Understanding Your Excess Inventory StrategyBy Logan Wamsley
There are several ways that excess and obsolete inventory can negatively impact the profitability of OEM and EMS companies. Mainly, this inventory tends to tie up working capital, preventing these companies from applying that capital more strategically. But, there are also annual inventory carrying costs that range between 15 and 25 percent.
It’s important to note that the window of opportunity to resale excess and obsolete inventory can close quickly. In fact, the longer this type of inventory sits without an exit strategy, the more diminishing returns can be expected, compounding the loss. This is why it’s important that companies have an exit strategy in place for excess and obsolete inventory.
It’s also worth noting that excess inventory is usually sold off at large discounts. It’s not uncommon to see up to a 95 percent loss or write-off on excess and obsolete inventory.
Some of the largest brands in the world trust Partstat to manage their excess inventory. We combine experience and technology along with our unique infrastructure to implement a proven process that maximizes ROI on excess inventory.
This proven process begins with big data. We provide customers a free line item detail report of their excess inventory. This report is generated through the big data we have been collecting on electronic components, semiconductors, and computer products over the last decade. This database consists of over 50 billion data points on approximately 21 million unique electronic components, semiconductors, and computer products. We then combine this data with advanced algorithms to provide current and historical trends on each component including inventory levels, market pricing, factory lead times, and lifecycle statuses. Using this is what allows our experienced product specialist to provide a free excess inventory report identifying products for resale and scrap.
Once we receive the excess inventory, we provide visibility through our customer online dashboard; companies can view current sales of their excess inventory and request inventory transfers to support multiple locations and partners. We then begin a robust marketing strategy that includes marketing on platforms that are indexed by Google and all other major search engines. We also market on dozens of industry-paid subscription services. This maximizes exposure to potential buyers.
Understanding how to price excess inventory is a crucial step in recovery rates. So we use the information from this same big data to maximize the resale, at the point of sale, by understanding real-time market availability, pricing, lifecycle status and competition.
In the final stage of the process, after we have maximized the return utilizing our robust marketing strategy, we can facilitate a lot bid process, in which we will auction off the remaining inventory to the highest bidders by commodity. Partstat will also handle all sales and logistics. We’ll provide a total reconciliation of shipping, invoicing, and payment collection.
Our goal was to design a full turnkey solution for excess and obsolete inventory that is designed to maximize returns, improve working capital, reduce annual inventory carrying costs and improve efficiencies in the supply chains of our customers.