As lean and “just-in-time” as we want supply chains to be, the fact is that demand planning is both art and science. So how can brands make the most of excess inventory, and make excess inventory make money?
The cons are clear: risk of not selling the items, cost of warehousing, cost of disposal, opportunity cost of a more lucrative item being sidelined, higher insurance premiums, risk of natural disasters or theft of goods in warehouse. Brands have many things to consider when faced with excess inventory, hence the demand for demand planners.
But while the possibility of all these costs is daunting and often motivation enough to think of excess inventory as “dead stock” and a liability, what if deliberately extra inventory became the ‘smart’ move?
Think about it: the world is moving faster than ever, but it revolves on an axis and around the sun. Trends, likewise, return; ideas are given new life; old movies are remade.
Which is not to say that brands should hold inventory past its useful life, waiting for a return to its glory days. The excess inventory strategy has many benefits, but turning an expired good into a still-fresh item is not one of them.
What, then, is the deliberate excess inventory initiative and how does it help businesses?
First and foremost, the reason most companies hold some quantity of buffer stock: to enable faster restocking in response to unprecedented demand. The last thing a brand wants to do is disappoint eager shoppers by asking them to wait months for a reprint (though this, of course, can also be a deliberate scarcity tactic wielded by marketers).
Another reason retailers may choose to hold larger quantities of stock is to secure wholesale pricing from distributors, since purchasing in bigger volumes often results in some form of “bulk purchase discount”. And finally, in counterpoint to the earlier mention of a deliberate perception of scarcity, for some retailers having full shelves is key to brand positioning.
But holding more goods than necessary isn’t a pleasant experience when demand is worse than expected, or lukewarm at best.
Enter inventory liquidation: additional sales channel, and environmentally-friendly and community-conscious avenue.
With planned inventory liquidation, businesses factor in their exit strategy from holding excess inventory: after a certain cut-off point, goods are listed on online liquidation marketplaces like Pollen’s for sale to the highest bidder – whether locally or internationally. These buyers – importers, exporters, distributors, wholesalers, retailers – will then go on to sell the goods further down the supply chain until they items eventually reach the hands of end consumers seeking just these products.
Income for the original retailer, income for the parties along the liquidation supply chain, consumers getting the goods they need at prices they can afford, and reduced landfill.
(And, in cases where a business chooses to do their part for the community at large by donating their unsold items, companies like Pollen work with partners around the globe to ensure the goods get to those who need them – quickly, and cost-effectively).
Turns out, there are benefits to planned excess inventory.