Overflow inventory is the surplus goods that businesses have and less or no space to store them. As a growing number of people turn to online purchases of goods, the volume of returns is also equally high. According to the report by Al Arabiya, around $4 billion of goods are returned on average in the MENA region every year. The excess inventory takes up warehouse space, leaving inadequate area for storing the current stock. This is just one of the reasons for inventory overflow.
What causes Overflow Inventory?
- The “demand factor” in a business is not consistent. It fluctuates throughout the year based on seasonal preferences, current trends, or even new government policies. Global crises can also affect business sales; the past pandemic is a living example of how businesses get affected and how easily purchasing trends change. Many companies take to bulk purchasing to benefit from discounts in pricing or to avoid additional expenses due to a hike in oil prices or a change in government policies. Yet at times, things do not go as planned.
Businesses can end up with surplus goods due to - i. Poor Market forecast
ii. Changing Seasonal trends
iii. New Competitors in the market
iv. Poor Inventory management - Poor Market Forecast
Businesses increase their stock based on market study and analysis. But many a time, this prediction can go awry. Economic recession and the pandemic caused swift changes in the purchase trends of consumers. The unpredictable nature of the supply chain can result in an overflow inventory.
Changing Seasonal Trends- Most businesses witness a rise in their sales during the holiday season. Days like Black Friday in the U.S. or the Dubai Shopping Festival season in the UAE are times of the year when consumers go easy on their budgets and make purchases. Most businesses start increasing their stock to prepare for the anticipated excess sales during the peak season.
But purchase trends change every year with the changing consumer preferences. Many businesses again end up with an inventory overflow. - Competitors in the market
- For any purchase, customers today have unlimited alternatives to choose from. New brands and companies are popping up daily, offering similar goods at competitive prices. There is no predictability of when the demand for your product stagnates, and you have more stock in your hand than bargained for.
- Poor Inventory Management
- A disconnect between supply and demand can also happen due to poor inventory management. Many businesses still use conventional inventory tracking methods, a tedious process prone to many errors. Suppose the incoming goods are not tracked periodically. In that case, you will inevitably have surplus goods and a chaotic warehouse.
- What happens if you don’t have space in your warehouse?
Excess inventory must be taken care of before it gets out of hand. If your goods have a shelf life, it could translate to huge losses for the business. You will also run into problems managing warehouse space to accommodate the old and the new stock. Random storage, trying to fit in the excess goods with the current stock, results in further confusion in inventory management.
Some businesses choose discount sales at a cut-price to clear up the stocks before they lose value. But you can also consider a warehouse for rent to store the excess goods if it is possible to find a market for them, and they do not have an immediate expiry date. Flexible storage solutions are ideal spaces to store your goods as you figure out means to liquidate your overflow inventory. - How can you manage Overflow Inventory?
- Every business will go through an inventory overflow at some point. It is essential that you plan ahead on managing the surplus goods instead of waiting for it to happen.
A sound inventory management system should include
i. Perioding tracking updates of the inventory
ii. Dedicated Area for Excess Inventory
iii. A reliable warehouse management system
Periodic Inventory tracking
Suppose your business follows the manual tracking of inventory. In that case, it is time to consider switching to an automated system to track your stock. Fulfilling orders with real-time data on the goods ordered, current stock, excess stock, and out-of-stock items is more convenient. You can also reduce or avoid unwanted piling up of goods by monitoring supply chain patterns and inventory turnover ratio. This way, you can avoid a potential overflow due to poor purchase decisions.
Dedicated Area for Overflow Inventory
Having a designated area reserved to store returns or excess goods can avoid clutter in the warehouse and mixing them up with the current inventory. You can accurately track your overflow inventory and the excess quantity and decide how to manage the items.
Invest in a Warehouse Management System
A reliable warehouse management system gives better visibility of your inventory. You can track your current stock levels, damaged goods, customer returns, and goods that are currently out of stock. Tracking the goods down to the batch level enables us to plan goods management better and mitigate inventory overflow.
Proper Storage and Retrieval of Goods
In most cases, customer returns are due to receiving the wrong item or damaged products. Inefficient retrieval processes can result in errors in picking, and improper handling can cause physical damage to goods. A more suitable method would be to store and retrieve goods using SKUs. Integrating them into a good WMS makes it possible to track the goods faster and avoid unnecessary returns due to wrong deliveries and keep a check on inventory overflow.
How will flexible storage help with Overflow Inventory?
If the inventory overflow is temporary, you need extra space to store and organize your surplus stock better. Flexible storage is an excellent option for acquiring extra space. The beauty of this system is that you can avail only as much space as you require, increase or decrease according to your need and pay for only what you use. There is no need to expand your existing warehouse and bear the expense because inventory overflow is not permanent.
You can work on mitigating the excess inventory without disturbing the running of your existing warehouse or going heavy on the capital.
Worried about your surplus stock causing a warehouse overflow?
Cargoz offers flexible storage services across the UAE to manage your inventory efficiently. We have partnered with 300+ warehouse service providers providing on-demand spaces for different kinds of storage. You can now find storage services of a pallet space or rent an entire warehouse in any location of your choice in a matter of minutes. Get in touch with us to know more.