8 Steps to Improving Inventory Management and the Bottom Line

Even the most efficient of multichannel merchants often stumbles when it comes to managing excess inventory. Common practices such as discounting or liquidating items devalue products and undermine sales. Ecommerce can magnify that problem, making it easier for shoppers to find products for cut-rate prices.

But it doesn’t have to be that way. Here are 8 steps that will help you avoid the biggest inventory management mistakes and come out on top.

Make a Plan: It sounds simple, but one of the biggest mistakes companies make is to put off decisions about what to do with their slow-moving inventory. But the inevitable accumulation of inventory could lead to a company paying increased taxes at the year’s end.

Avoid the Hoarder Mentality: Leasing additional space to store overage might sound like a good idea, but all it will be doing is contributing to the profitability of storage and logistics warehouse companies and incurring more costs.

Rethink Liquidation: Selling excess inventory for a dime or even pennies on the dollar may cost more than just a loss in profits for those items. The product may wind up in secondary markets competing against a company’s efforts to sell current stock. When price comparisons are just a click away, you can bet that many customers and potential customers will choose the cheaper option.

Move On: Sure, you can continue to sell merchandise that has become outdated or stale, but why would you want to? If sales have tapered off on certain products, there is no reason to believe those sales will magically pick up at a later date. Why not move on to newer, more attractive and likely more profitable product lines?

Remember Employees Are Not Your Customers: Employee discounts are a nice perk, but offering unsold items at steep discounts to employees is just a Band-Aid approach that will only mildly — and temporarily — reduce inventory levels.

Employees Are Not Charities Either: Thinking about spreading some good will by donating excess inventory to your staff? If employees are allowed to take moderate amounts of product home with them, expect that product to start showing up on eBay.

Avoid Landfills: Besides risking multichannel products landing on the secondary market, in today’s environmentally friendly society, do you really want to tarnish your company’s image by just dumping products in the trash?

Donate for Tax Benefits: A gifts-in-kind organization can help you donate excess goods to nonprofits (schools, civic groups, etc.). If you’re a regular C corporation, you can receive a federal tax deduction worth up to twice the cost. Plus the tax code stipulates that donated merchandise cannot be resold, bartered or traded and must be used in a manner consistent with the charity’s mission. Thus donating excess inventory to a company that distributes it to charities nationwide could be the best way to solve inventory headaches while protecting your brand and bottom line.

Gary C. Smith is the president of NAEIR

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