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How to Put Your Excess Inventory to Work for You!

How to Put Your Excess Inventory to Work for You!. A Guide to Managing Excess Inventory. Excess inventory is inevitable. The market for business surplus is estimated at $350 billion annually (World Bank abstract) Overruns, inaccurate forecasts, new products, returned, discontinued retail items

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How to Put Your Excess Inventory to Work for You!

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  1. How to Put Your Excess Inventory to Work for You! A Guide to Managing Excess Inventory © Educational Assistance Ltd. 2003

  2. Excess inventory is inevitable • The market for business surplus is estimated at $350 billion annually (World Bank abstract) • Overruns, inaccurate forecasts, new products, returned, discontinued retail items • Downsizing, relocations & mergers can generate excess assets too © Educational Assistance Ltd. 2003

  3. Excess Inventory Leads to Inefficiency and Higher Costs • Non-productive material management • Wasted warehouse space • Utility expenses • Insurance and Taxes • Opportunity Cost (-) impact on bottom line © Educational Assistance Ltd. 2003

  4. Traditional Disposal Options • Reverse Logistics – The process of planning, implementing and controlling flows of raw materials, in process inventory, and finished goods, from the point of use back to a point of recovery (vendor). • Sell Excess Inventory – The process in which product is remarketed as a means of recapturing costs. • Recycle Inventory – The process in which the structure of a product is destroyed in order to recapture its materials. • Donate Inventory – The process of giving inventory to a not-for-profit organization. • Waste– Disposal of inventory through traditional landfills. © Educational Assistance Ltd. 2003

  5. Reverse Logistics Sell Excess inventory Recycle Inventory Donate Inventory Waste Financials Bottom Line Employee Costs Insurance/Taxes Opportunity Cost Space Utilization Operations ROA Re-marketing control Product Liability Costs/Benefits of Disposal Options © Educational Assistance Ltd. 2003

  6. Benefits: Does Not Re-Enter Distribution Channels Most Predictable Reduces Product Liability Costs: Re-Stocking Fee Transportation Charges Not 100% Removal Personnel Costs Turn-Around Time Opportunity Costs ReverseLogistics © Educational Assistance Ltd. 2003

  7. Benefits: Some $ recovery May be able to Control Distribution Channels Costs: Fragmented market Turn-Around Time Opportunity Costs Fees for Sale May Interfere with Distribution Channels Product Liability Very low $ potential Sell Excess Inventory © Educational Assistance Ltd. 2003

  8. Sample Current Liquidator Prices • Marilyn Monroe microphone radio  $5.00 each (retail value $29.95) • 42 piece art set -  8% of retail • Pallet of 2 ton prof. truck/van jacks 4000 lb capacity. $ 479.99 • Ocean prince sardines - $.25 each • 2 truckloads of excess paper products bought for $7,000 listed for sale at $21,000 © Educational Assistance Ltd. 2003

  9. Benefits: 100% Removal Environmental Stewardship Positive Corporate Image Avoid penalties & fines Costs: Recycling Fees Transportation Fees Potential Liability from Environmental negligence Recycle Inventory © Educational Assistance Ltd. 2003

  10. Computer Recycling • Obsolete computers contain: lead, mercury, cadmium, chromium, lithium, nickel and zinc • If mismanaged (not-recycled) these materials can be harmful • Also, precious metals go un-recovered • Sample recycling cost: $0.15/pound • “Take-Back Programs” • Regulations regarding patient data © Educational Assistance Ltd. 2003

  11. Benefits: “Out of Sight – Out of Mind” 100% Removal Costs: Waste Management Fees Environmental Negligence Creates Negative Corporate Image among employees/outsiders Liability (HIPAA) Landfill/Waste © Educational Assistance Ltd. 2003

  12. Benefits: Lower Tax Liability 100% Removal Positive PR Environmentally responsible After-market control Costs: May incur shipping costs Initial Effort to Identify Suitable Not-for-Profit Partners Misunderstood Option Donate Excess Inventory © Educational Assistance Ltd. 2003

  13. Excess Inventory Recycler State Local Permits Fees Disposal Certification Charitable Organization Mission & Experience After-Market restrictions Efficiency & Resources Ability to offer 170 e (3) above-tax write off How to select a recycler or charity © Educational Assistance Ltd. 2003

  14. Tax Considerations • Inventory/Product Donations are also called in-kind donations • IRS rule 170 e (3) can help increase deduction Cost basis: $500 FMV : $1000 170 e (3) : $750 write-off or ½ difference + • C and sub-chapter S corporations tax status • Receiving charity cannot dispense tax advice © Educational Assistance Ltd. 2003

  15. Excess Inventory Management Resources • www.epa.gov/epr (Extended Product Responsibility Page) • www.safety-kleen.com (electronic scrap from clients only) • www.surplus.net (liquidators network) • www.equipment.net (specialty excess) • www.guidestar.org (non-profit network) • www.irs.gov(tax issues) © Educational Assistance Ltd. 2003

  16. For additional help • Contact EAL • Corporate Development Director • Call 630-690-0010 • email us at info@ealworks.org • visit us on the web at www.ealworks.org © Educational Assistance Ltd. 2003

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