Pros and Cons of Excess Inventory

One of the risks of owning a business is ending up with excess inventory. There are a number of reasons that holding excess inventory can be detrimental to the business. However, there are several ways in which holding excess inventory can be a calculated decision that yields a profit. Here are a few of the pros and cons of hanging on to extra inventory.

Pros:

Stocking the shelves – Having extra inventory in storage allows business owners to restock their shelves quickly. Full and organized looking shelves are more visually appealing to customers and lead to higher sales volume.

Availability – There is less of a risk of running out of a certain item. When a customer comes in or orders a product online getting it to them immediately is imperative to the sale. Having to wait may cause the customer to look elsewhere.

Bulk savings – Many vendors and manufacturers offer bulk purchasing discounts. By ordering in bulk the business saves money on the front end and gets a higher return on the investment.

Cons:

Up front cost – By ordering excess inventory, a business is taking the gamble that although they are spending a lot of money up front and tying up their liquid capital, that they will make a profit off of the investment later. This may not always be the case because…

Items become obsolete – In the time it takes to sell all of the items that a business has ordered some of the products may no longer be popular or may be completely obsolete. Technology is especially risky in this area.

Storage costs – Many businesses have the need to rent a large warehouse to safely store all of their inventory. To offset the cost of storage many business owners increase the prices of their products and in doing so, lose their competitive pricing edge.

The silver lining around this cloud of cons, however, is that there are companies like Ideal Trading that are experienced in the liquidation of excess inventory. Excess inventory can be bought in bulk, providing the business with some extra liquid spending and the opportunity to downsize their storge costs.

For information on services offered by Ideal Trading like excess inventory liquidation, bankruptcy liquidation, small business liquidation, appraisals, auctions, and estate sales, please visit our website here.