What Is Too Much Inventory On Hand, And What Are Its Drawbacks?

Too Much Inventory on Hand

too much inventory on hand

What Is Too Much Inventory On Hand?

When we start a business or aim to start one, you will think of one thing first on which your entire business will be based: the inventory of your business. All the actions related to the list of your business must be handled with extreme care to avoid any uncertainty in the future. In addition to this, we have already seen that many business organisations store a large amount of inventory at the backend to prevent the risk of the future. But very few of them think this holding "too much inventory on hand” is a threat itself. Wonder why? Because it ultimately costs you even more in the future, having too much inventory is unquestionably costly. Proper awareness of this as a problem must be supreme among the businesses. Even now, we can see that only a small percentage of people are aware of the situations that arise due to huge stock ownership.

Furthermore, we can also say that having too much inventory held on hand is simply evil, as it nibbles away at your costs like a quiet enemy. As a result, you must determine which goods are no longer necessary for your firm and are simply eating up your operating costs without creating profit. To minimise income reduction and user losses, reasonable steps should always be performed. To avoid the problem of having too much stock, figure out what sections of the company organisation must be improved and what will be deleted. Therefore, to understand this wide concept, we will discuss all the problems caused by having extra inventory on hand and how to prevent it. 

 

Effects of having too much inventory on hand

It is for sure that when there is a thing stored with you for a long time, it is your core responsibility to look after its shape, working, maintenance, etc., because unless it is not sold out, it will be a liability upon you. Likewise, managing your business’s inventory levels is a significant task that should be managed effectively to avoid overstocking situations. Using automated inventory management software like Inventooly could also prove fruitful to manage the inventory of your business. Through this fantastic tool, you can trace all the updates relevant to the inventory of your business and be relaxed in every aspect.

Generally, when one has stock stored on the rear end of the company, it appears to be a positive development. But, as we all know, too much of anything is terrible. Consequently, having too much inventory in your business could cause plenty of issues for you. Moreover, you have to keep a continuous check up on every item for yourself and see that whether it is still being able to use or not. Because let us face it that when a thing is lying idle, its life decreases with the passing time. Or it could also not perform according to the normal working. One has to face several problems in holding excess inventory on hand.

Let us discuss some of the major effects that a business would face in case of having too much inventory available:

  • Profit Reduction:

It is pretty standard that you fail to adopt new techniques and strategies to expand your business when there is so much already on your plate. Likewise, when there is an excessive inventory on hand, its expenses increase simultaneously. Because you will ultimately have to make sure that your products are working well and not becoming outdated with each passing day, in addition to this, you will have to pay this maintaining, checking, and other relevant costs from the portion of your company’s profit. 

Therefore, it is only fair that if a firm has excessive inventory on hand, it should get rid of it at some spot. As a result, valuations will be reduced, allowing for a reduction in sales levels. As a result, your profit ratio falls, putting your company in a difficult position. So, it would not be wrong to say that it's a good idea to get rid of any unused or stale inventory as soon as possible.

 

  • No room for new products:

When there is already excessive inventory on hand in any business, you will never be able to look for new products or expand your sales range because all your cash is tied up due to the overstocking inventory stored in your business. Which in turn could not let you introduce new and trendy products in your firm. 

As a result of the storage of obsolete inventory, neither any new product is launched, and buyers are frequently losing, creating a significant challenge for the company. Moreover, it also poses massive friction between the company and its clients, who have invested and are looking for a profit. You are just stuck with old inventory and handling it while your competitors are crossing you by adopting the latest and innovative products according to the customers' demands. In short, you need always to keep room for new products because there is no surety that when the trend and demands of the customers will be changed.

 

  • Holding costs:

Another hazardous effect of having too much inventory on hand is that your holding and storage costs increase simultaneously. Unless the inventory is sold, you will be paying these costs on it. Therefore, the experts also advised that you must have the necessary measures to get rid of too much inventory as quickly as possible. 

