Inventory Challenge
—— The excess inventory which is not used temporarily or never has a chance to be used
Excess inventory has become an issue for many of manufacturers
The global electronic industry is a fast changing industry. Manufacturers needs in electronic components are difficult to anticipate and excess stock has become an issue for many of them.
In today’s fast-pace, competitive world, excess inventory challenges stem from everyday business challenges – slow moving inventory, unexpected design change, canceled builds, datacenter decommissioning, customer returns, or demand/technology shifts.
Moreover, with global supply chains vulnerable to disruption and sudden fluctuations in demand, manufacturers are facing even greater levels of excess inventory. It's an expensive problem for organizations of all sizes, across all consumer verticals. Volatility is here to stay.
How is Excess Inventory Generated?
One common reason for excess inventory in electronics assembly companies is the uncertainty in demand forecasting. As the market for electronic products is highly dynamic and subject to rapid changes in technology and consumer preferences, it can be challenging to accurately predict the demand for components and finished products. If a company overestimates demand and orders more inventory than it needs, it can lead to excess inventory.
In addition, interim purchases of goods to provide needed components for production can also lead to excess inventory. This is the case, when the goods could be delivered with shorter delivery times than had been announced or contrary to expectations. With constantly changing market conditions, the delivery dates of orders that have already been placed can change again and again.
In general, there are both external and internal reasons for excess stock: external reasons include order changes or cancellation, quality problems, returns, etc; internal reasons include engineering changes, excessive purchases, wrong purchases, experimental production, material surplus, etc. However, sometimes the excess stock may not only be due to a single external or internal reason, but may be caused by a chain reaction of several reasons.
To sum up:
① Inaccurate forecast
② Order cancellation and returns
③ The products are not up to standard and need to be returned to the factory for repair
④ Engineering changes
⑤ Key parts changes (replacing parts)
⑥ Laboratory
⑦ Poor management of storage and production line
-
-
What is Excess Inventory?
Excess inventory refers to any products or materials that a company holds
in excess of what they need to meet current demand for its operations.
This excess inventory can be a liability, tying up valuable capital and warehouse space.
EXCESS
Excess inventory is risky inventory that is not used temporarily or never has a chance to be used.
The ideal inventory state is of course zero inventory, which allows for better capital flows and more profitability. More inventory not only takes up more warehouse space and money, more seriously also hide many problems in production operations.
In especially a lot of parts stock, long-term not used and difficult to sell, to use, it's kind of useless. To throw away, it's a little wasteful. To sell, we can't get a good price. After a long time, these parts would get rusted and rotted and still occupy a lot of human and financial resources.
It can arise due to various reasons such as overestimation of demand, poor inventory management, slow-moving products, or changes in customer preferences. For many companys, excess inventory can have significant financial and warehouse impacts.
Risks of Excess Inventory
The longer your assets sit untouched, the greater the potential for loss as the parts go obsolete and lose resale value.
Excess inventory can create logistical challenges. It will take up valuable space in warehouses, making it difficult to store and manage other products. It will also make it harder to locate and retrieve products when they are needed, leading to delays and inefficiencies in the supply chain.
Excess inventory can also have significant financial impacts on electronics assembly companies. The most obvious risk is the cost of holding inventory, which includes storage, insurance, and obsolescence costs. As the inventory ages, it becomes less valuable, and the company may have to sell it at a discount or write it off as a loss. Excess inventory can also tie up a company’s working capital, limiting its ability to invest in growth opportunities or respond to unexpected market changes. In some cases, excess inventory can lead to cash flow problems.
We are 100% focused on excess inventory
Get the most value and turn your excess inventory into
a revenue stream today!
As an industry leading excess electronic components recycling company, Astronic Components hope to use circular economy principles to unlock its value, while generating financial returns for our clients.
