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The knowledge of excess inventory

7/5/2018

The knowledge of excess inventory

The definition of excess inventory

Excess inventory refers to products that have not yet been sold. It exceeds the expected consumer demand for the product and there is the surplus of supply.

Excess inventory is called Overstock, excessive stock, excess2sell, b-stock, or excess inventory.

It usually represents a certain type of inventory demand or mismanagement during material flow, which may be due to over-purchasing by buyers, inaccurate predictions by manufacturers on demand, cancelled orders, economic downturns, unforeseen weather changes, or  the late delivery or to factors such as delivery in advance.ExcessChip technology Limited analyzed the reasons for excess inventory

ExcessChip technology Limited  think that excessive inventory is the result of multiple interruptions in the product cycle.These factors can be roughly divided into three categories:

60% transport delay - In the process of processing orders, due to processing time, order frequency and international regulations and other complex factors caused delays. Which may be a single reason, it may also be the accumulation of various reasons.

25% Technical Challenge - That is because that there are gaps in each company's inventory management systems and technologies, some problems caused by system integration, purchase orders, EDI processing, and lack of business visibility,those factors can lead to Surplus inventory and excess inventory.

15% Other factors - when you sell some electronic parts,some companies can not accurately meet the needs of consumers lead to excess inventory.For example, consumers are not satisfied with the quality of goods and functional requirements, resulting in returns and bad review.

what kind of consequences will be caused by excess stocks? What are the shortcomings of Surplus inventory

ExcessChip Technology‘s manager said that:

"Excessive inventory can cause problems related to scrap, storage, and additional costs, which can affect the overall effectiveness of the company."There are two major disadvantages of excess inventory.

1. Excess inventory can cause cash flow to be too tight.

A company want to get bigger profit, you need to sell more goods.If the company's sales performance is poor, resulting in excessive inventory of goods, this will cause the company's cash flow to be tight, because the company also needs to bear the cost of the goods. This means that the more excess stocks, the higher the company's expenditure costs, which is very unfavorable for small and medium-sized companies,because big companies have more powerful economic strength, the impact is relatively small.

2. Surplus inventory shows that a loss of income.

As the demand for the product decreases, the  value of the excess product is lower,and "shelf space" needs to be separated from new products with higher profit margins

In addition, the holding costs of additional inventory such as inventory, insurance and taxes further reduce profits. Therefore, the company's overall income will be affected by excess inventory, which will lower the company's overall revenue.

There is also a relationship between excess inventory and inventory turnover.

Inventory turnover measures the speed at which companies sell their inventory and the  comparing with the industry average. Low turnover means that sales are poor,  lead to too many stocks , and a high inventory turnover rate indicates that the company's sales are strong ,which show taht companies have the ability to handle and manage surplus inventory well, which has a positive impact on the company's profits. Therefore, improve your inventory turnover is a good way to determine whose projects will reduce your cash flow and reduce costs.

how do you think the advantages and disadvantages of excess inventory ?

From the above comprehensive point of view,the surplus inventory not only limits the cash flow,but will also result in a loss of company capital income. When companies have more and more excess inventory, there is no doubt that this will seriously limit the company's turnover, so many companies now pay great attention to the management of excess inventory.

However, considering the features of products, some certain products is beneficial to the growth of the company's income, because of some products may be due to the passage of time, resulting in the value improved, such as antiques and MLCC capacitor.

With the development of technology, more and more companies have seen the potential for inventory recovery. ExcessChip technology is a leader in the recovery of excess electronic components inventory, focusing on recycling all types of electronic components, it's an international professional technology company to recycle all kinds of electronic parts , with higher inventory management ability and strong economic strength to help the manufacturers, suppliers, and even individuals to reduce the pressure of excess inventory.

Customers can upload their excess electronic components inventory list through a variety of channels, and ExcessChip technology will accurately and reasonably evaluate the value of electronic components through the customer's offer, help you achieve profits.you don’t need to worry the problem of excess electronic components inventory.