Avoid your stock from swallowing up all of your business's cash, whoever said it right. Furthermore, it can also be said that having too much inventory means that the expense of retaining or carrying it increases day by day. As a result, disposing of extra inventory as soon as possible might save you money on holding fees.

 

  • Loss of Customers:

There's no doubt that the only way to know what people want is to put yourself in their shoes. Doing surveys, enquiring about the values of similar products, interacting with customers, and asking what they enjoy are all ways to understand market conditions better. As a result, you must deal with your extra inventory. Because if your attention is occupied with this problem, you will be unable to attend to what is necessary to do in the future. 

You must sell what the customers desire and not sell them because you have extra inventory on hand. It will only drive your customers to search for new products as you are failing to offer them trendy and unique products. 
 

Management of too much inventory on hand

It is also significant for your business and its reputation that you must take the necessary steps to manage your overstocking inventory to prevent all the above threats. You will only be able to cope with such a situation when a complete planned strategy is implemented as quickly as possible. However, using inventory management software like Inventoooly might help you deal more effectively with this problem. It will not only guide you well in maintaining the levels of your business’s inventory, but it will also let you know how your costs are divided and being spent over your inventory.

So let us now dive into the steps that could help you manage too much inventory on hand in your business:

 

  • Remarketing of your old inventory:

The first and foremost measure that you can take to manage the excess inventory of your business is the remarketing of old stock. It is for sure that when your stock gets old and is lying in your company’s warehouses, it automatically creates an environment of stress. Remarketing makes a big difference in selling the old and existing stock. If you do not want to liquidate your inventory and still hope it can be sold, you must try this technique. Because people always prefer what looks good and catches their attention right away.

Therefore, to sell and get rid of unused inventory on hand, you could remarket your inventory by displaying ads on social media platforms so that you might be able to gather more sales. Changing the outlook and style of advertisement could significantly impact the public. 

 

  • Liquidation of stock:

Another way of getting rid of too much inventory is liquidating your stock. It is so simple! You just have to find the right liquidator who will be able to buy all your excess stock at a reasonable price. This will help you remove excess inventory from your company and focus on such important matters.

As talked above, holding extra inventory on hand could open up several problems that are unbearable eventually and might cost you your whole business. Therefore it is the easiest solution to deal with too much inventory to sell it to a suitable liquidator at the right time. 

 

  • Introduce automation:

We all know how fast technology is improving with each passing day, which will force you to enhance the activities and procedures of your business. So that you will be able to enjoy much higher levels of profits. Likewise, you can handle too much inventory on hand in your business by introducing automation in certain areas. Innovation of your methods and techniques and involving digitalised machinery or software is what will take your business to the next level. People like simple things yet innovative ways, right? And we could not deny the fact that science and technological developments have made our lives unimaginably easy these days.

Using automated inventory management software like Inventooly will be very helpful to monitor the inventory levels 24/7. There is no need to go all the way down to the warehouses of your business to handle the important matters. You are informed on your mobiles what orders are being received and which inventory is being sold out the most. This will help you to manage and take the correct decisions when needed.

 

  • Examining your product levels:

Another basic solution for managing excessive inventory on hand is that you must be aware of your business's order and product levels. Segmentation will help your business to a great extent because you will be able to classify which products are being sold the most and which are only eating up the costs of your business. 

Dividing your products into different categories will help you decide what areas should be improved. Moreover, it will make you sure which products you need to dissolve right away to save the costs of your business. In addition to this, properly examining the order levels could also help reduce excessive inventory on hand.
 

Conclusion:

As talked above, it is always good to have a backup when you are running a large enterprise, but at the same time, there is a thing line between the backup and unnecessary stock-keeping. You need to make sure that your business does not have too much inventory on hand, which will put your business’s profits at risk and at some time, you are no longer able to run the activities normally. 

This kind of situation occurs when all your attention and focus are drawn upon the existing and lying stock in your company's warehouses. In addition to this, your all costs are being spent on it, which reduces your business's profit. Who would want that, right? So if you have reached this far, I am sure you will be able to handle too much inventory on hand effectively by applying some of the efficient ways discussed above.