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How to Manage Excess Inventory

Businesses are always trying to ensure that they have enough inventory on hand to effectively meet market demand. This involves understanding market factors like customer needs, market tolerance for their products, demand, competition, and supply chain factors, amongst others.

Of course, despite how hard businesses work to plan these are simply projections. Ultimately businesses cannot foresee all outcomes. Just think of the COVID 19 pandemic and how it has negatively affected supply chains to the point that in some sectors there is a shortage of goods. The opposite can equally be true, where a business overestimates demand for certain items and end up carrying excess inventory. In fact, Forbes reported that as of the fourth quarter of 2022 in the US alone there is an estimated $732 billion of excess merchandise sitting in warehouses. That figure represented more than 10% of all retail sales from the previous year.

So how can businesses and warehouse deal with excess inventory effectively and avoid having idle products taking up space in their warehouses?

First and foremost, to effectively manage excess inventory means having the right technology in place. Often excess inventory occurs due to mismanagement of inventory. Businesses can become focused on their high turn around and/or most profitable products. In focusing on just managing the demand for those products they overlook their inventory that is slowly accumulating on their warehouse shelves. Sometimes this excess inventory can be years old. Yet technology solutions like a WMS can prove your best asset to avoid these situations. A WMS will accurately track your inventory and provide current and historical data. From this data businesses are able to gain important insights about warehouse operations and analyze inventory performance. This in turn helps businesses take better decisions and manage inventory better as a whole.

Once you have the technology implemented your business can now start to implement strategies to help avoid or else better manage situations when there is excess inventory. The next thing a business will want to do is track inventory levels in real-time. This will help with your planning and forecasting. By simply tracking your inventory levels and the times of the year certain products move versus others, you’ll be able to gain customer insights into their buying patterns as well as the amount they are purchasing during certain periods. Furthermore, you will also be able to ascertain if certain products are purchased together at some periods, while at other times of the year one product may lag behind a top seller. This will help you to manage the inventory of those periodic items versus more stable items.

Managing your warehouse storage space is another way that can help you manage excess inventory. Warehouses may not be able to sell all their excess inventory all at once. What warehouses can do is help themselves by maximizing their storage capacity. For those items that are in excess due to a slow period or a variety of other reasons, a warehouse can strategically store them so that they do not become a hinderance to the rest of your operation. So, make sure that items that are more stable are strategically placed so that fulfilment and management times are reduced, while items that maybe be in less demand or in excess are stored out of the way. At the same time, you can always make sure to have a certain number of those excess items in accessible locations, and as need arises or levels change you can restock those locations from your excess inventory storage locations. In this way you will eventually run through your excess inventory in a methodical way while also increasing productivity.

Your WMS will also be able to help isolate products that are sometimes ordered together, especially those where your excess inventory items are bought with your high turnover items. For example, in WAM (Akaita's WMS solution) you can report on your inventory through a variety of filters. With these types of reports you can identify those types of paired purchases and then offer them through your sales channels in bundles and at a reduced price. In doing so you can increase the demand and viability of the item you have an excess amount of and begin to bring that excess inventory back to a manageable equilibrium.

Finally, is an analyzation of your processes and then adjusting these so that excess inventory is avoided, or else managed appropriately and consistently. For example, are there bottlenecks with your fulfilment that cause inventory to amount to excess quantities? Are there liabilities in your supply chain? Does your procurement department order too much stock because they do not have stock level visibility? There are many factors that can be considered but by finding the root cause of the excess inventory issues you can start to define or adjust your processes to fix them.

Excess inventory can be a drain on a business’ resources. It can affect warehouse productivity, negatively impact your processes, and impact your bottom line either through storage costs or tied up capital associated to the inventory. Yet as we’ve seen excess inventory can be proactively managed by implementing the right technology like a WMS (such as Akatia’s WAM), tracking your inventory levels in real-time, optimizing your storage strategies, creating opportunities to reduce your excess inventory through insightful reports, and adjusting or implementing processes to get at the root cause of the issue. By implementing these strategies you will be able to control and manage your inventory more effectively and avoid excess inventory weighing your business down.

If you’re having issues with excess inventory or would like to digitally transform your inventory management, click the link below to get in contact. We be happy to speak with you!


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