Are You Keeping Obsolete Inventory?

Many of us are "pack rats," meaning we have difficulty throwing things away, even when we know we'll probably never use them. Unfortunately, companies that do this may be wasting a great deal of money, because there are very real costs associated with carrying inventory. The more inventory a company holds, the higher these ongoing costs will be, which is reason enough not to carry outdated, or obsolete, inventory.

Let's look at a few costs associated with carrying all types of inventory.

Labor: Time must be spent performing all of the activities required to stock parts, including putting stock away, picking, counting and relocating. The larger the inventory, the greater the number of transactions and the greater the number of people involved. There is also "support" labor required for all of the clerical tasks associated with managing inventory transactions. Any  labor spent on obsolete inventory is wasted.

Equipment: Equipment is required to load and unload stock as well as transport materials to their points of use. Typically, fork trucks, pallet trucks, tow motors and ladders are used for this purpose. In addition, you need racks and shelves for storage and possibly even pallets and skids for larger parts. Although you may not be transporting obsolete inventory very often, it is not uncommon to periodically relocate slow moving items.

Training: Although the training may be inexpensive, or in some cases free, employees taking time away from the job are real costs to any company.

Future Opportunity: All space used for storage is space that cannot be used for other purposes, such as a new product line, new machinery, expanded office space and more. Lack of available space for these purposes may cause a company to expand or relocate its facility unnecessarily.

The examples above are reason enough to eliminate obsolete inventory. There are many ways to address this, but the key is to develop some type of inventory obsolescence program, then stick to it.

Please watch for part 2 of this Post where I will review some ideas on how to eliminate obsolete inventory.

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As an Inventory & Operations Consultant, my mission is to help you find the “LOST” cash in your warehouse.  I accomplish this by developing customized solutions that will make businesses more organized, productive and therefore more profitable.

 

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