If you run a business that sells products, excess stock is an issue you will likely have to contend with eventually. Whether it’s through a mistake on an order form or a lack of customer enthusiasm for a specific product, excess stock always poses a unique problem – and it’s one you will need to overcome in order to give your business room to breathe.
However, many business owners don’t see excess stock as a problem that has to be solved. Yes, the stockroom may be a mess for a while, but the business owner is confident the issue is temporary: the stock will soon be sold, and order can be restored – but is this the right choice?
The problems caused by retaining excess stock
- Disruption to your usual method of storing stock – such as a stock room or warehouse – which will be disorganised until the stock sells. This can significantly disrupt the overall efficiency of your stock management
- In some cases, excess inventory cannot be stored in normal storage areas due to its sheer volume, and boxes and bags spill into other areas of the business. Should this happen, it is – at best – an inconvenience, and at worst, a fire hazard that violates safety legislation
- Assuming that excess stock will eventually sell does not mean that the stock definitely will sell; it’s all too easy for what is believed to be a short-term blip to become a long-term problem
Given the above, it’s obvious that the management of excess stock needs to be more proactive than simply storing the items wherever possible and hoping they will sell in due course.
Exploring alternative options
If you have recently sold stock similar to your excess items, or there is high customer demand anticipated, then off-site, professionally-run storage is the best choice – you can reclaim the space the excess is currently occupying, while still having the products to hand when they are required.
However, if it has been months since you sold a similar product and there is no clear, definitive sign that that will change in future – there have been no customer enquiries, for example – then you should be more cautious, asking yourself: is the excess stock actually worth keeping?
It’s tough for business owners to admit that their excess stock might not sell, potentially leaving them at a loss. However, it’s an acknowledgement you’ll need to make, as the sunk cost fallacy can mean that you sustain further costs and inconvenience purely due to a reticence to absorb the potential loss. If you suspect that the stock will never sell, donating or disposing of it is likely to be the best choice.
The alternative option
If you’re not quite sure that your stock is worth keeping, but you’re not convinced it will never sell, then there is a third option worth exploring. Move the stock into storage for your convenience, but set a time limit of around three months. If that time passes and the stock has still shown no signs of selling, it’s probably time to say goodbye.
Hopefully, the above should help to ensure you can manage any excess stock issues your business experiences in future – good luck!