During the recent webinar, Inventory Fitness – Governance, Targets, and Segmentation, we took audience questions and answered them.
Here are some issues that people in industry face and are interested in finding a solution to!
Question 6 of 14
Question:
When you are evaluating inactive inventory, what are your recommendations for determining what is salable and what should be scrapped?
Answer:
Well, the first and most important thing is you should make a decision, and the rule should be simple. So, for example, if there are customers that will buy the inactive inventory, great. If not, dispose of it.
If, for example, those customers would lead to decreased margins or wouldn’t get you enough money back to cover the costs, dispose of it. The key piece is don’t let it sit around because if it does, it’s going to take mental energy, it’s going to take space, and it’s going to take time. Get rid of it and move on.
Yeah. In any case, that is absolutely the paramount thing is to make a decision in a timely fashion. What that means is define the parameters to make the decision. So, you don’t have to raise this to the highest level at a certain age, at a certain spec, with a certain business case.
Get rid of it. I was asked at a webinar or a seminar I was giving in Mexico. Well, which one’s better? Do I sell it for money, or do I pay money to dispose of it? Which one’s generally better?
Neither one’s generally better. You can run all the business cases you want. The hard part is to make a decision. Because if you don’t, you’re wasting storage space and headspace, and storage space costs you liability, storage fees, working capital, and headspace is worse.
You trash your headspace, and now you get to confront and discuss this problem at every inventory meeting ever until the dawn of time and end of time. Anyway, make a decision. Put the parameters together. Gain some agreement on what the parameters are.
Go from there.
Get rid of it.
Sell it for money, dispose of it, yeah. By paying money either way. Get it out of your head in your warehouse.
Remember, we’d be happy to chat with you about any of this in more detail.
And if you’re interested, check out our schedule for upcoming business process improvement courses that we offer throughout the year to help you achieve business excellence.