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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

How to Put Your Excess Inventory to Work for You!

A Guide to Managing Excess Inventory

© Educational Assistance Ltd. 2003

excess inventory is inevitable
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

excess inventory leads to inefficiency and higher costs
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

traditional disposal options
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

costs benefits of disposal options
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

reverse logistics
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

sell excess inventory
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

sample current liquidator prices
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

recycle inventory
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

computer recycling
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

landfill waste
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

donate excess inventory
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

how to select a recycler or charity
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

tax considerations
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

excess inventory management resources
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

for additional help
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