Inventory compliance improves with technology
September 13, 2013
Inventory compliance can involve complex procedures for many companies, especially as businesses expand into new markets. Organizations can improve their processes by updating their inventory technology. Some businesses may be able to gain a competitive advantage by improving their inventory management.
Even government agencies struggle with inventory management. A recent report revealed that the Department of Homeland Security had $28 million worth of radios in storage while officials were facing shortages of this equipment, according to The Washington Post. The report indicated that the agency needed to improve its inventory management procedures to prevent overspending on equipment necessary for employees to successfully operate.
How to handle excessive inventory
Even efficient companies struggle to manage excessive inventory, and it can lead to losses in profitability, according to an article in CFO magazine. Additionally, if executives are trying to cope with overages, they may lose focus from core business priorities. There a number of ways organizations can attempt to deal with overstocked inventory, but some techniques end up creating a larger amount of waste.
When companies face slow-moving stocks, some executives will handle the problem by leasing additional warehouse space or taking no action. However, this can exacerbate the issue because inventory can pile up further while overhead costs increase, and businesses will have to continue to pay taxes on excessive inventory.
Some businesses may choose to liquidate the inventory to get rid of it quickly, but this can lead to other complications. The product could end up in a secondary market that is in direct competition with the company's efforts to sell its current stocks, CFO magazine said. This can lead to unhappy customers. Continuing to sell outdated inventory is not likely to produce better results. Selling excess inventory to a landfill will contribute to waste and will not help businesses recover the lost profits.
There are parts inventory legislation that can allow companies to move overstocked inventory by donating it and receiving a tax credit, the source said. However, profitability and warehouse management can improve with adjusting practices and updating technology systems. Inventory software can help companies better manage their warehouses and prevent excessive stocks. Adjusting these procedures can help businesses cut costs and increase profitability because they will have less waste.