking here.