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The Inventory Mentor, NETSTOCK

The hidden costs of excess inventory


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We recently covered the basics of excess stock and how these unnecessary items reduce profits for businesses with inventory. On the surface, the costs of excess inventory are quite obvious -- you've invested working capital in items that just sit on your warehouse shelves.

But that's only half of the problem. There are lots of other costs that pile up as a result of excess stock. Worse still, it can be hard to see these problems to begin with and even more difficult to fully quantify them.

Let's take a look at some of the additional, hidden costs created by excess stock.

Excess stock leads to additional expenses

Beyond the cost of the unneeded items themselves, there are numerous additional expenses that must be accounted for. Here's quick laundry list of expenses you may not have considered:

  • The cost of the extra space in your warehouse to store your inventory
  • The cost of insuring excess stock
  • The cost of labor and security in your warehouse
  • The cost of loss via obsolescence
  • The cost of loss via deterioration, expiration, and breakage
  • The cost of lost opportunities because your cash is tied up in excess

The opportunity cost of excess stock

That last bullet point is absolutely critical. Instead of investing wisely into your business, you're paying for these additional items and their carrying costs. Imagine what you could do with that capital instead. You could develop new product lines, invest in labor, start a new marketing campaign, or update your systems.

With the wrong tool to manage your inventory levels, you're doomed to repeat this costly cycle of excess day after day, year after year. You can get by while doing this, but you're missing out on opportunities to grow your business.

There is a better way

With the right tool in place to reduce excess and produce optimal purchase orders, you can dramatically cut your costs and boost your profitability. NETSTOCK offers the tool that businesses with inventory need to better manage their forecasting and ordering processes.

Visibility is the key here. The NETSTOCK dashboard puts you in control so you know exactly what's going on (and what's going wrong) in your inventory. Every day you don't have the right tool in place to achieve a balanced inventory, the costs continue to pile up.

It's time to take control of your excess stock problem and drive more profit from your inventory.

 

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